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UPDATE 2-France's low-cost telco Iliad aims to raise operating profit by 10 pct
March 12, 2015 / 8:02 AM / 2 years ago

UPDATE 2-France's low-cost telco Iliad aims to raise operating profit by 10 pct

* Shares rise 5 pct at open before paring back gains

* Dividend 2014 39 cents vs 37 cents in 2013

* Growth in new broadband customers slowed by Bouygues

* Mobile still growing as races to finish network build out (Adds trader, shares, dividend)

By Leila Abboud and Gwénaëlle Barzic

PARIS, March 12 (Reuters) - French telecoms group Iliad pledged to raise operating profit by 10 percent this year after it reached a 15 percent market share in mobile three years after shaking up the market with low-cost, no-contract plans.

Founded and majority-owned by billionaire Xavier Niel, Iliad sparked a price war in mobile in 2012, forcing larger rivals Orange, Numericable-SFR and Bouygues Telecom to cut costs to cope.

Iliad, which markets its services under the brand name Free, expects to keep its network investments stable this year even as it races to complete a national mobile network and wean itself off a roaming agreement with Orange by end 2018.

Last year it put up 1,900 mobile antennas and aims for at least 1,500 this year, while also converting many of them to faster mobile broadband technology known as 4G.

"We will show that we know how to turn these investments into profits," said Chief Financial Officer Thomas Reynaud.

While expanding into mobile, Iliad has had to contend with sharper competition in its core broadband market, which remains its cash cow, generating 736.7 million euros ($782.15 million) in free cash flow last year, up almost 16 percent.

Number three mobile operator Bouygues Telecom, which was hardest hit by Iliad's entry to the mobile market, has been aggressively expanding into broadband with cheaper bundles aimed at Iliad's budget-conscious customers. It recruited 415,000 new fixed customers last year, more than rivals, and compared with 228,000 for Iliad.

Reynaud said it was too early to know whether Iliad could take back the crown from Bouygues this year. But on Tuesday Free launched a new set-top box, featuring Google's Android TV software and super high definition images known as 4K, pitched at the entry-level subscriber.

For 2014, the group posted sales up 11.2 percent to 4.17 billion euros, and earnings before interest, tax, depreciation, and amortisation (EBITDA) up 6.6 percent to 1.28 billion euros. Both were in line with forecasts.

Net income rose 4.9 percent to 278.4 million euros, lower than analysts' expectations for 308.65 million.

A Paris-based trader took heart from what he called good recruitments in fixed and mobile, adding that Bouygues Telecom "is not disturbing the market with its aggressive fixed offers".

Free cash flow swung to negative 37.2 million euros, excluding financing costs and dividends, under the weight of network investments.

Iliad plans to pay a dividend of 0.39 cents per share this year, compared to 0.37 last year.

Shares rose 5 percent at the open before paring back gains to 1.6 percent by 0845 GMT. ($1 = 0.9492 euros) (Editing by Nicholas Vinocur and Geert De Clercq)

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