International prospects at centre of bwin.party tussle

It was likely no coincidence that bwin.party CEO Norbert Teufelberger was keen to emphasise the operator’s international prospects during this morning’s analysts meeting.

After reporting disappointing H1 revenue figures, and with question marks lingering over the firm’s operational structure, Teufelberger knows bwin.party’s international reach remains his strongest hand.

And rightly so. 888 and GVC will have international expansion at the front of their minds when weighing up their offers for the operator, and on the face it bwin.party has plenty to offer both.

DOT COUNTRY PROSPECTS

The newly regulated Romanian market is a good example of how the new owner of bwin.party could emerge as the dominant force in a number of Europe’s new dot country regimes.

Bwin.party said it had agreed to pay €7.9m in back taxes to acquire a licence in Romania, compared to the €0.9m GVC will pay and the €3.1m 888 this morning said it would be paying. Those figures clearly show how bwin.party holds the key to this nascent market.

It is a similar story in Greece, which the firm will re-enter in partnership with a local licensee and where Bwin was “the number one operator by far” before pulling out, according to Teufelberger.

But while bwin.party told a convincing story this morning, the ease with which the firm might reactivate customers in these markets may have been overstated.

Teufelberger said no major above the line marketing will be required upon re-entry, and that a CRM strategy will suffice to return the operator to immediate profit in these territories.

But one source told eGaming Review the Greek market was nothing like the cash cow bwin.party enjoyed in 2013 and earlier, and that legal issues, compliance, capital controls and 30% GGR tax would make things tough.

GERMAN ASPIRATIONS

Closer to home, Germany will also be of significant interest to both GVC and 888 as the country edges towards a new regulatory framework.

Both 888 and GVC are active in Germany, with GVC’s small yet high value CasinoClub brand understood to have encouraged the firm to explore further options in the market.

Germany is bringing in 27% of the bwin.party total revenues currently, more than double its second biggest market, the UK, and Teufelberger said he expects Germany to eventually get a completely new regulatory framework more befitting a market of its size.

“There is huge potential for us should the uncertainty be removed. If it gets regulated properly there will be two big beneficiaries – us and one private operator there,” he said.

That private operator is likely to be Tipico, the new major sponsor Bayern Munich FC. Local brands such as Interwetten and Mybet have tried to catch up with bwin.party in Germany but the firm has done well to hold onto market share and brand awareness, despite neither reflecting the quality of its overall product.

“We’ve renewed our marketing deals to ensure that when things really start, we’ll be there with the marketing channels available to us,” Teufelberger said, noting that several UK operators had been sniffing around Germany, but that bwin.party’s recent TV deal with Sky essentially locks them out of the market for the next three years.

And therefore with the only guaranteed option to obtain major sportsbook market share in Germany coming via acquisition, bwin.party ticks most of the boxes in terms of local expertise and brand power, not to mention its strong online casino presence.

OPERATIONAL PROBLEMS

The tussle over bwin.party would surely lack ferocity without these clear strategic benefits as the firm still appears to be full of operational contradictions.

While Teufelberger placed emphasis on the progress made in regard to the disposal of non-core assets, it was these very assets which were cited as the primary drivers of the slight rise in clean EBITDA for the half year.

Meanwhile the reasons offered for the 6% decline in revenues – no World Cup, VAT in EU markets, low gross sports win margin – are hardly factors which others who have posted robust revenue hikes over the period haven’t had to contend with.

If there are some bright spots to draw from the results, it would be the continued strong performance of the operator’s Foxy Bingo and Cheeky Bingo brands, but revenue declines across all verticals other than bingo tells its own story.

Both GVC and 888 will back themselves to turn these problems around, however, and with bwin.party still holding decisive market shares in a number of important territories, even a takeover price beyond the figures currently on the table could hold plenty of upside.