BASILE NEIADAS CEO of OPAP

PM Communications: Compared to other blue chip companies in Greece that are listed on the Stock Exchange, OPAP has done extremely well. Could you please tell the readers of The Telegraph what attributes to your success?

Mr. Neiadas: The fact that investors invest in OPAP is very flattering for the management. It is a result of the rejuvenation and the new measures that we took for our major game Stoichima. In the past we were suffering from the illegal competition that comes from Internet providers as well as from local illegal bookmakers. The fact is that we made two major moves, and the first one was to enforce the law. With the help of the court decisions and the Greek police, OPAP was able to have the illegal operators terminate their advertisement on the streets and on television. At the same time, all the rejuvenation measures that we implemented for our game Stoichima, proved to be highly efficient, in terms of the game becoming very competitive. Furthermore the loss in sales that OPAP encountered the first semester of 2005, compared to the first semester of 2004, turned out to be an increase in sales after our rejuvenation measures, which proves that OPAP attracted a great amount of players back from the illegal betting to OPAP's games, especially Stoichima. We have already declared a 60% increase in sales of the Stoichima in the first quarter of 2006, compared to the similar quarter of 2005, this tendency continued very strongly on the second quarter as well. Of course there was also the World Cup in Germany, the main event of the summer, where we enjoyed the trust and loyalty of our players and the sales of OPAP exceeded all of our expectations.


P.M. COMMUNICATIONS: We are aware that there has been an increase in the costs and we know that one of your main priorities is the focus on OPAP's risk management in house function. What are the detailed measures that you are implementing in order to improve the efficiency of the management including all the games you offer?

Mr. Neiadas: First of all let me comment a bit on the profits. Although there has been an increase in sales of more then 18%, it is normal for the profits to have a smaller increase from this percentage. The reason being that one of the major rejuvenation measures that OPAP took for the Stihima game was the increase for the payout to the players. This was one of the factors that made the game much more attractive. For instance, when you increase the payout from 60% to 66%, the targeted payout and the cost is covered 90% by OPAP and 10% by INTRALOT. Then you can assume that you sacrifice some of your profits, in the sake of recovering your sales. You offer a game that in the long run will be beneficial for OPAP and then we wait to catch up with the profits down the road, which usually takes longer then a quarter.

Of course, it remains important to also follow the tendency of the worldwide competition. The tendency right now is for the competitors to offer better odds, which means that we need to have a better payout to stay in an international competitive level that is desirable by the company. Now in our effort to cut down the costs, OPAP agreed and made the decision from the board of directors, to take the risk management in house as of the beginning of February 2007. Of course, we will need some consultancy for that, but the decision made is to receive advice and guidance from experts in the field. If we assume that we are talking about a game that exceeds 1,7 billion Euros, you pay a percentage on the sales, which is a large amount of money. In the meantime you are able to create your own organization and hire people from the international market. These employees will be paid with a management fee or a salary class bonus. This consultancy will not only have the task to help us in conducting the risk, but we will also train the people from OPAP. At the moment we are looking into a period of 2-3 years to have our employees gain the necessary experience in order to deal with this type of operation. The cost savings needs to be compared with the existing situation of the last two years, where we were acquiring a cost of 10,2%. The target is for the risk management to be considered and operated by OPAP for another period of two years, where we can expect OPAP's total cost for this operation to be less than 10% per year. That will be for the benefit of our shareholders. Of course we don't mean that the figure will be zero, but even if the number is limited for the first year at 5-7%, it will be a significant benefit to our shareholders. The more we progress and the more experience we obtain, will aid OPAP in minimizing the cost and bring the numbers down in the coming years.

P.M. COMMUNICATIONS: What other aspects of your balance sheet do you seek to highlight for potential and existing investors?

Mr. Neiadas: From our balance sheet, a large amount is invested in what we call sponsorships, donations and advertising. OPAP is very careful with advertisement and we make a point to advertise in a very socially responsible manner. We want to promote our games in a very controlled way, especially for games that are not considered to be addictive. The most distinctive example is KINO, though it is OPAP's second most important game, we have never directly advertised KINO to the public because we consider the game as addictive. On the other side, we are investing a lot of money in sponsorship and donations, money that is benefiting and going back to the Greek society. In order to help all activities that include health, sports, education and cultural activities. This particular amount targeted for sponsorship and advertisement appraised to 70 million Euros last year, we are committed and therefore the sum will remain around the same amount for this year. OPAP's investors would like to see the same figures for that department as long as we keep the advertisements controlled.
Another favorable aspect for OPAP is the rate decrease of the income tax. The income tax, according to a law implemented by the Minister of Finance, is decreasing every year. The income tax started with a 35% on the net profits of companies and was lowered to 32% the first year. This year the tax is 29% and the next year it will go down as low as 25%. The great amount of sales that OPAP is experiencing at this moment is a very significant saving reduction for the benefit of the shareholders. The third important sum represents the investment amount, more specifically the IT infrastructure investment, where OPAP has a tender that is rounding up monetarily. We would like to replace the IT infrastructure of the company, including the main computer system of Athens and the disaster center in Thessaloniki, with 15.500 new terminals of three types that OPAP will obtain. This is an estimated investment that will exceed most probably 100 million Euros and the results of the servicing fee for all the new systems, is estimated to cost approximately 12 million Euros per year for the first five years of operation for this new system.

