Tabcorp faces a surprise battle with giant rival Sportsbet for Victoria’s betting licence

The bidding process for the Victorian joint venture betting deal is down to the final two competitors which both could be rewarded under a multiple licence arrangement.

Tabcorp is locked in a race with rival Sportsbet for the Victorian wagering licence, in a process that could result in both emerge as winners under a multiple licence scenario.

The Victorian government has moved into the late stages of the bidding process to find the next joint venture wagering partner. Tabcorp and Sportsbet’s rivals have recently been informed they had been eliminated.

That leaves incumbent Tabcorp, which has held the licence since 1994, and Sportsbet, Australia’s biggest corporate bookmaker and owned by the London-listed Flutter Entertainment, as the main options.

Tabcorp and Victoria are in a joint venture that expires in August next year, for which Tabcorp last paid an upfront $410m in 2011 for the right to exclusively operate retail betting outlets and TABs in pubs and clubs in a deal that also helps fund the state’s racing industry.

The Victorian government had presented options for one exclusive licence holder, similar to present conditions for Tabcorp, as well as a scenario presented for multiple licences for two or three bookmakers.

While the licences are for 20 years, the Victorian government has an option to make changes after the first 10 years.

Although either Tabcorp or Sportsbet could go it alone, several sources have told The Australian that the multiple licence scenario was still an option. If it were to happen, both Tabcorp and Sportsbet may operate betting shops.

While Tabcorp has existing TAB outlets around Victoria, it would be considered a surprise by some observers that Sportsbet could also want its own venues.

But Sportsbet could be pursuing a strategy of having outlets as a way of promoting its brand if the federal government follows through with the mooted ban of betting advertisements on television.

It is likely the Victorian government will make a decision in October and an official announcement would then follow in November.

JPMorgan has put a price tag of about $750m to $800m on the next licence for Tabcorp, while Andrew Orbach of Taylor Collison has previously told clients that the upfront licence payment “may sit between $600m and $960m” depending on valuation modelling.

The current joint venture arrangement between Tabcorp and the racing industry means the latter receives annual funding derived from the pari mutuel “tote”, which has been on the wane in recent years due to the rise in digital betting by punters who are placing their wagers with companies such as Sportsbet.

The Victorian government recently announced an increase to its point-of-consumption tax from 10 per cent to 15 per cent, which was hailed by state racing authorities as a vital source of revenue to be passed on to the industry.

One sticking point with the wagering licence has been confusion over access to customer database information related to the present deal with Tabcorp – a point that resulted in Entain Group – the owner of the Ladbrokes and Neds brands in Australia – informing the Victorian government in May that it was withdrawing from the bidding process.

Meanwhile, Entain is believed to be the target of an investigation by the Office of Liquor and Gaming Regulation in Queensland due to “advertising zones” it has established in a handful of pubs and hotels in the state.

The “Labrokes Lounges” are a similar sponsorship and promotions deal that Entain struck with pubs and hotels in NSW last year.

Entain is able to advertise its brands in Australian Hotels Association venues in competition with Tabcorp, and sponsor pubs and hotels in NSW.

Tabcorp, which has an exclusive licence to operate betting shops and outlets in NSW and Queensland, has taken legal action against Entain over the NSW deal, arguing that it contravened its exclusive licence.

The Australian has seen a letter from Queensland Attorney-General Yvette D’Ath warning clubs and pubs “to adopt a cautious and measured approach when considering any in-premises arrangement with interstate WSPs” (wagering services providers) until the OLGR investigation is finalised.

The letter says there are restrictions imposed on Queensland venues around permitted gambling activities unless they are supplied by the “appropriately licensed provider”.