Iliad Updates on FTTH, 3G
The company, which had nearly 2.3 million broadband subscribers (19 percent market share) at the end of 2006, reported record profits of €124 million (US$163 million) from revenues of €950.3 million ($1.25 billion). And it expects to have 2.8 million customers by the end of 2007.
Despite those impressive numbers, the operator's stock fell 5 percent to €72.90 ($96.21) because investors had been hoping for a better dividend than the company's proposed €0.27 per share.
Today's investor presentation, though, was as much about the future as about past performance, as Iliad updated its fiber and mobile strategy.
The company is pushing ahead with its €1 billion ($1.32 billion) FTTH plan, first announced in September 2006, and is targeting 30,000 fiber customers by the end of this year. (See Iliad Plans €1B FTTH Build, Iliad Gets Active With FTTH, and Iliad Buys Into French FTTH.)
Those customers will get the same triple-play package as Iliad's DSL subscribers do -- voice, Internet access at up to 50 Mbit/s, and IPTV for €29.99 ($39.54).
By the end of 2007, Iliad plans to be passing 500,000 of the 4 million French households it plans to cover by the end of 2012. This year, 350,000 homes in Paris and a further 150,000 in the capital's suburbs and in Montpellier, Lyon, and Valenciennes will be passed at a cost of €150 million ($198 million). The operator's main build-out partners are Cisco Systems Inc. (Nasdaq: CSCO) and Draka Holding NV (Amsterdam: DRAK.AS). (See Draka Wins Iliad Deal and Free Uses Cisco for FTTH.)
Analysts at Lehman Brothers note that this capex outlay is half of the original guidance of €300 million ($396 million) for 2006 and 2007. Only €8.6 million ($11.3 million) was spent in 2006.
In a research note issued this morning, the Lehman team says this puts Iliad much more in line with the rollout plans of France's other FTTH hopefuls, Orange (NYSE: FTE) and Neuf Cegetel Group (Euronext: NEUF), and that this is a "positive move" that reflects the greater likelihood of network sharing between the business rivals. (See FT Fleshes Out FTTH and Neuf Launches 50-Mbit/s FTTx.)
3G and WiMax
Where the company is far less committed is 3G mobile. Having expressed an interest in France's fourth 3G license, Iliad has now decided the price -- €619 million (US$818 million), plus 1 percent of revenues -- is too high. (See Iliad Eyes Mobile License, Spectrum Up for Grabs in Europe, and ARCEP Invites 3G Bids.)
The company said today that asking the fourth license holder to pay the same fee as the existing 3G operators, which already have their networks built and customers signed up, does not constitute "fair treatment." So it will only bid if there is a "significant price reduction," a delayed rather than up-front payment schedule, or if Iliad can find a "credible equity partner."
Analysts at Dresdner Kleinwort can't see the fiscal terms being altered. "The first two are unlikely as the government has decided on the structure already and any deviation from previous arrangements would be vulnerable to legal action from incumbent licensees," states analyst John Davies and his team in a research note issued to investors this morning.
And while the Dresdner team believes there's more chance that Iliad could find a partner, perhaps an international mobile player or another domestic competitive carrier, they don't think the overall opportunity is attractive, retaining the view that "a full blown fourth mobile network in France will not happen."
Bids for the French 3G license are due in by the end of July.
Meanwhile, Iliad continues to check out the potential of disruptive broadband wireless technology WiMax. The company owns the only national WiMax license in France, following its acquisition of Altitude Telecom in 2005, and says it will have completed what it calls an "urban field test" by the end of 2007. (See Euro Altnets Step Up M&A.)
Now it's getting excited about the more widespread interest in the technology's potential, and during its investor presentation this morning noted the availability of 802.16e, or mobile WiMax, base stations from Motorola Inc. (NYSE: MOT), Nokia Corp. (NYSE: NOK), and Samsung Corp.
Iliad had not responded to questions about the trial, or its WiMax vendors, as this article was published, though in April 2006 the company announced it would make fixed WiMax services available to some customers on a trial basis using equipment from Alvarion Technologies Ltd. (Nasdaq: ALVR).
— Ray Le Maistre, International News Editor, Light Reading