(Adds quote, context)
PARIS, May 15 (Reuters) - French telecoms group Iliad posted a sharp rise in first-quarter sales on Friday, as strong growth in its mobile business offset more intense competition for broadband customers.
It also reaffirmed it was aiming for an operating profit margin of above 10 percent this year.
Founded and majority-owned by billionaire Xavier Niel, Iliad has won 15 percent of the mobile market since launching its service with no contract, budget plans in 2012, forcing larger rivals Orange, Numericable-SFR and Bouygues Telecom to slash prices to compete.
Iliad, which markets its services under the brand name Free, reported first-quarter sales rose 7 percent to 1.07 billion euros ($1.22 billion) as it signed up 420,000 new mobile customers.
A further 77,000 broadband subscribers joined in the quarter, but average revenue per fixed line customer slipped to 34.70 euros because of promotional offers, the company said in a statement.
In the first quarter Bouygues signed up 96,000 new broadband customers, outperforming other operators.
Competition for broadband customers in France has picked up in recent quarters after Bouygues, the third-biggest mobile network operator and the hardest hit by Iliad's entry to that market, aggressively expanded into broadband.
Bouygues launched cheap bundles of television, fixed telephony, and broadband aimed at Iliad's budget-conscious customers, attracting more subscribers than rivals last year.
In response Iliad has been discounting its triple-play bundles in on-line flash sales that give customers 12 months of service at either 1 or 10 euros, which has depressed its average revenue per user.
Chief Financial Officer Thomas Reynaud said customer additions were strong in mobile and holding up well in fixed.
"Our commercial performance is very strong and we are accelerating our network investments especially in 4G, which will pay off in the future," he said.
Iliad has said it expects to keep its network investments stable this year as it races to complete its own national mobile network and wean itself off a roaming agreement with Orange by the end of 2018.
Iliad's shares are up 9 percent this year to close at 375.96 euros, compared with a 18 percent rise in the French blue-chip index and a 17.5 percent rise in the Stoxx 600 Europe telecoms index. ($1 = 0.8770 euros) (Reporting by Leila Abboud and Gwenaelle Barzic; Editing by Greg Mahlich)