Once a Competitive Strength, Wagering Has Become Tabcorp's Achilles Heel

With significant barriers to new competitors, we expect Tabcorp will continue to dominate the Australian lotteries landscape. Tabcorp's lotteries are underpinned by long-dated, state-based licences throughout Australia (with the exception of Western Australia)--an enormous scale which adds a degree of earnings certainty. Even when Tabcorp's state licenced exclusivities end, we expect the scale of the business is such that new entrants will find it extremely hard to compete against Tabcorp's distribution network and national jackpot pool size. We also expect the firm will remain unparalleled in physical wagering--stringent regulatory licensing requirements create barriers to entry to compete with Tabcorp's retail locations, such as racing venues, hotels, and TAB agencies. However, the pari-mutuel model is in decline as punters increasingly choose fixed-odds betting, and technological change means geographic exclusivity no longer translates to a monopoly.