P.M. COMMUNICATIONS: To summarize, the investment includes an initial 100 million for the new systems and the result is 12 million per year?

Mr. Neiadas: These specific figures are approximates because of the participants in the tender that will offer their best price for the system, so we can only estimate. In OPAP's final text we don't state a specific number as an estimation, because we let the companies offer us the best possible price.

P.M. COMMUNICATIONS: Please share with the readers of The Telegraph what you estimate the benefits these new systems will establish?

Mr. Neiadas: There are various benefits. First of all, we will be acquiring one of the most modern and technologically advanced computer systems for the operation of our games. The second benefit is that we will have a significant amount of terminals to serve to all the existing needs, plus an expansion that we want to apply. I would also like to point out that OPAP has the right to purchase an additional 30% of the number of terminals in the duration of the contract within 5 years, with exactly the same price of the one that we bought initially. The result is that we carry a very profitable system with the opportunity to expand the system even further if it becomes necessary.

The second great advantage of this system is that it can independently support all types of betting that are available right now in the world market, given that they are permitted by the law. They represent Internet betting, mobile phone betting, and the interactive television betting. All these types of betting are included in the specifications of the system and can be activated when and if permitted by law.

P.M. COMMUNICATIONS: By what date do you expect to have implemented all these new systems?

Mr. Neiadas: I cannot give you the exact date because it depends on a Committee that is completely independent from the management of OPAP. The fact remains that from the moment we will announce a winner for this entire procedure, it will take OPAP up to two months to receive the signature of the contract. Once the contract is signed, the company will have 10-12 months to produce the hardware and the software and have the system ready for operation. The challenge remains that globally we will install the system and will have to switch off the old system and switch on the new system.

P.M. COMMUNICATIONS: You intend to include the Greek football league into the Stoichima at the beginning of the next season. Are you scheduled on time for that establishment and what kind of impact you expect?

Mr. Neiadas: We are on time. On the 18th of July there was an official announcement by the committee formed by the Ministry of Sports, which is responsible for checking the applications of the Greek teams, and they will give us the green light for the implementation of the coupon of Stoichima. We had the first announcement where the Ministry gave us the green light for the first 25 soccer and basketball teams, allowed to be included in the Stoichima coupon. The green light was a major development and what is even more important is the fact that in the same announcement it clearly stating that there would be a new list of teams very soon. This committee is working on the issue and we expect the announcement by the 20th of August, when the new soccer championship starts. That means that there will be more teams available for the inclusion in the coupon. I remind you that betting on the Greek championship matches is mandatory, along with two other foreign championship matches. Therefore, the players will have the opportunity to bet on triple betting minimum if a Greek championship match is included in his choice.

P.M. COMMUNICATIONS: We are aware that you have attended the capital link, what do you achieve by attending these sorts of events and how will it increase your investors? Do you have any investment interest abroad?

Mr. Neiadas: With the exception of Cyprus, we do not offer our games outside the Greek territory. We are respecting the monopoly status and in the same way we don't want foreigners to come and offer their betting on the Greek territory. However, throughout the year we remind foreign investors of our existence and demonstrate to them that we are continuing to work very hard and conducting our business in a very responsible and socially respective manner. Of course we have a presence in newspapers and magazines abroad, where more specifically we give interviews and advertise in special reports that are published with newspapers and magazines. We especially participate if the reports have a focus on Greece or on the sector that OPAP represents, the gambling industry. The fact that we have certain announcements to make on a national and international level that requires the publicity, especially if these announcements are followed by good results.

P.M. COMMUNICATIONS: Let us focus on illegal betting and in particular, an event that occurred in the United States. It appears that the laws lack clarity in terms of the offshore lottery and other betting/gambling operations. Could you overview how this would develop the US market and what type of impact it has on other markets?

