PARIS -- During the first half of 2004, Iliad demonstrated its renewed ability to deliver profitable growth, reaffirmed its leadership in the French broadband market and improved further its profitability ratios.

The Group’s ADSL market share grew to 16.9% as of June 30, 2004 from 15.0% as of December 31, in a highly competitive environment.

Free’s triple-play ADSL package (in unbundled areas) and dual-play ADSL package (in non unbundled areas) remain attractively priced at a unique € 29.99 per month.

The total number of ADSL subscribers was 768,000 as of June 30, 2004 of which 355,000 were unbundled and 330,000 equipped with a Freebox modem.

One.Tel’s subscriber base increased to 328,000 at the end of June from 215,000 at the end of December, a 53% increase. Customer acquisition should slow down during H2 2004 in order to reach the Telephony sector EBITDA target.

Kertel sold 3.9 million prepaid cards over the period. With a constant focus on customer satisfaction, Iliad has also pursued its strategy of service and technological innovation. Free’s ADSL offering* in unbundled areas is the only full triple-play service in France, with the following key features :

* Depends on copper line characteristics

In light of these strong fundamentals, Iliad’s management has upgraded its two key targets announced at the IPO: The 1 million ADSL subscriber mark should be reached during the first half 2005 vs. at the end of 2005 previously announced. Based on signed IRU agreements, the percentage of unbundled customers should be above 70% by June 2005 vs.a target of 60% at the end of 2005 previously.

The 77.2% consolidated revenue growth was fuelled by (i) continuous ADSL subscriber growth (ii) increased subscription to One.Tel’s service pursuant to intense marketing efforts and (iii) strong Kertel sales (accounted over a full six months).

106.5% EBITDA growth.
It is worth noting that EBITDA progressed significantly in the Internet sector (up 219.2% at €35.1 million). Internet sector EBITDA margin3 progressed to 24.7% in 1H04 vs. 14.1% in 1H03 and 17.4% in 2H03. This performance further validates the rationale of unbundling the local loop and the benefits to Iliad of operating its own network. On the other hand, the EBITDA margin of the telephony sector decreased to 11.0% in 1H04 vs. 21.8% in 1H03 and 17.7% in 2H03. This level was impacted, as expected, by increased marketing expenses at One.Tel during the first part of the year. Iliad reiterates its objective to at least maintain its telephony sector EBITDA at the 2003 level.

53.0% EBIT growth to € 24.2 million. Iliad was able to significantly increase its EBIT level despite depreciation charges increasing by 241% to € 21.4 million. Pre tax income increased by 103.6% to € 24.0 million. Net income increased to € 15.5 million despite a full income tax charge at 35.43%.

In the fast growing French broadband market, Iliad’s strategy has been to focus on a few well-defined objectives:

Following these simple principles, the Group has been able to reinforce its market share quarter after quarter and to become the leading alternative ADSL operator in France.

As explained at the time of the IPO, management believes that 2003, 2004 and 2005 are key years in the ADSL land grab and that it is uniquely positioned to be at the forefront of that battle, thanks to its proprietary network and Freebox technology.

Iliad