Xavier Niel can feast on European telco misery
LONDON, March 27 (Reuters Breakingviews) - Xavier Niel is set to be more than a spectator in the looming consolidation of Europe’s telecoms industry. The French billionaire has spent the past three decades building up a vast network of carriers across nine European countries. He’s now sitting on assets and shareholdings worth roughly $33 billion, according to Breakingviews calculations. Unlike many rivals, Niel has the financial firepower to pursue more investments as Europe’s telecoms market braces for mergers and breakups of industry behemoths.
The 55-year-old founder of Iliad made his name and fortune by using rock-bottom prices to crush French competitors. But he’s no longer an outsider. He’s a regular at the Élysée Palace due to his friendship with French President Emmanuel Macron. He co-owns the Le Monde newspaper, while his partner Delphine Arnault is CEO of Christian Dior and daughter of LVMH (LVMH.PA) boss Bernard Arnault. Niel’s influence also stretches well beyond French borders. His telecoms portfolio, which spans Europe, Africa and Latin America, is organised under two privately owned vehicles, Iliad and NJJ.
Start with Iliad, which runs telecoms networks in France, Italy and Poland. It earned EBITDA after leases of 3.3 billion euros last year. Valued on the same 6 times multiple as rivals Vodafone (VOD.L) and Telefonica (TEF.MC), the 33-year-old company would be worth 21 billion euros. That’s almost twice the valuation when Niel took it private in 2021. Moreover, Iliad is growing faster than its European rivals. It reported revenue growth of 10% last year; Vodafone’s top line rose by just 4%.
Delisting Iliad freed Niel from scrutiny by equity investors. It also allowed him to make opportunistic investments, snapping up stakes in Vodafone and Luxembourg-based Millicom through another vehicle, Atlas Investissement. Those shareholdings have a combined market value of 1.2 billion euros, though they were partly funded through derivatives, potentially limiting the tycoon’s cash outlay. They may provide some clout in future M&A. A possible breakup of Vodafone could help Niel revive a failed 11 billion euro deal to merge Iliad’s Italian unit with Vodafone’s local business.
Dealmaking has not always been easy. In Switzerland Niel used his NJJ vehicle to buy the former subsidiary of Orange and rebranded it Salt, betting on a merger with domestic peer Sunrise. A planned joint venture between the two companies fell through in 2020 when rival Liberty Global (LBTYA.O) swooped on Sunrise. Still, valuing Salt’s 549 million euros of EBITDA at a multiple of 7 times – in line with other Swiss groups – implies the business is worth 3.8 billion euros. That’s 37% more than what he paid to take control in 2014.
An investment in Irish carrier Eir has fared less well. The company is Ireland’s largest fixed-line operator but has struggled to win mobile customers. On a multiple of 6 times last year’s EBITDA of 652 million euros it’s worth little more than the 3.5 billion euros Niel and other investors paid in 2017. Smaller investments in Monaco Telecom and holdings in Senegal and the Comoros are probably worth a combined billion euros, bankers estimate.
While this patchwork of telecoms networks may seem to lack industrial logic, it allows Niel to spread his bets in an uncertain environment. Any future dealmaking in Europe depends on antitrust regulators taking a softer approach to consolidation, which has yet to materialise. And although debt financing has become more expensive, Niel does not appear to rely on excessive leverage. His portfolio gives him a ticket to play in the M&A merry-go-round, whenever the music starts.
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(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)
CONTEXT NEWS
French telecoms group Iliad, controlled by billionaire Xavier Niel, on March 16 reported that revenue had increased by 10% to 8.4 billion euros last year amid heavy investments and expansion in Italy and Poland.
CEO Thomas Reynaud said in a conference call that Iliad wanted to be part of any consolidation in Italy. Vodafone last year rebuffed Iliad’s 11 billion euro proposal to combine the two companies’ businesses in the country.
Niel on Feb. 24 raised his stake in Luxembourg-based telecoms firm Millicom International Cellular to 20% through his investment vehicle Atlas Investissement. Niel first bought 7% of Millicom in November and subsequently hiked his holding. Millicom, which operates in Latin America, has drawn takeover interest from buyout firm Apollo Global Management and former SoftBank executive Marcelo Claure, who value it at about $10 billion, the Financial Times reported on Jan. 25.
In September 2022 Niel disclosed a 2.5% stake in Vodafone, saying his investment vehicle Atlas was supportive of the UK company’s intention to pursue consolidation opportunities and its efforts to separate its infrastructure network. Liberty Global subsequently bought about 5% of Vodafone while Abu Dhabi’s e& hiked its stake to 14%.
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