Iliad

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  • December 14, 2018

    Iliad running out of luck

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    Once on the winning side of strategic French telecoms price wars thanks to a struggling SFR, Iliad now looks wounded, and a possible prey, suffering from declining fixed and mobile KPIs – we expect cash flow losses of €617 million this year. Broadband, in a capex-heavy migration to higher margin fibre, may stabilise revenue with (somewhat) differentiating new ‘Freeboxes’ bundled with Netflix. Mobile (€2.3 billion burned since launch) hopes rest on on-net transition fostering profitability, but the 5G capex race looms. The new Italian mobile venture is explicitly and surprisingly behind the French legacy: it is already delivering a worse performance, and carrying much higher outlays (after 5G auctions spiralled). We believe Iliad has to revamp its model in France and consider differentiation with content to escape the discount brand trap.
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  • May 15, 2018

    Covert growth in UK mobile

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    The UK mobile market is growing strongly – we estimate revenues by 5% and EBITDA by 8% in 2017 – excluding one-off regulatory drags and the loss of non-profit-generating handset revenue. Regulatory price cuts end in mid-2018, and the handset effect will disappear from all reported figures from April 2018, leaving scope for very positive headline growth next year – considerably better than its European comparators and the sluggish UK fixed market. The outlook for the UK mobile industry is the best it has been in a decade, with significant growth in data demand, price increases, some supply constraints, rational competition, and major regulatory drags rapidly fading.          
  • UK mobile market Q4 2016 – Nearly back to growth
    UK mobile market Q4 2016 – Nearly back to growth
    December 18, 2017

    European mobile in Q3 2017: Still growing (just)

    European mobile service revenue growth declined this quarter to 0.3%, likely due in large part to the increased negative impact from the European roaming surcharge cuts, which we estimate at around 0.5-1.0ppts for Europe as a whole. The continued growth was supported by continued ‘more-for-more’ price increases coupled with strong data volume growth. Partially countering this, there has been a step up in competition at the low end in some markets, often driven by the smaller operators. Looking forward, the negative EU roaming impact is likely to decline from next quarter given the end of the summer holiday season, and on balance we would expect positive price increase trends to overcome negative low end competitive trends, at least in the short term. This might change in 2018, as Iliad launches in Italy, and recently consolidated operators become more of a threat.    
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  • December 14, 2017

    Iliad launching in Italy:Breaking the curse of the fourth operato [...]

    Against the consolidation trend in the European market, France’s Iliad is to launch a fourth mobile network in Italy in the next few weeks, thanks to a roaming and frequency access agreement with Windtre — this deal allowed Wind and Tre to gain regulatory clearance for their merger. The model followed by Iliad’s Free Mobile in France since 2012 cannot be reproduced in Italy, where prices are already low and where it has no established brand reputation. Iliad’s owner Xavier Niel’s experience in oligopolistic Switzerland is of little relevance, and Germany’s Drillisch use of M&A to fill its capacity is not an option in Italy. Nevertheless Iliad has opportunities to seize in Italy where subscriber churn is the highest in Europe, customer service variable, and trust in telecoms brands very low. A credible consumer-friendly value offer could become a real alternative to the three incumbents, although distribution will still be a challenge
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  • European mobile in Q4 2016
    European mobile in Q4 2016
    April 19, 2017

    European mobile in Q4 2016

    European mobile service revenue growth was unchanged in Q4 on the previous quarter at -0.1%, tantalisingly close to growth but just held back by renewed mobile termination rate cuts in Germany. ‘More-for-more’ tariff changes are becoming increasingly commonplace, as operators increase data bundle sizes to allow for volume demand growth, but nudge up pricing as partial compensation. This has not yet translated into positive revenue growth across Europe as a whole, but increasingly looks like it will do, with a number of moves made in early 2017.
  • April 12, 2016

    European mobile in Q4 2015 – The challengers’ challenge

    European mobile service revenue growth was flat at -0.8%, while underlying country movements were somewhat more dramatic. The key highlights were Italy returning to positive growth driven by pricing stability, and France showing worsening growth decline for the first time in over two years impacted by challenger telco pricing cuts. An assessment of these challenger telcos highlights a somewhat precarious position, as continued price aggression yields diminishing incremental gains, and they all remain some way from gaining the scale to achieve profitability. The only incentive for challengers to remain aggressive is as an encouragement for their competitors to buy them; increasing regulatory hurdles to consolidation would remove even this incentive, leaving price increases as their only rational route to profitability.
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    December 17, 2015

    European mobile in Q3 2015 – Consolidation before convergen [...]

