Iliad Grabs 5.4% of French Mobile Phone Market

By Sam Schechner

PARIS--Iliad SA (ILD.FR) said Friday its new low-cost mobile phone service has grabbed 5.4% of France's mobile market in less than six months, reshaping both the strategies of rivals like Vivendi SA (VIV.FR) and the everyday behavior of cellphone customers.

Iliad's carrier, Free Mobile, has attracted 3.6 million subscribers in France since launching in January. However, its net income for the first half fell 45% to 80 million euros ($100 million) in part because of higher expenses to build the mobile service, which itself still loses money.

Overall consolidated earnings before accounting interest, tax, depreciation and amortization--a key figure for the telecommunications business--were roughly flat on the year at EUR417 million. But Free Mobile alone posted a EUR44 million Ebitda loss, which was offset by growth in Free's fixed-line Internet-TV-phone services, also sold under the Free name.

Overall revenue soared 38% to EUR1.44 billion, as the droves of new mobile customers added EUR320 million to the top line.

The fast adoption of the mobile service illustrates how quickly Iliad and its maverick chief executive, Xavier Niel, have reshaped the mobile-phone landscape in France--and potentially offered an example for other upstarts around the globe.

Free's mobile-service plans--one at EUR2 per month, and another with data service at EUR20 per month--shocked its much more pricey rivals in France, leading to an overall price reset from rivals such as France Telecom (FTE), Vivendi's SFR and Bouygues SA's (EN.FR) Bouygues Telecom.

Iliad's stock closed Thursday at EUR120.65, up by a quarter since early May.

-Write to Sam Schechner at [e-mail]

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