Iliad reported a fall in first-half profits, as the weakness in its fixed-line business continued, it started to lose mobile customers in France and the company endured start-up losses in Italy. The company said it started a new sales strategy in June, which returned the fixed and mobile businesses to customer growth in the summer, and reiterated its target to improve margins over the full year. However, Iliad lowered its cash flow target for 2020 due to the problems at the fixed business.
Revenues in the first half were flat year-on-year at EUR 2.40 billion. The French fixed business fell 2.2 percent to EUR 1.33 billion, while mobile grew by 2.4 percent to EUR 1.07 billion, and the Italian business contributed EUR 9 million.
EBITDA fell 1.9 percent to EUR 866 million, including a loss of EUR 28 million in Italy. In France, EBITDA was up 2.2 percent to EUR 894 million, and the margin rose nearly 1 percent point to 37.3 percent. Iliad said it continued to benefit from an improved traffic and subscriber mix at the mobile business, while the landline business suffered from promotional offers, higher VAT and new TV deals. Net profit for the group reduced 0.4 percent to EUR 232 million.
Margin targets maintained
For the full year, the company said it expects to maintain the improvement in the French EBITDA margin, on its way to a target 40 percent in 2020. Italy should also reach EBITDA breakeven, on a market share of less than 10 percent. However, Iliad lowered its forecast for free cash flow (EBITDA minus capex) to EUR 1 billion in 2020, due to the tough competition and lower profitability in French fixed market.
In the second quarter, Iliad also started to lose mobile customers in France. Free Mobile shed 200,000 subscribers, which the operator said was mainly on its EUR 0 or EUR 2 plan as it focuses on the higher offer. The company said it still added half a million customers in the first half for its more expensive unlimited plan, which reached a total of 7.55 million subscribers, out of 13.625 million mobile users in total. Free said the mobile business returned to net adds in July/August after it launched a new mid-tier offer at EUR 9 per month the first year before migrating to the unlimited plan.
In the French fixed market, Free lost customers for a second quarter in a row, down by 28,000 to 6.473 million. The promotional activity showed in broadband ARPU figures, which fell to EUR 32.8 in H1 from EUR 34.0 a year ago.
FTTH growth strengthened to 88,000 new customers, for a total 734,000, and Free maintained its forecast for net FTTH additions of 300,000 to 500,000 in the full year, to reach over 1 million customers in early 2019. Iliad said it plans to speed up the migration to FTTH, reaching net additions of half a million a year from 2019. The potential fibre market should reach 9 million premises passed by the end of 2018, versus 7.9 million at the end of June.
In addition to the greater focus on fibre, Iliad said it's implementing a loyalty programme and new online offers to help turnaround the fixed business. The company said the new approach was already bearing fruit, with net customer additions in July and August. In Q2, ARPU was down only EUR 0.10 from the first three months of the year.
