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Iliad Reaches Record Since 2004 IPO on Mobile Users: Paris Mover

Iliad SA Founder Xavier Niel
Shares of the broadband company founded by entrepreneur Xavier Niel, seen here, have jumped more than 30 percent this year, as Iliad took wireless customers from France Telecom SA and Vivendi SA’s SFR unit. Photographer: Antoine Antoniol/Bloomberg

Iliad SA, the wireless company that shook the French market with 2 euro-a-month ($2.50) packages, rose to a record in Paris after winning 3.6 million subscribers in the first six months of its venture into mobile and beating earnings estimates.

The shares rose as much as 5.9 percent, the biggest jump in three months, to 127.75 euros, a record since the Paris-based company first sold shares publicly in January 2004 for 16.3 euros apiece. The stock was up 3.5 percent at 124.90 euros as of 9:31 a.m. local time.

Shares of the broadband company founded by entrepreneur Xavier Niel have jumped more than 30 percent this year, as Iliad took wireless customers from France Telecom SA and Vivendi SA’s SFR unit. Iliad’s market-share was about 5.4 percent at the end of June, up from the 4 percent it had 80 days after it started its wireless business.

“The mobile trends are strong again -- they’ve got solid customer intake in the second quarter,” said Stephane Beyazian, an analyst at Raymond James Euro Equities. “One point to keep an eye on is how heavy investments will be going forward.”

Iliad’s first-half revenue jumped 39 percent to 1.44 billion euros, the company said today. Net income fell 45 percent to 80 million euros because of startup costs on mobile. Analysts had projected profit of 75 million euros on sales of 1.37 billion euros, based on seven estimates compiled by Bloomberg.

Growth Forecast

Iliad entered the mobile market under the brand name Free on Jan. 10 with discounted packages priced at 2 euros and 19.99 euros a month. It distributes exclusively over the Internet and doesn’t subsidize handsets, in a strategy based on lower prices and costs on average compared with those of France Telecom, SFR and Bouygues SA.

“When we look at the wave of subscribers we’ve gotten on mobile and fixed, we have hints telling us that it won’t just stop from one day to the next,” Chief Financial Officer Thomas Reynaud said in an interview.

Iliad forecast “strong” revenue growth in 2012 and expects sales of more than 4 billion euros by 2015. Its mobile market share should reach 15 percent in France “in the mid-term” and 25 percent “in the long run,” it said.

“We could do even better in the second half if we play our cards right,” Reynaud said, referring to the 39 percent sales increase in the first half.

The company still makes most of its business by selling fixed-line phone packages. Revenue from that business, which accounted for 78 percent of sales in the first half, will grow more than 5 percent in 2012, Iliad said. Sales in the fixed unit grew 9 percent in the first half to 1.13 billion euros.

Rivals Outpaced

In mobile, Iliad has outpaced other late entrants in Europe, such as Yoigo in Spain and Three in the U.K. and Italy. TeliaSonera AB’s Yoigo edged up to 5 percent of the Spanish market at the end of 2011, five years after its service started. Three, the wireless unit of billionaire Li Ka-shing’s Hutchison Whampoa Ltd., took about eight years to win 10 percent of the U.K. and Italian markets.

In France, competitors have scrambled to fight back by lowering prices, drafting cost-cutting plans and starting separate discount brands to sell voice and data packages over the Internet, stripped of a phone and of in-store service.

France Telecom, the country’s former monopoly and largest phone company said last month it stabilized its wireless market share at home at about 38 percent thanks to price cuts.

Vivendi said yesterday it would cut operating costs by about 500 million euros annually by the end of 2014 at the SFR unit. The division’s earnings before interest, taxes and amortization slumped 18 percent in the second quarter. Third-ranked competitor Bouygues cut its profit target this week, also citing increased competition.

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