Iliad Tempers Its FTTH Target

Iliad (Euronext: ILD) is aiming to pass 241,000 Parisian homes with its FTTH (fiber-to-the-home) offer by the end of this year, about 30 percent fewer than originally planned, the French competitive operator said today. (See Iliad Reports Q3.)

Iliad, which provides triple-play services under its Free brand, announced in March this year that it planned to pass 350,000 homes in Paris and a further 150,000 homes in Montpellier, Lyon, Valenciennes, and some Paris suburbs, by the end of this year at a cost of €150 million (US$216 million). [Ed. note: Free actually charges money for its services. Go figure.] In total, Iliad aims to pass 4 million French homes by the end of 2012, a rollout that will cost around €1 billion ($1.44 billion). (See Iliad Updates on FTTH, 3G and Iliad Plans €1B FTTH Build.)

Now, though, the company has cut back its year-end Paris target by 109,000 homes. Iliad's new target is to have eight fiber access nodes operational by the end of the year capable of serving 241,000 homes with a triple-play service that promises up to 100 Mbit/s downstream and 50 Mbit/s upstream, free in-country VOIP calls, and more than 100 channels of IPTV for €29.99 ($43.25) per month, the same price as its current ADSL2+ package.

Rollout also appears to be a few months behind the original schedule outside Paris, too. For example, Iliad says it has begun the civil works in Valenciennes, a town of more than 400,000 residents in northeast France, but that service will not be available until the second quarter of next year.

In terms of FTTH capex for this year, the company says only that it had committed more than €100 million ($144 million) by the end of August.

Iliad, one of a number of carriers building out fiber access networks in France, is also being less bullish about the number of actual FTTH subscribers it believes it can sign up by the end of the year. (See FT Fleshes Out FTTH and Neuf Launches 50-Mbit/s FTTx.)

Each quarter, the operator publishes a set of year-end operating goals, which has in the past included having 30,000 fiber access customers by the end of 2007. That target no longer features in the company's stated goals: Iliad had not responded to questions about that particular target as this article was published.

While the operator didn't respond to questions about a slower initial rollout, it's believed that Iliad has faced some slight delays in finding premises in which to house the active Ethernet access equipment that will provide a dedicated fiber link to each subscriber. Another industry executive suggests that mainland Europe's FTTH pioneers may also be struggling to find enough experienced staff to deploy the new access equipment. (See Iliad Gets Active With FTTH.)

Those factors seem to be short-term issues, though. Iliad has been an aggressive rival to incumbent Orange (NYSE: FTE) for more than four years now and has built itself, and maintained, a fixed broadband share of around 20 percent by planning and executing a succession of service rollouts, of which fiber access is the latest, while keeping its prices and costs low. As a result, the operator looks likely to be a significant contributor to Europe's growing FTTH user base. (See FTTH Council Sets Euro Target.)

In the meantime, Iliad continues to add to its DSL customer base. At the end of September it had 2,767,000 broadband customers, an increase of 141,000 during the third quarter.

That growth has enabled Iliad to retain its year-end DSL customer target of 2.8 million, and it's still aiming to have 4 million broadband customers in total by 2010.

Iliad's third-quarter revenues were €307 million ($442 million), up 29.4 percent compared with the same period a year earlier. The operator also noted that its churn rate is lower than 1 percent, and that its ARPU (average revenue per user) is €35.30 ($50.91), up more than 5 percent from the third quarter of 2006. Iliad, which recently had a bid for a 3G mobile license rejected, did not report earnings and margin numbers today, as it reports those numbers on a half-yearly basis only. (See No 3G License for Free.)

Last week France Telecom reported its French DSL subscriber base had risen to 6.9 million, an increase of 327,000 during the third quarter. (See France Telecom Boasts Q3 Growth.)

— Ray Le Maistre, International News Editor, Light Reading

Mark Sebastyn 12/5/2012 | 2:59:52 PM
re: Iliad Tempers Its FTTH Target Free deserves recognition for their bold endeavor but the economics look particularly challenging to me. I hope I am wrong... but a 5% return on investment isn't anything to write home about.


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