    European mobile service revenue growth again improved, albeit marginally, with the quarter’s gain driven by declines easing further in what nevertheless remain the three weakest markets: France, Italy and Spain. Generally stabilising pricing environments were a key factor although ARPUs in these markets remain largely in decline, under continued pressure from strong out-of-bundle revenue declines. In a post-consolidation world, H3G/O2 in the UK and Yoigo in Spain will be the only mobile-only MNOs in the top five European mobile markets, effectively cementing a convergence based future. Consolidation trends might point to the prospect of greater price stabilisation but a fresh land grab for the converged market could derail this. Overall, in spite of healthy underlying data trends, we continue to see medium term growth recovery prospects capped at around 1% given precedent from both the UK, where a healthy economy, healthy pricing environment and strong data trends have failed to exceed this level, and Germany, where post-consolidation revenue growth has reverted to negative territory, both due to competition and consolidation.
  • April 13, 2015

    European mobile in Q4 2014

    European mobile service revenue growth improved for a fourth consecutive quarter jumping 1.7ppts to -2.7%, the slowest rate of decline in over three years. Easing declines in France, Italy and Spain largely drove the improvement but a full recovery in these markets is still some way away given that all of their growth rates remain below -5%. The UK, and now Germany, are experiencing positive mobile service revenue growth although their improvements in the quarter were more modest. Three announced consolidation transactions have yet to be approved by the regulators although none of these deals are likely to offer much market repair, being either of the wrong kind of deal or being in markets that are growing. Consolidation targets remain in France, Italy and Spain which offer clearer routes to market recovery as seen in Germany where the consolidation of O2/E-Plus has already led to positive rhetoric on medium term market growth prospects. Network investment continues with 4G roll-outs at or over 70% population coverage in all markets and targets being accelerated, supporting long term optimism in the sector. Strong data traffic growth coupled with the growing importance of data to service revenue give a clear focus for operators on value-adding network quality investment, although the impact of pricing competition in some markets could weigh on the ability to capitalise on these trends in the medium term.

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    March 24, 2014

    European mobile in Q4 2013: Focused on consolidation

    European mobile service revenue growth again disappointed in Q4, dropping slightly from -8.9% to -9.1%, with underlying revenue growth dropping a little further from -6.0% to -6.3%, again reaching a record low. There had been hopes that improved GDP growth would drive a volume rebound, that price declines would start to annualise out, and that declining out-of-bundle usage would wane in its impact as this usage declined. In the event, ongoing price competition from smaller operators, MVNOs and quad play offerings, combined with surging use of OTT communications platforms, have dominated trends. In the medium term, the development of 4G and Vodafone's Project Spring may bring some much needed network differentiation back to the market, allowing pricing power to return to the larger operators. However, it will be 2015-2016 before these factors come into play: in the short term, the main source of optimism is consolidation.

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    December 3, 2013

    European mobile in Q3 2013: Improving to minus nine

    In this presentation we show our analysis of revenue growth trends for mobile operators in the top five European markets (UK, Germany, France, Italy and Spain). The historical analysis is based on the published results of the operators, although they include our estimates where their data is inconsistent or not complete. A copy of the underlying data in spreadsheet format is available to our subscription clients on request

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    September 19, 2013

    European mobile in Q2 2013: Still terrible; investment and consol [...]

    In this presentation we show our analysis of revenue growth trends for mobile operators in the top five European markets (UK, Germany, France, Italy and Spain). The historical analysis is based on the published results of the operators, although they include our estimates where their data is inconsistent or not complete. A copy of the underlying data in spreadsheet format is available to our subscription clients on request

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    June 4, 2013

    European mobile revenue growth and outlook Q1 2013: Hitting a nad [...]

    In this presentation we show our analysis of revenue growth trends for mobile operators in the top five European markets (UK, Germany, France, Italy and Spain). The historical analysis is based on the published results of the operators, although they include our estimates where their data is inconsistent or not complete. A copy of the underlying data in spreadsheet format is available to our subscription clients on request

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    May 10, 2012

    Numericable: beyond deleveraging

    France's sole cable operator, the smallest of the country's five broadband providers, is sub-scale on the retail market and the heavy cost of servicing its debt leaves only meagre resources to leverage its superior network commercially. However, thanks to its white label deal with Bouygues, Numericable has resumed revenue growth and should achieve its 2014 debt/EBITDA target. As France Télécom's network upgrade to fibre progresses, the main upside for Numericable lies in a closer alliance with Bouygues and possibly other DSL providers.
  • Iliad
    Iliad
    March 13, 2012

    Iliad gears up its investment

    Iliad accelerated fixed line subscriber recruitment in 2011 thanks to a substantial increase in capital expenditure on its Révolution box, shrinking its cash flow margin. Iliad's margin should recover somewhat in 2012 thanks to decreasing box prices. Fibre deployment is being scaled back due to weak demand. Mobile operating losses may be modest this year, but we expect pressure will build up in 2013 as network running costs rise and the termination rate asymmetry drops out.
  • February 22, 2012

    Launch of Free Mobile

    The launch of the fourth mobile network operator in France has so far met with dramatic success, gaining around 1.5 million subscribers in the first month, driven by rock-bottom pricing and a clever mass media PR campaign. Its tariffs are, however, so low that it is very hard to see how they are sustainable in the longer term. In the short term, Free's economics are boosted by asymmetric voice and text termination rates that result in other operators' customers effectively subsidising Free subscribers by €5 to €10 a month. This arbitrage is very likely to disappear over the next two years, but Free Mobile can increase its prices when this occurs. Its challenge will be to acquire a critical mass of subscribers before this point, and to retain them thereafter.
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    November 24, 2011

