Europe's largest online sports betting operator could bring more of its business to Malta if issues surrounding bandwidth reliability and cost and HR talent were resolved, Betfair International managing director Niall Wass told The Sunday Times.

Betfair set up its international headquarters in St Venera in 2006 with a staff of 25. The headcount has since grown to over 200. The company, which has licences in the UK, Malta, Germany, Austria, the US and Australia, posted record results for the year ended April 30 with an adjusted EBIDTA of £72 million, up 29% from 2008. The company is debt-free and holds £130m in cash. Some shareholders have also had their investment repaid.

Betfair's top management in Malta gave Finance Minister Tonio Fenech a tour of its state-of-the-art premises on Friday before a private meeting during which the company's results and these issues were discussed.

"The technology infrastructure in Malta is not as good as in mainland Europe," Mr Wass said. "Our network has gone down once a week for the last 10 weeks. We are disappointing our customers. The infrastructure is 10 times more expensive than the equivalent in mainland Europe. We would like to help Malta raise its bar because it will help the country become more successful in attracting other business here, not only from this sector but also from others, like financial services."

Mr Wass explained that Betfair's advanced systems handle 6.4m transactions a day - more than all the European stock exchanges combined daily. Significantly, transactions are settled in real time. Over £100m has been invested in underlying technology. Betfair boasts the second largest Oracle database in the world and envisages moving to the No. 1 slot by the end of this year.

The company currently boasts 2.5 million registered customers.

Over 50% of the St Venera team is made up of Maltese staff who make up most of the finance, operational, compliance, marketing, helpdesk, and affiliate teams, but Mr Wass emphasised that there were issues with the depth of the talent pool. People with industry-specific skills like online marketing, in particular, were hard to come by, especially with companies in e-gaming competing for the same talent.

"We need to find ways to address these issues," Mr Wass pointed out. "We do not run all of our business via Malta yet. Our technology is all in the UK, and we could bring more people, more revenue, and more tax income here in much less than five years."

Betfair's remarkable success lies in the uniqueness of its business model. Its core business is sports betting, although its product portfolio also includes arcade offerings like poker and casino. By pioneering the betting exchange concept, Betfair became a platform to allow punters to bet against each other - the sports result is irrelevant to Betfair.

"It is a very different customer proposition," Mr Wass explained. "A traditional bookmaker won't like it if you start to win. Amounts punters can bet will be limited and eventually the account might be closed. We never close an account unless there are fraudulent issues. That is what makes us different. Our betting exchange makes it fairer for customers: they get a better price, they are allowed to set their own odds, they are not betting against a bookmaker but against each other."

The betting exchange is the brainchild of Andrew Black, who Mr Wass described as an "eccentric genius". Mr Black worked in the City of London, spending much of his time examining financial stock exchanges, but he loved to bet on horses and had an interest in technology. He spent a year designing a prototype on his laptop and came up with an efficient 'stock exchange' for sports betting and essentially found a way to cut out the middleman.

Betfair was launched in 2000 in the UK, where a strong culture of betting, particularly on horse racing, existed. Punters were particularly sophisticated, doing their homework meticulously to study the difference in pricing. The proposition was a huge success. Betfair currently holds 25% market share in the UK, twice the share of the No. 2 player.

Three years later, Betfair looked to Australia where a market for sports betting posed enormous potential. A joint venture was entered into with gambling tycoon James Packer, Australia's richest man. But it took a few years before the venture was granted a licence.

"Because the model we have is so much more efficient and so much fairer, local market players are wary of it because it steals market share," Mr Wass said. "We had a huge battle to get into Australia, but eventually we won and we are now fully licensed and we are marketing."

Betfair's international business, which constitutes 51% of its operations, is growing twice as fast as its UK business. Mr Wass was heavily involved in expanding the European operation and Betfair soon moved into markets like Italy, Germany, Greece and Spain. The company seeks to acquire licensing in major markets but there is often resistance by local authorities, particularly where state-run monopolies exist.

"We believe the only way to deal with betting and gaming is to regulate, license and tax it. If it is not regulated, it can lead to issues for some people. Those issues become worse when people are betting with an unregulated operator. That is our philosophy and that is why we apply for a licence wherever we can."

In the US, sports betting and online poker are against the law, which made it difficult for Betfair to enter a potentially lucrative market. Only horse racing betting is allowed online. Betfair last year acquired the TVG network, the US's largest legal wagering business, for $50m, to position it to take advantage of any legislative change. The acquisition allowed Betfair to gain a foothold in the US market. As an American player, Betfair now hopes to be able to argue its position with the authorities and move the debate forward.

In Europe, Betfair had hoped that a European-wide ruling would help regulate online gaming across the continent, but recent European Court of Justice (ECJ) rulings have made it clear that will not happen. The Santa Casa ruling by the Luxembourg-based court last month gave member states the right to ban online gaming websites. It essentially meant member states were obliged to protect consumers from the adverse effects of online gaming. The ECJ ruling, however, did not uphold monopolies in gambling but rather that EU citizens needed to be protected by their respective state authorities.

Mr Wass pointed out that Italy and France have started to show the way for things to change on the way to liberalisation. The two countries had regulated themselves and issued licences and had done "a great job".

"The Santa Casa ruling has allowed a state to protect its monopoly under certain circumstances if they can prove that it is more efficient than a private operator," Mr Wass explained. "We do not believe this is the case. We have very sophisticated technology, far better than what state operators can provide. We challenge them to find better systems than ours."

Betfair is confident that other rulings will be kinder to private operators. Its own case against the Dutch government comes up soon and Mr Wass hopes the outcome will be more positive and allow more customer choice. Betfair's main argument is that under European legislation, customers should be allowed to choose where to bet.

"In Australia we fought for three years," he said. "It cost a lot of time and money but it was worth doing. It takes time to explain all the details, the procedures, and the technology we have and why it is not right to try to ban gaming, but it is worth the investment in the end."

Mr Wass said Betfair tended to acquire numerous new customers during major footballing events. "Betfair does not care about the result of a game," he reiterated. "This year, bookmakers have been badly hit because in August and September all the favourites won. Normally, 62% of favourites win in the first month; 92% have won this year."

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