Iliad Clobbers Rivals but Stock Takes a Hit
French telco Iliad has reported strong sales growth for the first three months of the year after signing up more new mobile customers than any of its bigger rivals for what it claims was the 21st quarter in a row.
The operator, founded by French billionaire Xavier Niel, said in a sales update that revenues increased 7% in the first quarter, to more than 1.2 billion ($1.3 billion), compared with the year-earlier period.
Despite the sales improvement, Iliad's share price was down about 4% in Paris at the time of publication.
That drop could reflect investor concern about a looming mobile service launch in Italy, where conditions are likely to be much tougher than when Iliad (Euronext: ILD) entered the French mobile market several years ago. (See Iliad's Italian Odyssey May Be a Hard Slog.)
Iliad is also spending heavily to maintain its momentum in the French market: It plans to invest between 1.4 billion ($1.6 billion) and 1.5 billion ($1.7 billion) in France this year, up from about 1.3 billion ($1.5 billion) in 2016.
While most operators invest between 15% and 20% of their revenues in capital expenditure, Iliad's spending in 2016 represented as much as 28% of its sales.
Iliad has picked up nearly quarter of a million new mobile customers since the end of December, bringing its total to about 12.9 million. Its number of 4G customers rose by about 400,000, to 6.3 million.
The company also reported modest gains in the fixed broadband sector, adding 66,000 new subscribers, to give it 6.45 million altogether.
The number of customers using high-speed fiber-to-the-home services remains low but rose by 59,000, to 369,000.
Iliad said that about 700 million ($780 million) of its sales came from landline services, 5% more than in the year-earlier period, with about 530 million ($590 million) generated from mobile, an increase of 9.3% on the figure for the first quarter of 2016.
Iliad has shaken up what was previously a moribund mobile market since launching its low-cost services in early 2012, forcing bigger rivals Orange (NYSE: FTE), Numericable-SFR and Bouygues Telecom to overhaul their own tariffs or continue to hemorrhage customers.
Strikingly, though, Iliad was able to boost customer numbers without seeing any reduction in per-subscriber spending.
In the landline sector, monthly average revenue per user (ARPU) rose to 34.5 ($38.4) from 34.4 ($38.3) a year earlier. While the company does not publish details of mobile ARPU, its figures indicate that it made about 40.85 ($45.47) from each mobile customer all told in the recent quarter, up from 40.64 ($45.23) in the year-earlier period.
The company has previously relied on an agreement with Orange to provide mobile services in parts of the country where its own network did not reach, but has been investing heavily in its own 4G infrastructure.
Besides updating on customer numbers, Iliad said that its own 4G network was now available to about 80% of the population, up from 76% at the end of 2016.
Iliad's mobile numbers compare very favorably with the first-quarter numbers from market leader Orange, which lost about 60,000 mobile customers (excluding M2M connections), leaving it with around 24.3 million in total. (See Orange Doffs Beret to Spanish Biz for Q1 Growth.)
Orange's mobile monthly ARPU shrank to 21.4 ($23.8), from 21.6 ($23) in the year-earlier period -- a figure that suggests its tariffs are still much higher than Iliad's.
Orange's ARPU has fallen from more than 30 ($33.4) per month in the first quarter of 2012.
Iain Morris, , News Editor, Light Reading