Bouygues Chief Bitter Over Iliad's Inclusion
Martin Bouygues, the chairman and CEO of the French industrial group that bears his name, has lashed out at French competition authorities over the decision to let Iliad (Euronext: ILD) enter the mobile-phone market in 2012.
Speaking to analysts earlier today, Bouygues said the industry has gone through a "storm" in the last four years that has entailed the loss of 50,000 jobs.
"We've not been against a fourth license but we have said it should be done under well-defined and well-controlled conditions," said Bouygues, implying he was far from happy with the actual conditions.
Bouygues also claims he was previously informed that no "economic impact study" had been carried out regarding the licensing of Iliad when he requested access to such documentation.
"Whether that's true I don't know but I find it mind-boggling -- like launching a drug without doing clinical trials," he told analysts.
Despite his complaints, however, Bouygues believes his company can prosper in a four-player market and recently turned down an offer from cable group Altice to acquire Bouygues Telecom . (See Altice Queries Bouygues' Motives in Rejecting €10B Bid, Bouygues Says 'Non' to Altice and Altice Confirms Bid for Bouygues Telecom.)
Altice already owns Numericable-SFR , France's second-biggest telecom operator, and had hoped to merge the two companies to create a strong rival to market leader Orange (NYSE: FTE) and leave France with just three infrastructure-based players.
Asked to explain the decision of the Bouygues board to reject that offer, Bouygues said he could not go into the details of confidential talks but insisted that Bouygues Telecom would create value for shareholders as a standalone entity.
His comments were made as Bouygues Telecom swung to a current operating profit of €8 million ($9 million) in the second quarter from a loss of €7 million ($7.9 million) a year earlier, with revenues stable at €1.1 billion ($1.2 million) over the same period.
"The strategy of bringing costs down and readjusting offers and re-pricing the customer base -- a major project indeed -- is all behind us," said Bouygues. "The hard work is paying off at last."
Encouraged by the second-quarter improvements, the operator has raised its full-year outlook and now expects to generate EBITDA of about €750 million ($848 million), up from €694 million ($785 million) last year, having previously guided for a stable year-on-year performance.
It also now reckons it will easily beat an earlier target of reducing costs by €300 million ($339 million) in 2016 compared with the amount it spent in 2013.
Like Orange and Numericable-SFR, Bouygues Telecom has come under considerable pressure to reduce tariffs and spruce up its offerings following the market entry of Iliad, a low-cost rival that is widely blamed for triggering a price war in France's mobile market. (See Orange Earnings Dip on Price Competition and Iliad Plans Next Assault on French Rivals.)
Bougyues Telecom says its recent promotions have helped to boost 4G usage, with 42% of its 11.4 million customers on 4G plans at the end of June, up from just 19% a year earlier.
Besides managing to stabilize ARPU, the operator grew its mobile subscriber base by 160,000 connections in the second quarter.
Bouygues Telecom also flagged success in the fixed-line sector, where it is now investing in the rollout of fiber-to-the-home (FTTH) services.
Adding 78,000 fixed broadband customers in the second quarter, Bouygues Telecom had 2.6 million subscribers at the end of June, including 398,000 customers on very high-speed networks and 23,000 of those using FTTH services.
Analysts have expressed concern about the costs of deploying a fiber-optic network given the level of competition in France's broadband market, where Orange, Numericable-SFR and Iliad are all fighting for business. Bouygues Telecom's capital expenditure rose at a year-on-year rate of 12.8%, to €380 million ($430 million), in the first half to account for about 69% of the Group total.
Yet Bouygues urged patience during his earnings presentation to analysts.
"The fixed-line business has low EBITDA and high capex but this is early days and we have to spend a lot at first," he said. "We're only entering the market and the performance is pretty good -- believe me, profit margins will improve."
Bouygues Telecom expects to boost its fiber-optic footprint from 5.1 million premises at the end of June to about 7.1 million by the end of the year.
The operator also hopes to improve its spectrum position during a forthcoming auction of 700MHz airwaves -- ideal for providing mobile broadband services in less densely populated communities. (See Altice's Bouygues Bid Creates 700MHz Confusion.)
Bouygues says the company will provide more information about its telecom strategy at an information day for analysts on October 6.
— Iain Morris, , News Editor, Light Reading