Mr. Neiadas: This was a very big development for the worldwide market. We observe a tendency by several countries and the US was not the first. Just two months ago, the Italians blocked two sites. The Italian government voted a law that is blocking some Internet sites that are offered to Italians by some Internet betting providers. In the US a law is passed by the Parliament, if I understand correctly it has to pass through the Senate as well. This particular law is a break-through law, from the point of view that for the first time a law is interfering in betting in a manner that is apparently not allowed in the United States. This is a very important development for OPAP because the international gaming industry acted immediately and the price of the stock of all the similar providers went down the first day by 600 million lbs and the psychology demonstrates that there are going to be some major developments. We don't know exactly what these will be, but I remind you that if something starts on the other side of the Atlantic Ocean, then of course it gives us a good hint that the same issues might occur in Europe as well. The European Union might consider a similar legislation to stop this betting opportunity for all the Internet site providers. We are monitoring very closely these developments and trying to do our best collaborating with the Greek government in seeing what direction we have to aim.

P.M. COMMUNICATIONS: Mr. Neiadas, since you assumed this position, you have successfully sought to add values through renovation in a number of areas implementing new IT platforms, terminals and so on. What other innovative items do you plan to apply to your management and philosophy?

Mr. Neiadas: There are not too many new games that a lottery can invent or copy or rejuvenate. The reason is that experience has shown that lottery games that are attractive to players worldwide are not many. OPAP is making a constant effort to provide a fresh look to our existing games, by interfering and rejuvenating when and if the game needs to be improved or updated.

However the new games are rather limited in two ways. First is that there are not too many games available in the world market that would be suitable for the Greek market. The second factor is the social responsibility aspect. According to the legislation, before implementing any game we need the approval of the Minister of Finance and the Minister of Sports. So the management of OPAP may have a lot of ideas and constantly propose their ideas that are applied in several countries, however mainly for reasons of social responsibility, the government must deny the operation of these games and we must respect their decision. The interference of the government has pluses and minuses for public owned companies and our investors know that very well. From their point of view, if OPAP was a private company listed on the Athens Stock Exchange, we would be able to make more ideas happen, but at the same time we would not enjoy a monopoly. Therefore, the government is interfering and assigning half of the members of the board of directors, plus the two ministers must approve any new game or any alteration that OPAP wants to consider on our existing games. With our sponsorship program we are returning to the society large amounts of money, all these factors aid with the European court decisions and with the local European country Supreme Court decision to provide OPAP the right to keep the monopoly status in Greece. So the role of the government to OPAP has the plus of helping us in enjoying the monopoly, but also has the minus that we cannot do any operation that we would like to do. A great example is the famous video lotto terminals, which is a way of gambling that was not accepted by the government, neither for OPAP nor for any other private operators.

To give an example, we create a new game called Bingo Lotto, a game that is not in the magnitude of KINO or Stoichima. It is a game that we like because it is not addicting, it is pure amusement and a recreational game for the whole family and it gives us an opportunity to tackle market groups that are not frequent for our agencies right now. Women and elders like the game because they have the luxury of playing it from their house and it also gives us a good communication tool from the point of view that we can do the draw through a live program on television where we slowly plan to educate the players and offer them a limited show in the beginning. If we see that the game is successful and that the participants enjoy the game then we can take actions in order to enrich and improve the game with various recreation activities, for example either singers or dancers.

Concerning OPAP technology, they are negotiating deals all over Europe. We will be very happy to see some of these deals signed, but our interest is limited to 20% of the sales there. The international expansion of OPAP will be completed but it is not the first priority right now. OPAP stated that matter very clearly last year when we did our public offering. The reason being that we first wanted to focus on the domestic issues in order to determine how we will expand our activities outside of Greece. Of course we always have in mind that OPAP needs to be careful with the monopoly status however that does not mean that we are closed to any potential opportunities that might exist, mainly in the European market. On the other side we need to set priorities and for the moment OPAP does not have a specific announcement to make.

P.M. COMMUNICATIONS: As the majority of your Stock is in the hands of foreign investors, we would like to give you the opportunity to send a final, direct message to the readers of The Telegraph, please go ahead sir…

Mr. Neiadas: We never try to encourage someone to invest in OPAP, we only state facts and try to be as correct as possible. This is why we never extrapolate; we never give estimates in numbers or percentages that are not officially announced with our quarter results. I think a responsible and correct company like OPAP, proves everyday that it has a reliable management that applies itself in order to aim high and try its best for the good of the company. Now, there are some investors that see a prospect short-term, other investors that see prospects long term and this is the name of the game we play, where the Stocks change hands everyday. This means that OPAP's stock is wanted at all times and in the past we saw that whenever something was happening and some of our investors wanted to sell, there were always other investors willing to buy. This is good news for OPAP and we are looking forward to continue in this positive direction and have OPAP play a major role both in the Greek and in the international field.