France's Iliad Gets a Broadband Trouncing

Despite its aggressive tactics and braggadocio, France's Iliad is getting trounced in the country's broadband market by incumbent telco Orange and smaller rival Bouygues Telecom.

Owned by French billionaire Xavier Niel, Iliad (Euronext: ILD) began life as a thorn in the side of Orange (NYSE: FTE), renting capacity on the incumbent's network to provide copper-based broadband services to French consumers. Since then, however, it has been investing in its own fiber network, and made a game-changing entry into the French mobile market in early 2012.

Widely blamed for triggering a price war in the mobile sector, Iliad -- which trades using the Free brand -- is used to reporting headline figures that embarrass its competitors. That much was no different in the recent July-to-September quarter. Reporting sales figures earlier today, Iliad flagged a 6.5% increase in revenues, to €1.18 billion ($1.26 billion), compared with the year-earlier quarter. Bouygues Telecom reported less impressive growth of 4.2%, to €1.21 billion ($1.29 billion), while Orange's revenues were virtually unchanged, at €4.8 billion ($5.13 billion), over the same period.

When it comes to broadband customer growth, however, Orange and Bouygues are setting the pace. Orange picked up another 133,000 broadband customers in the July-to-September quarter, giving it about 11.1 million overall, while Bougyues gained 93,000, taking its total to about 3 million. Iliad managed just 66,000 additions and now serves about 6.3 million subscribers altogether.

What's unclear is whether Iliad is faring better when it comes to the really nippy stuff. The operator does not break out details of customer numbers for fiber-to-the-home (FTTH) services, indicating only that 4 million homes now have "connectable" FTTH sockets.

Orange, by contrast, revealed that its FTTH customer base grew by 127,000 subscribers in the recent quarter, with some customers upgrading from older broadband products. Bouygues, meanwhile, said it had 448,000 customers on services of 30 Mbit/s or higher at the end of September, and 91,000 on FTTH connections.

Whether or not Iliad is outperforming those two rivals in the ultrafast game, it can take some consolation from a comparison with Numericable-SFR , France's other big network operator. A part of the Altice cable group, it lost more than 75,000 broadband customers in the July-to-September quarter, picking up 44,250 FTTH subscribers but recording a net loss of more than 75,000 subscribers at its ADSL unit. Having served about 6.6 million broadband customers just two years ago, Numericable-SFR was down to fewer than 6.2 million at the end of September.

Of course, customer growth isn't everything. Many companies have sacrificed profitability to boost market share only to regret the strategy later. Having emphasized the importance of "profitable growth," Iliad continues to put rivals to shame on that front and remains France's second-biggest broadband operator by customer numbers.

But it also aims to capture a quarter of France's broadband market in the "long term," and grew its market share by just 0.2 percentage points, to 23.8%, in the year to September. Both Orange and Bouygues enjoyed meatier gains. For a company that makes such a big deal of its appeal to consumers, that will be a bitter pill to swallow.

— Iain Morris, , News Editor, Light Reading