The exact value of the Italian gambling market is hard to determine, not least, due to the existence of a substantial black market in gambling products and services. However, government sources estimate that in 2006 the licenced section of the market was valued at around €39 billion, with sports betting and horserace betting currently accounting for 14% of the total market. (By way of comparison, the French betting market is curretnly estimated to be worth somewhere in the region of €28 billion (£17.4 billion).

In August 2006 the Italian regulatory authority, Amministrazione Autonoma Monopoli di Stato (AAMS) moved to open up the Italian betting market through the launch of a tender process for the issuance of a wide range of new betting licences (see table at bottom of page).

Following the tender application Ladbrokes was awarded 142 new betting licences, spread geographically across Italy. These comprised the following:

• 33 dedicated horseracing licences (betting centres)
• 58 dedicated sports betting licences (betting centres)
• 51 non-dedicated sports betting licences (betting points)

Ladbrokes has also successfully applied for remote betting licences for horseracing and sport, which were issued on a non-competitive basis to companies that complied with regulatory standards.

Ladbrokes has targeted capex of €104m to fund its expansion in Italy over the next two years; €24m for the initial 12 shops; c€50m for further shop acquisitions; c€12m for licences relating to the new shops; and c€18m for fit-out costs of the new shops.

At the time of the award of the Italian betting licences Christopher Bell, Chief Executive of Ladbrokes plc said:

"We are very pleased with the outcome of the tender which represents a major step forward for us in Italy. We have appointed an Italian Chief Executive who brings extensive local knowledge of the industry to our operations and we will continue to expand our Italian business through acquiring further existing licences."

When announcing its preliminary statement of results for the year ended 31 December 2007, Ladbrokes said that during the year in Italy 13 existing betting shops had been acquired for a cost of £16.7 million, giving it a total of 17 acquired shops by the year end. It said that these shops had traded in line with its expectations during 2007.

Ladbrokes is now represented in the major cities of Rome, Milan, Turin, Naples and Genoa and since the year end has completed the acquisition of a further eight shops around Turin and Vicenza.

Ladbrokes said that the rollout programme for the 142 new Bersani licences continues, following the licence award in March 2007, with the first shop and corners opened in December 2007. It said that whilst finding premises for new licences remains challenging, they are scheduled to be opened throughout 2008.

The new local language internet site, Ladbrokes.it, was launched in November 2007. Ladbrokes said that its odds service provider, Pianetta Scommesse had increased its customer numbers during the year.

Ladbrokes said that gross win for the year was £6.5 million, with operational and administration costs of £7.3 million and duty of £0.8 million, resulting in a start-up loss of £1.6 million for the year.

William Hill PLC in association with its joint venture partner Codere SA (Codere) was awarded 20 concessions to operate horseracing betting shops, 7 concessions to operate sports betting shops and 28 concessions relating to sports betting points. Remote licences relating to horseracing and sports betting were also applied for and granted.

William Hill recently said that progress had been made in the first half of 2007 in identifying and acquiring locations to exploit these concessions and that trading in the remote business was planned to commence there before the end of the year, with retail commencing during the course of 2008.

William Hill and Codere have targeted capex of €40m to fund the joint venture’s expansion in Italy in the next 18-24 months.

The biggest of the British beneficiaries was Gala Coral, which already operates an Italian-language website and a betting shop in Genoa. Gala paid an estimated £30m for 403 licences for general sports betting.

Italy's Lottomatica SpA was awarded a total of 1,644 new betting licences, comprising 1,144 sports betting rights and 500 horse racing betting rights. The company also won an online betting licence. Lottomatica's business model will be based around franchisees. Intralot won 426 new betting licences, whilst Betfair and Unibet won remote betting licences.

When announcing results for the nine month period ended September 2007, Lottomatica said that sports betting wagers, with over 1,000 locations in operation, were approximately €26.7 million, for the months of August and September. Revenues from sports betting were approximately €5.2 million, equal to gross wagers net of prize payouts.

The biggest overall winners were the incumbent operators Snai and Sisal, who together were awared 64% of the new licences.

The London stock exchanges listed Lesiure & Gaming operates in the Italian betting market through its subsidiary BetShop Italia, a franchised network of over 1000 branded shops and networked retail gaming outlets offering sports betting across Italy. On 9 January 2007, in a trading update for the year ended 31 December 2006, the company said that it was pleased to announce that it had been awarded 47 further licences in Italy (27 for horse racing and 20 for sports betting) to complement its existing Betshop Italia network.

In January 2008 Leisure & Gaming provided a trading update for the fourth quarter of 2007 and guidance for the financial performance of the Company for the 12 months ending 31st December 2007. The Company noted that it had suffered a disappointing second and third quarter, incurring substantial trading losses. For the full year, including all central costs, it said that it expected to report a gross profit of approximately €3.2m and an EBIT loss for the year of approximately €1.6m.

The company said that in relation to Q4 trading, it had achieved net win of €6.6m (vs €7.0m for the equivalent period in 2006)and gross profit of €1.8m (vs €0.3m for the equivalent period in 2006). It said that in December 2007, the Italian regulator published protocols for skill gaming, which will allow for the provision of poker and other new gaming products by the Company in the course of 2008.

The Company was notified on 22nd February 2008 that Cliff d'Arcy has an interest in 2,549,697 million shares in Leisure and Gaming plc, representing 3.00% of the issued share capital of the Company. Secretive Swiss investor Neil Craven also has a substantial holding in the company.

Following the tender opened by the Italian Monopoly (AAMS) in October 2006, 888 was granted an online sports betting licence, with content initially to be restricted to sports betting and skill games. In October 2007, 888 announced that together with Cogetech, its local partner specializing in the Italian betting market, it had opened up a website 888.it, which would offer fixed odds betting on all national sports events and international events; excluding horse racing.

Source: AAMS Autonoma dei Monopoli di Stato, Industry Sources