* Iliad signs 1.8 bln euro mobile deal with Bouygues
* If Bouygues wins SFR, Iliad gets 15,000 masts, spectrum
* Iliad won more mobile, fixed customers in 2013 than rivals
* Xavier Niel throws weight behind Bouygues bid for SFR
(Adds bullet points, spectrum details, Niel quotes)
By Leila Abboud and Gwénaëlle Barzic
PARIS, March 10 Shares in French low-cost
telecoms company Iliad soared 15 percent on Monday
after it announced industry-beating sales and profit growth and
signed what could be a transformative mobile network deal with
larger rival Bouygues.
Iliad, backed by tycoon Xavier Niel, stands to benefit from
sector consolidation in prospect after media company Vivendi
received two bids for the second-biggest French mobile
Bouygues, which is one of the bidders, said on Sunday it had
agreed to sell its entire mobile network and some of its
spectrum to Iliad for up to 1.8 billion euros ($2.50 billion) to
assuage regulatory concerns if Vivendi accepts its offer for
That would be a major boost for Iliad, bringing it increased
mobile coverage at the flip of a switch as an alternative to the
costly build-out of its own network.
The group put up 700 new mobile masts last year to take its
total to 2,500. It would get 15,000 masts from Bouygues.
Iliad would also stand to acquire a valuable portfolio of
mobile licences from Bouygues, including some in the 800
megahertz band that are known as "golden frequencies" for the
quality and range of coverage they offer.
Iliad has far less spectrum than the other operators, so
getting most of Bouygues' will allow it to improve services and
cut its reliance on a roaming contract with leader Orange
, which carries its traffic while its network is being
Analysts estimated that Iliad paid Orange 600-700 million
euros for roaming last year. The contract has been costly but
has allowed Iliad to offer national coverage from day one while
it builds its network.
Iliad said on Monday its Free Mobile service signed up more
users than rivals last year, taking its customer base to 2.8
million and giving it a 12 percent market share - just two years
after its launch. The broadband business, its main cash
generator, added 276,000 new customers on a net basis for the
Niel, Iliad's founder and largest shareholder with a 56
percent stake, threw his weight behind Bouygues' bid for SFR,
the country's second-biggest mobile operator, and criticised a
rival bid from cable operator Numericable as bad for
the quality of France's networks and its consumers.
Speaking to reporters on Monday, Niel said the Bouygues-SFR
tie-up would reconfigure the market around three evenly-matched
competitors - current leader Orange, the new
SFR-Bouygues and a stronger Iliad.
"We would have the tools to fight against the two monsters,"
If Bouygues wins its bid for SFR, it would take the French
mobile market back to being served by three companies just four
years after Iliad was awarded a licence to increase competition
in an industry that once enjoyed some of the biggest profit
margins in Europe.
Iliad's entry sparked a price war that took a chunk out of
its rivals' earnings, forcing them to cut costs and staff.
Niel vowed to keep up relentless pressure on its competitors
even if the market goes down to three mobile services.
"We will create competitive pressure in the market, as we
have always done, by being extremely innovative and aggressive."
The formula has served Niel well in the 15 years since he
founded Iliad and surfed on the opening of the French market to
competition to create a company worth more than 10 billion euros
today. Niel is #162 on Forbes' richest list.
But shares in Orange rose 3 percent, suggesting France's
former telecoms monopoly would also benefit from the removal of
Bouygues was up almost 9 percent.
Robin Bienenstock, analyst at Bernstein Research, welcomed a
possible combination of SFR and Bouygues.
"We think that this is the best deal for Vivendi, Bouygues,
Iliad and Orange, easing price pressure in both wireless and
wireline," she said in a note.
"Altice (the 40 percent owner of Numericable)
seems likely to raise their offer to avoid being left out."
Iliad's shares were up 11 percent at 210 euros by 1345 GMT,
below an earlier high of 222.85 euros. Numericable
tumbled 12 percent to 25.00 euros.
Vivendi's board is expected to meet later this week to
decide the future of SFR.
Iliad's revenue last year rose 19 pct to 3.7 billion euros
($5.13 billion), while earnings before interest, tax,
depreciation and amortisation rose 31 percent to 1.2 billion
euros, and net profit jumped 42 percent to 265 million euros.
Analysts had on average forecast sales of 3.75 billion
euros, EBITDA of 1.16 billion, and net profit of 299 million.
($1 = 0.7214 euros)
(Reporting by Leila Abboud and Gwenaelle Barzic; editing by
Natalie Huet and Tom Pfeiffer)