    Mobile revenue growth and outlook Q3 2011: The outlook bleakens

    In this presentation we show our analysis of revenue growth trends for mobile operators in the top five European markets (UK, Germany, France, Italy and Spain). The historical analysis is based on the published results of the operators, although they include our estimates where their data is inconsistent or not complete. A copy of the underlying data in spreadsheet format is available to our subscription clients on request

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    January 24, 2011

    French fixed line retail upheaval

    French ISPs are about to enter a disruptive four month window of penalty-free broadband subscriber churn, triggered by the VAT rise on IPTV. SFR has followed Iliad's Free by offering unmetered fixed-to-mobile calls at the risk of ARPU decline. We expect Free's market share to stabilise, whilst those of SFR and Bouygues should rise to the detriment of Orange.
  • Iliad
    Iliad
    December 22, 2010

    Iliad’s Freebox V6

    France's Iliad will rekindle broadband subscriber recruitment with its Freebox V6 (router and TV set-top box), and extension of the triple play to include unmetered fixed-to-mobile calls. Freebox V6 is positioned as an innovative premium quasi-PC device including a 250GB PVR, a Blu-ray player, a game console and a web browser, re-establishing Iliad's technology leadership. Iliad expects that V6 subscribers will be less profitable in the short term than in the medium term, but cumulative free cash flow guidance for the ADSL business remains unchanged for 2010-12.

  • France Télécom
    France Télécom
    September 13, 2010

    French telecoms retail highlights

    Late entrant Bouygues Telecom is gaining broadband market share via the quad play. Orange and SFR have now also launched quad plays, but Iliad's mobile offers will be ready only in 2012. Iliad hopes to use its new Freebox to energise recruitment around new IPTV services in Q4 2010. SFR will also launch a new box. Led by a likely VAT hike for triple play bundled IPTV services in 2011, triple play pricing is set to rise after many years, from €30 to €35/month. FTTH upgrades in urban areas will be gaining visibility this winter.
  • Iliad
    Iliad
    March 31, 2010

    Iliad withstands new competitive pressures

    France's altnet Iliad again delivered stronger than expected profit and cash flow growth in 2009 on the back of continued strong results at the Free brand and a positive contribution from the Alice brand. These results demonstrate the continued pull of Free for the triple play customer despite intensifying competition, including from cable, making the low cost, low churn business model sustainable. By 2012, we expect fixed line profitability to increase and deliver enough cash flow to finance the launch of the Free Mobile project.
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    March 8, 2010

    French fixed line 2009 corporate results

    Despite the recession, in 2009 the French broadband market added 1.8 million connections to reach 19.6 million, but we expect the deceleration in growth to persist in 2010. Orange's leading position weakened further in Q4 2009, despite retail price cuts, and we expect a further decline in market share in 2010, impacting FT's top-line. SFR was the star performer of 2009, although its Ebitda margin has improved slightly. Iliad remains the ‘best in class' in terms of profitability, but must address high churn at Alice. Bouygues' fixed line début was an impressive splash – at a cost.
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    November 13, 2009

    Broadband, IPTV and Fibre in France

    This report on the French broadband market examines growth trends in 2009 and forecasts to 2012, updates our previous assessments of the commercial significance of IPTV in the triple play (a bundle of broadband, telephony and TV), and details the state of fibre-to-the-home (FTTH) deployment. Shrugging off the recession (milder and shorter than in the UK), the French broadband market is set to reach 19.6 million connections by the end of 2009, up 1.9 million on 2008 – only 12% less than the level of net adds of 2008. With 2009 better than we expected, we now anticipate a sharper slowdown in net adds in 2010, with 1.4 million net adds projected. We still expect the total to reach 22.8 million connections by 2012 (70% household penetration).

  • Iliad
    Iliad
    October 30, 2009

    Iliad unopposed for 4th mobile licence

    Iliad is the only candidate in the rerun of the French 4th 3G Licence tender and we believe its bid will be successful. Free Mobile could launch by the autumn of 2011 under a ‘low cost' model. We remain doubtful on the venture's economic prospects – Iliad appears to underestimate the network and subscriber acquisition costs required to build a mobile operator of profitable scale.

  • Iliad
    Iliad
    March 31, 2009

    Iliad’s 2008 results and prospects

    Iliad, now France's number two broadband provider, will increase total revenues by 10% per year by 2012, mainly by growing its subscriber base (rather than ARPU) in a market however rapidly reaching maturity. Excluding mobile, the EBITDA margin could rise by five percentage points to 40% in 2012, but a mobile launch in 2011 would pare the margin down to 32%. Funding both the fibre-to-the-home and the mobile network capex commitments could compress Iliad's cumulative cash flow to just €168 million during 2009-2012, thus requiring new financing or a minority partner in the mobile venture.