Iliad's Free Strategy Pays Off
Iliad says its revenues for the first half of the year are €337.8 million (US$412 million), and that it had 1,316,000 ADSL customers on June 30, up from 1,064,000 at the start of the year. This makes it number two in the French broadband market with a 17 percent share, behind incumbent France Telecom SA (NYSE: FTE), which had 3.66 million on the same date. In all, there are 7.8 million DSL lines in France, according to the incumbent's latest statistics.
Iliad's Free Internet-based services accounted for €260 million ($317 million) of the revenues, while its traditional voice business, One.Tel, and calling-card operation accounted for €72.4 million ($88.3 million), with the remaining €5.4 million coming from other Iliad services.
The company believes it will announce earnings before interest, taxes, depreciation, and amortization (EBITDA) of more than €90 million ($109.75 million), twice the amount from the same period a year earlier, when it releases its audited results for the first half of the year on September 8. It also believes it will achieve its target of 1.5 million broadband customers by year's end, upgrade all its DSLAMs to ADSL2+ by 2006, and generate positive cashflow during the second half of 2005.
The news sent Iliad's share price up by more than 2 percent to €35.10 on the Euronext Exchange. The company staged its IPO in January 2004, when its shares floated at €16.30 (see Investors Go Mad for Free Shares).
The operator's progress is even more impressive given the intense competition in the French market, where Free is competing not only with FT, but also with Neuf Telecom, and Telecom Italia SpA (NYSE: TI), which bolstered its market share earlier this year when it acquired Liberty Surf (see Italians Prep Big French DSL Rollout and Neuf: Time Is Right for IPTV).
But Free was early to the market with its offer of voice, video, and high-speed Internet access over a single connection, and it aims to keep ahead of the pack by exploiting the capacity afforded by its ADSL2+ access infrastructure and its aggressive pricing. The company offers its all-inclusive triple-play service for just €29.99 ($36.58) per month and was the first in France to offer high-definition TV over DSL.
Heavy Reading analyst Graham Finnie says Free's early success, helped by an effective regulatory regime, has been the catalyst for the broadband revolution in France, as it forced the other operators to develop and launch competitive services perhaps earlier, and at a lower price, than they otherwise would have.
As a result, says Finnie in his recent report, Next-Generation Broadband in Europe: The Need for Speed, "France has the cheapest broadband in Europe on a per-megabit cost basis. In addition, all the major service providers, including cable operator Noos, are offering triple-play services, and France Telecom has committed to an ambitious plan to make HDTV commercially available from all of its exchanges by the end of 2006 -- a strong signal that France is likely to be the pioneer of HDTV in Europe."
— Ray Le Maistre, International News Editor, Light Reading