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Camelot’s shareholders agreed to a 50 per cent cut in their return from National Lottery sales in the expectation that top lottery operators from around the world would bid against it.
The consortium, of Royal Mail, De La Rue, Cadbury Schweppes, Thales and Fujitsu, agreed to reduce their return from the lottery pound from 0.5p to 0.25p to raise returns to good causes, one of the key factors determining the choice of operator, said Dianne Thompson, Camelot chief executive.
She said the decision was taken at a time when the company was expecting a raft of competitors for the third licence, which runs from 2009-19.
Potential competitors included Australian lottery operator Tattersalls, Ladbrokes, continental European operators including Lottomatica and Intralot, and Sir Richard Branson, who made a bid for the second licence.
“We thought we would be up against really stiff competition,” Ms Thompson said. In the end, only Sugal & Damani took on Camelot, whose advantage as the incumbent put off rivals.
The consortium took £47m from the lottery in 2006-07 – £30m after tax. Return from the lottery is calculated over the lifetime a licence, rather than on an annual basis.
One Camelot insider said being part of the Camelot consortium gave shareholders a credibility which helped in winning contracts.
But Ms Thompson said shareholders each invested £10m in Camelot and were attracted not by returns but by the prestige of being associated with a UK institution.
The insider added that the move to reduce returns probably helped Camelot show it could generate larger contributions to good causes than Sugal & Damani.
The National Lottery Commission, which was keen for bidders to show strong incentive structures in their bids, said Camelot’s rate of return would be between 0.3 and 0.5 percentage points higher than its rival’s.