Iliad partners up to accelerate fibre rollout

via Flickr © Leonardo Rizzi (CC BY-SA 2.0)

via Flickr © Leonardo Rizzi (CC BY-SA 2.0)

  • Will form an infrastructure company and build out more fibre
  • The goal is to attract third party operators onto the network
  • Says it’s the only operator in France to offer 10G fibre and offer upload speeds of 600 Mbit/s

In an almost carbon copy of the impending (but still only rumoured) move by Liberty global/Virgin media to build a new UK fibre network and to entice Sky to join in as an anchor tenant (see - UK's fibre build breaks into a canter), the Iliad Group and a French private equity firm (InfraVia) have today announced a similar plan to accelerate FTTH rollouts in France. 

As with the UK move (still not confirmed at the time of writing) the Iliad plan is to form a new corporate entity and use it to build infrastructure to target fibre-starved neighbourhoods outside the densely populated areas. These, they calculate, comprise around 26 million lines. 

In these non-dense areas, conventional vertically integrated network and service models tend not to stack up to make a business case, so the arrangement is carefully designed to attract multiple content or service providers who together can market competitive services and attract enough subscribers to make the underlying infrastructure viable. 

It’s an approach that finally seems to have gained traction in Europe in the wake of  the developing regulatory framework and new European directives, which together champion co-investment as the key to accelerating FTTH  rollouts across the EU.

Iliad says its alliance with InfraVia is therefore in keeping with the regulatory push and will help it maintain its status as the leading ‘alternative’ FTTH operator in France, with 11.5 million connectible sockets and a sales presence in all of France's regions.

It also claims to have had the largest number of FTTH net adds in the second quarter of 2019 and is the only operator in France to offer 10G Fiber technology and provide an average upload speed of 600 Mbps on a widespread basis. (see - Free's fibre figures show French market marching on)

Iliad’s new fibre network entity will be responsible for acquiring and operating the Group’s co-financed FTTH tranches in the areas concerned. It says that Free will transfer its existing co-financing agreements to the entity along with around one million existing co-financed sockets. The Group will sell 51 per cent of the entity to InfraVia based on an enterprise value of around €600 million.

“The dedicated company will then co-finance the creation of new sockets and take up new co-financing tranches,” Iliad claims. “The dedicated company and Free will enter into a very long-term service agreement, under which the company will provide all access and information services for the co-financed sockets and will also be able to offer the same services to third-party operators.”

Why the carefully complicated commercial structure? 

The objective is to ‘co-develop’ in such a way so that no single company can be accused of controlling more than 20 per cent of the national infrastructure and therefore be in a position to exercise significant market power. Such a position would open it up to regulatory controls in the future. 

The potential downside?

That all the big infrastructure owners (all under 20 per cent market share) get together to squeeze out unwanted new entrant service or content providers. 

Still, that’s an issue for another day. 

Iliad market share setback

Reuters reports that Iliad has today reported a loss of 127, 000 subscribers to competitors in the first half of the year, sending shares in the French telecoms operator lower on Tuesday morning.

However, up popped Iliad CEO, Xavier Niel, to point out that the company was retaining the higher margin contracts and was “extremely optimistic about the evolution of the number of subscribers.”

According to Reuters, shares of Iliad were down 2.4 per cent at 92.68 euros in mid-morning trading. They have fallen 50 per cent over the past 18 months. 

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