(Adds background, shares)
By Leila Abboud and Gwénaëlle Barzic
PARIS Nov 28 France's upstart mobile player
Iliad is seeking talks with larger rivals Vivendi's SFR
and Bouygues Telecom over joining the duo's
network sharing plan, according to a letter published online by
Les Echos newspaper.
The letter attributed to Iliad Chief Executive Maxime
Lombardini underscores how the planned network sharing between
France's second- and third-largest operators, which aims to cut
costs in response to Iliad's low-cost service, could reshape
competition in Europe's fourth-biggest mobile market by clients.
Iliad, which is owned by billionaire Xavier Niel, is
concerned that it will be left without a partner and in a weaker
negotiating position with market leader Orange, if it
is left out of a network sharing deal with SFR and Bouygues,
said a person familiar with the group's views.
In a bid to spark talks with SFR and Bouygues, who are still
working on a final accord that is expected to be finalised early
next year, Iliad wrote to them and sent copies to France's
telecoms and competition regulators.
"We understand that the ... sharing accord being negotiated
between SFR and Bouygues will cover a very large part of the
country and more than half the population," Lombardini wrote,
according to Les Echos.
Iliad is not in principle opposed to network sharing, he
added, but a deal that did not allow for its inclusion "seems to
us a factor that will destabilise competition and could be
Iliad is required to cover 75 percent of the population with
its 3G mobile network as a condition of the licence it obtained
in 2011. Any network sharing would complement that coverage and
help Iliad keep investment costs down.
SFR and Bouygues declined to comment.
Iliad also declined comment.
Iliad has said it will spend 1 billion euros ($1.4
billion)on building its network. It must also pay between 500
and 700 million euros a year at least until 2016 to Orange under
a roaming contract to carry mobile traffic while the network is
Since launching its mobile service in January 2012, Iliad
has taken a 10 percent market share and forced rivals to cut
prices. French mobile prices have come down roughly 15 percent
and further declines are on the cards, spurring Orange, SFR and
Bouygues to embark on cost-cutting programmes to restore
Iliad's letter to Bouygues and SFR was also aimed at showing
Orange that Iliad could turn to others for its roaming and
network sharing needs, the person familiar with the situation
Orange boss Stephane Richard has to date shown little
interest in network sharing with Iliad, which has the smallest
network in the country while Orange's is the largest.
"The imbalance between the networks of Orange and Iliad is
too big to make network sharing interesting for us," said
Richard at a Morgan Stanley investment contract last Friday.
"The only topic up for discussion is the future of the roaming
In any case, France's competition regulator is likely to
review the network sharing accord once it is finalised by SFR
and Bouygues, to determine if it complies with antitrust laws.
In March the competition regulator laid out the criteria it
would use to evaluate network sharing deals, including whether
they apply to cities or rural areas and the type of equipment
The combined market power of the companies proposing to
share equipment will also be considered, it said at the time.
Bouygues and Vivendi shares were up 0.2 percent at 1153 GMT,
while Iliad's rose 0.6 percent. France's blue-chip index
was up 0.3 percent.
($1 = 0.7367 euros)
(Additional reporting by Kate Holton; Editing by David Holmes)