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Iliad 'Disappointed' by H1 Customer Losses

Iain Morris
9/4/2018

French telco Iliad acknowledged its sales performance in the first half had been "disappointing" as it reported the loss of 70,000 mobile and 47,000 broadband customers, along with a fall in profit from ordinary activities.

Thanks to signs of a turnaround at the end of the period, and a strong performance in Italy, the company's share price was trading up more than 3.5% late morning in Paris, at €111.90 ($129.42). But it remains 44% lower than at the start of the year.

Owned by French billionaire Xavier Niel, Iliad (Euronext: ILD) has made its name as a disruptive challenger to France's telecom old guard. After establishing itself as one of the country's biggest broadband operators, Iliad caused mayhem for the likes of Orange (NYSE: FTE), Bouygues Telecom and Numericable-SFR when it launched a low-cost mobile service in early 2012. (See Orange Bullish in Spain as Convergence Bid Pays Off.)

But its fortunes have changed this year as rivals fight back. Iliad blamed its mobile losses on "heightened competition for entry-level offerings" and said the French landline market had also been "fiercely competitive" in the first six months.

Despite the customer setbacks, overall revenues were flat at €2.4 billion ($2.8 billion), compared with the first half of 2017, while earnings in France (before interest, tax, depreciation and amortization) were up 2.2%, to €894 million ($1 billion).

Overall EBITDA fell 1%, to €866 million ($1 billion), because of losses in Italy, where Iliad recently launched a mobile service. Iliad's profit from ordinary activities was also down 5.6%, to €406 million ($469 million).

A breakdown of the French results shows that Iliad managed to grow its mobile revenues by 2.4%, to nearly €1.1 billion ($1.3 billion), thanks to heavier spending by existing customers. However, the landline business registered a sales decline of 2.2%, to about €1.3 billion ($1.5 billion), which Iliad blamed on competition, higher VAT rates and new promotional deals.

Iliad said it had been taking steps to improve its domestic performance, including the launch of new offers and a promise to introduce "new boxes" for broadband customers in the near future. It is also increasingly focused on persuading its mobile customers to upgrade to pricier services.

A similar strategy can be seen on the broadband side, where the operator is trying to shift broadband users onto its high-speed all-fiber network. Despite the headline broadband losses, Iliad captured another 178,000 all-fiber customers to give it 734,000 in total. It also added another 200,000 4G customers, bringing the total to about 8.4 million.

Iliad finished June with about 13.6 million mobile customers and nearly 6.5 million broadband subscribers in the French market. Its investment in all-fiber expansion means there are now 7.9 million "connectible" sockets, up from 6.2 million at the end of last year.


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With overall capital expenditure up 8.9%, to €773 million ($893 million), first-half investments also went into the rollout of the company's own 4G infrastructure, which today covers about 90% of the French population, said Iliad. Nearly all of the company's mobile sites are connected to fiber, it now claims, insisting that fiber connectivity will be a prerequisite for the launch of higher-speed 5G services.

If there were disappointments in France, Iliad could take heart from its performance in the Italian market, where it has been able to capture as many as 1.5 million mobile customers since launching a service in late May. Results show that Iliad generated about €9 million ($10.4 million) in sales during one month in the Italian market, as well as an EBITDA loss of €28 million ($32.4 million), which Iliad blamed on startup expenses and the costs of using a rival's network to provide services. About €164 million ($190 million) in capital expenditure went toward developing the Italian business, Iliad said. (See Iliad Grabs 1M Customers by Day 50 of Italian Odyssey.)

The company's headline financial target is to achieve an EBITDA margin in France of about 40% by 2020, up from 37% now. It also plans to spend about €1.55 billion ($1.8 billion) this year on developing its fixed and mobile networks, up from about €1.5 billion ($1.7 billion) last year and an end-2017 forecast of between €1.4 billion ($1.6 billion) and €1.5 billion ($1.7 billion) for spending this year.

— Iain Morris, International Editor, Light Reading

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