March 10, 2016 / 5:00 PM / 4 years ago

UPDATE 1-Iliad shows strong growth of mobile business

(Adds details, CFO comments on consolidation)

By Mathieu Rosemain and Gwénaëlle Barzic

PARIS, March 10 (Reuters) - French telecoms group Iliad reported a jump in its core operating profit that drove its shares higher on Thursday as it gained more mobile subscribers than rivals last year.

Iliad, which markets its services under the Free brand, is racing to build a national mobile network and wean itself off a roaming agreement with Orange by the end of 2017.

Iliad has been the number one recruiter of new mobile clients in France for the 16th quarter in a row, Chief Financial Officer Thomas Reynaud said on Thursday.

The group, led by telecoms tycoon Xavier Niel, said its 2015 core operating profit rose 16 percent to 1.5 billion euros ($1.65 billion), while sales increased by 5.9 percent to 4.41 billion euros, in line with expectations.

It gained 1.6 million subscribers in its mobile business last year and 270,000 new broadband subscribers in the competitive landline segment, with average revenue per user (ARPU) of 34.5 euros ($37.9), compared with 35.10 euros in 2014.

The telecoms operator’s shares were up by as much as 6.7 percent, their biggest intra-day gain in about 10 months. The shares were up 3.6 percent at the close, giving Iliad a market capitalisation of 12.6 billion euros.

Iliad plans to nudge up investments in high-speed internet infrastructure this year in an effort to catch up with number one domestic rival Orange as operators compete to lure data-hungry customers.

Total capital expenditure will be in the range of 1.25 to 1.3 billion euros in 2016, compared to 1.22 billion euros in 2015, Reynaud said.

The additional investments will help expand the wireless mobile broadband network, or 4G, and fibre infrastructure, to provide faster internet at-home services, he said.

The quality of Iliad’s network may also benefit from the potential acquisition of Bouquets Telecom by Orange, since the deal would require dividing up some of Bouquets Telecom’s assets and selling them to Numerical and Iliad.

Orange has been in talks since early January to buy Bouquets Telecom for about 10 billion euros in cash and shares in a deal that would make Bouquets the biggest shareholder in Orange after the French government.

“The talks are going on,” Reynard said. “They are complex on operational and industrial aspects.”

$1 = 0.9110 euros Reporting by Mathieu Rosemain and Gwenaelle Barzic Editing by James Regan and Elaine Hardcastle

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