South African Bookmakers Fight Racetrack Owner Over Fee Rise

South African bookmakers are taking legal action against Phumelela Gaming & Leisure Ltd. (PHM), the country’s biggest racetrack owner, over an increase in fees to show live horse races in betting shops.

About 37 bookmaking companies, most from Gauteng, South Africa’s richest province, have filed a case against Johannesburg-based Phumelela following demands to pay 3 percent of their monthly revenue for the right to show races, Phumelela Chief Executive Officer Rian du Plessis said in a phone interview today. The fee has since been changed to a fixed monthly payment, he said.

“It is a worrying case,” Prean Naidu, general manager of Top Bet SA Pty Ltd., which has 13 bookmaking outlets in Gauteng and Limpopo provinces, said in a phone interview. “It will affect our business and the horse racing industry in general. With that system, we lose at the end of the day.”

South Africa’s horse-race gambling industry is worth about 10 billion rand ($957 million) a year, according to Du Plessis. As many as 425 meetings were held in the 12 months ending July 2013, data from the country’s National Horseracing Authority show. South Africa’s most-watched race, the Durban July Handicap, has a prize fund of 3.5 million rand and is sponsored by mobile-phone company Vodacom Group Ltd. (VOD)

Horseracing fans can view Tellytrack, a channel 61 percent owned by Phumelela that shows both domestic and international horse races, as part of their Multichoice TV package provided by media company Naspers Ltd. (NPN) Bookmakers have to pay an extra fee to Tellytrack to display the channel.

“It’s a very valuable product,” Phumelela’s Du Plessis said. “That’s why we are now charging a decent price. The increase in fees were long overdue.”

Phumelela, which owns and manages five of the nine racing tracks in South Africa, said net income for the six months through January rose 32 percent to 51.7 million rand. Revenue rose 19 percent to 587 million rand, according to a statement today.

The stock rose 3.7 percent to 21.25 rand as of 3:20 p.m. in Johannesburg, valuing the company at 1.6 billion rand. A close at this level would be the highest on record.

To contact the reporter on this story: Kamlesh Bhuckory in Johannesburg at kbhuckory@bloomberg.net

To contact the editors responsible for this story: Simon Thiel at sthiel1@bloomberg.net John Bowker, Anthony Aarons

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.