The enfant terrible of the French telecom market is looking further east for its next growth opportunity.
Iliad's Pole vault is bound to frighten its competitors.
Owned by French billionaire Xavier Niel, it has already proven a hard-to-beat adversary to older rivals in France and Italy since crashing their mobile markets in the last decade.
Today it announced a takeover bid for Play, one of four mobile network operators in Poland. The others will be asking what its arrival means for them.
Figure 1: 
French billionaire Xavier Niel has been a disruptive force in the European telecom sector.
The deal values Play at €3.5 billion ($4.1 billion) and would be financed through a mixture of cash and debt.
Iliad is offering 39 Polish zloty per share, a premium of 38.8% over Play's most recent closing share price.
For that fee, it has already signed a binding agreement with Play's main shareholders for a 40% stake, which would give it most of the seats on Play's board, it says.
Poland is an enticing prospect for Iliad. With 38 million people, it is central Europe's most populous country and one whose GDP per capita has grown by 6% annually over the last 20 years.
In this environment, Play's performance has been undeniably impressive. Launching services just 13 years ago, it now serves 15 million customers, giving it a 29% share of Poland's mobile market.
Last year, it made €1.6 billion ($1.9 billion) in sales, an increase of 2%, and €269 million ($317 million) in free cash flow.
Slashing prices has been one of Iliad's preferred tactics elsewhere. Yet it seems unlikely in Poland, where Iliad is buying a price-competitive operator rather than launching a new service.
Iliad's expertise could be vital in boosting the amount of business Play does through online sales channels, however.
The French operator also spies an opportunity to "facilitate" Play's entry into Poland's fixed-line market. In France, Iliad began life as a broadband operator, renting lines from Orange, the incumbent, to build market share.
Jean-Marc Harion, Play's chairman, clearly has an eye on Iliad's fixed-line heritage and earlier successes.
"This alliance with the Iliad Group marks an important chapter in Play's history, as it will accelerate its business development in fixed services," he said in a prepared statement recommending the deal to Play's shareholders.
Shareholder concern
Iliad's investors may be warier. The company's share price fell nearly 4% in France this morning as investors weighed the impact of a deal.
"Iliad is an opportunist with a strategy that works best in over-priced, under-competitive markets without a strong value leader," said Emma Mohr-McClune, an analyst with GlobalData, in emailed comments.
"Play has already leveraged that role in Poland for several years, and as a result this market now hosts some of the lowest 5G pricing levels in the EU, as well as a hyper-competitive mobile and convergence service landscape; it's difficult to see Iliad's opportunity opening here."
One investor concern will be the effect the deal has on Iliad's balance sheet. The operator's net-debt-to-earnings ratio was about 2.2 at the end of June. That will rise to roughly 3.2 as a result of the acquisition, increasing the pressure on Iliad to generate profits.
At the earnings level, Iliad has done a reasonable job of that lately, despite the pandemic-era difficulties.
For the first six months of the current fiscal year, it grew EBITDAaL (now a common measure that translates as earnings before interest, tax, depreciation and amortization, after leases) by 9.4%, to €876 million ($1.03 billion), compared with the year-earlier period.
Group revenues over that period were up 1.8%, to nearly €2.5 billion ($3 billion). And Iliad is confident Play will be "accretive" to free cash flow per share from year one of the takeover.
There may also be opportunities for cost savings and joint procurement activities with the Play takeover, especially if Iliad's intention is to focus more heavily on Internet sales and other online business.
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In its statement, Iliad says integrating Play will result in "synergies," without providing any details.
But the move comes at an awkward time on the geopolitical front. New Polish legislation could prevent the country's telecom operators from using Chinese equipment in their networks, and Play seems heavily reliant on Huawei, China's biggest maker of network equipment.
According to a recent report from Strand Consult, an advisory group, as much as 90% of products used in Play's radio access network come from Huawei. Switching to another supplier could add to Iliad's expenses.
Much like other European operators – Iliad included – Play has announced plans to spin off the towers that host its mobile network, selling shares in that business to other investors.
This would certainly help with deleverage, even if it means ceding control of network infrastructure.
Iliad just needs to hope the current appetite among investors for long-term infrastructure bets remains healthy.
UPDATE: Analyst commentary included.
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— Iain Morris, International Editor, Light Reading
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