Moody's warns Italian gaming reforms will hit William Hill among others

William Hill and other gaming operators will be hurt by a new reforms imposed by the Italian government for sports betting and gaming sectors, according to credit agency Moody's.

Competition is expected to ramp up with an increase to 120 online gaming licences awarded in 2016 with taxes and costs expected to rise as a result of the new laws.

The expansion in licences is likely to pull more operators into what is already a highly fragmented and competitive segment of the market.

William Hill's online revenues from gaming and sports betting in Italy rose 39% last year and Moody's said the increase in competition will be credit negative for the company and its rival.

"We expect a moderate increase in taxes for gaming machine operators, which is credit negative," says Donatella Maso, a senior analyst at Moody's.

"In addition, licence renewals for betting shops and corners will result in high one-off costs, although it is unclear whether these will occur in 2016 or the following year."

But overall, the measures are credit negative but not as severe as some operators had expected, the agency acknowledged.

William Hill will not be among the most affected, as its exposure to Italy is thought to be less than 3% of total revenues.

Furthermore, tax changes for online games and sports betting will be medium-term credit positive, with tax levied on gross gaming revenue rather than turnover from 1 January 2016 for sports betting and online skill games and 1 January 2017 for bingo.

This is felt to be positive overall in the medium term because operators will not bear the risk of volatile payout ratios, mainly associated with sports results.