The investment bank has compiled a report claiming Tasmanian Premier Paul Lennon has set dangerously high expectations of Government and racing industry returns from Betfair.
The Tasmanian Government expects Betfair to secure 4 per cent of the market and be paying the state and its racing industry up to $50 million a year by 2010.
Morgan Stanley believes $25 million per annum is more likely based on expected growth in the industry and says Betfair will be lucky to gain even half the market it is banking on.
Betfair spokesman Andrew Twaits said the betting exchange is confident it will exceed what it says are conservative revenue estimates.
“We think that our projections are on the conservative side,” he said.
“Morgan Stanley are entitled to their opinion, but we\’re very comfortable with the figures that we\’ve put up to the Tasmanian Government.”
“We think they\’re on the conservative side for the first five years of our operations and we\’re very confident that we will meet, and we think exceed, those projections.”
UPDATE: Geoff Harper, Chairman of the Tasmanian Thoroughbred Racing Council, agreed with Morgan Stanley that Betfair\’s predictions are optimistic.
“Because the Australian wagering market is quite complicated, the wagering market they talk about relates back to parimutuel betting and straight win and place betting,” he said.
“So at the end of the day it\’s not possible for Betfair to achieve that without a significant increase in Australian betting somewhere in the order of about 30 per cent or a reduction in TAB turnovers.”
Harper also said Betfair had based its business plan on being able to operate nationally.
“Betfair\’s model says they will achieve these figures by betting into the Australian marketplace – but what happens if it doesn\’t work?” he said.
Betfair spokesman Andrew Twaits said the betting exchange was assuming it would be able to operate nationally, in the same manner that any other company would and would be protected under the Trade Practices Act and the Constitution.
Twaits added that the Morgan Stanley report failed to present the whole picture.
“The report fails to take into account a number of key factors, in particular the experience of Betfair in the UK, it has been going there for five and a half years and we have 6 per cent of the market already,” he said.
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