Iliad shares drop 4% as mobile phone growth slows

Reuters

Shares in France's Iliad fell more than 4 percent after the low-cost telecoms operator founded by billionaire Xavier Niel reported slower growth at its mobile phone business Free.

Iliad said the number of new mobile customers fell to 640,000 in the third quarter from 720,000 in the second, suggesting that a price war with more established mobile operators is making it harder for Iliad's (Paris, France) Free Mobile service to lure away their customers.

It was the slowest quarterly increase in customers for Free Mobile since its launch, although the third quarter is traditionally a slower period.

Some analysts had anticipated the slowdown and had expected Iliad to launch a new commercial formula to boost sales.

"Be patient. We will launch new offers in the months ahead, when the time is right," Iliad finance chief Thomas Reynaud told Reuters.

Iliad said in a statement that Free had 7,435,000 mobile customers at the end of September, for a mobile market share of more than 11 percent, up from 10 percent at the end of June.

Mobile now generates a third of the company's revenues, which rose 23 percent to 2.77 billion euros ($3.73 billion) in the January-to-September period.

Third-quarter revenue was up 15 percent to 944 million euros. Analysts from Barclays, Credit Suisse and JP Morgan had expected quarterly revenue of between 927 and 935 million euros.

"These solid results demonstrate Iliad's ability to deliver results, even if does not beat expectations by as much as in earlier quarters," a Paris-based trader said.

Free's no-frills deals - which cost 2 euros or 19.99 euros a month without a phone or long-term contract - have forced larger competitors France Telecom (Paris, France), Vivendi's SFR (Paris, France) and Bouygues Telecom (Paris, France) to cut costs to compete and accelerate construction of superfast 4G networks to offer a better service than Iliad.

"When the time is right, we too will offer 4G," Reynaud said, adding that competitors' 4G launches had no impact on Free mobile's growth.

Shares in Iliad are up nearly 30 percent this year, after a 36 percent rise last year, and are in line with a broader rally by a European telecoms sector index this year.

The company has a market capitalization of 9.7($1 = 0.7430 euros)

(Writing by Geert De Clercq; Editing by Mark Potter and Tom Pfeiffer)

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