Iliad SA, the owner of France’s largest alternative broadband provider Free, says it has made an offer for Deutsche Telekom’s French internet business Club Internet. Serving 600,000 ADSL and 400,000 narrowband subscribers, the company has been valued at €340 million by the French bank Exane BNP Paribas.
It seems that everyone is interested in buying Club, with the country’s other competitive broadband operators Neuf Cegetel and Noos-Numericable also saying they have submitted bids. Telecom Italia has not yet announced a bid but is another likely candidate, operating in France under the Alice brand.
Iliad’s 2006 net profit rose by 80% to €123.9 million, as revenues grew 31.2% to €950.3 million. Sales of optional value-added media services on the operator’s set-top-boxes more than doubled to €163.4 million in 2006 from €74.8 million in 2005.
Iliad also says CEO Michael Boukobza will step down this summer to ‘focus on personal projects’, with Maxime Lombardini to take his place. Lombardini joined Iliad as head of development from TF1, where he was head of production. The company’s share price dropped 5% yesterday despite better than expected results due to this announcement and a lower than expected dividend of €0.27.
Boukobza declined to comment on reports. The company and its chairman Xavier Niel, who owns 67% of the company, are negotiating a sale to private equity group Cinven, which acquired cable op Noos-Numericable last year. Cinven is said to be prepared to pay €5 billion for the alternative telco.
“What we can say is that Xavier Niel intends to remain a shareholder in the company, but he would submit all interesting offers to the board if any are made,” was all the ‘comment on rumors’ Boukobza was willing to make.
Free currently has 2.3 million broadband subscribers and a 19% market share. The operator expects to have more than 2.8 million subscribers by the end of this year. Serving 80% (currently 76%) of its customers through its own network will also help improve Free’s margin. Unbundled customers are also able to subscribe to other services such as the company’s IPTV service, thereby increasing ARPU.
Iliad is also starting to build out its Fibre-to-the-home (FTTH) network, as announced last September. Its total build cost is said to be €1 billion, and the operator expects to have 30,000 customers by the end of this
year. They will pay the same as DSL subscribers – €29.99 per month for the triple-play service- but receive a higher Internet speed of 50 Mbit/s.
The fibre build-out should be completed by 2012, when the network will pass 4 million homes. Half a million homes should be passed by the end of this year. Of these, 350,000 will be in Paris and 150,000 in its suburbs, as well as the cities of Montpellier, Lyon, and Valenciennes. The fibre capex this year will be limited to €150 million, about half of the previously announced figure. This gives rise to expectations there will be less duplication and more network sharing among Iliad, France Telecom and Neuf Cegetel.
A bid for the fourth 3G mobile license has become very unlikely, as the French government is looking to receive the same fees from the new entrant as it does from existing operators. “Iliad shareholders will not pay €619 million [for the licence]”, Boukobza added.