Iliad continues buying spree with third deal outside of France

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French telecoms provider Iliad SA is to purchase Polish mobile group Play in a multi-billion-euro deal that will see Iliad become Europe’s sixth largest mobile operator.

The €3.5 billion deal originally saw Iliad purchase 40% of Play from two shareholders. Now it has bid for the remaining shares, offering a 38.8% premium on Play’s Friday share price of €8.70 (or 39 zlotys in local currency). Iliad said this gives Play an equity value of €2.2 billion and an enterprise value, including debt, of about €3.5 billion.

The offer, which starts Oct. 19 and closes Nov. 17, will be financed by debt and cash and will be Iliad's third outside of France following earlier deals with eir and the launch of operations in Italy.

“This deal is a major chapter in our internationalisation strategy. It will make us Europe’s sixth-largest mobile phone operator,” Iliad CEO Thomas Reynaud told reporters.

Reuters said Reynaud declined to comment on further geographical expansion but had confirmed the launch of a corporate telecoms business in France that would focus on fibre, while in Italy it will offer high-speed Internet.

Part of Iliad’s statement read: “For iliad, the acquisition represents a unique opportunity for growth and for entering the Polish telecom market. With 38 million inhabitants, Poland is central Europe’s largest market. It is the sixth-largest economy in the European Union and has seen steady growth for 28 years; per capita GDP has risen 6% on average per year over the last twenty years.”

Iliad acquired eir in 2018 and in May of that year launched operations in Italy, reportedly achieving two million customers by September. However, Emma Mohr-McClune,  global consumer platforms, services and devices analyst at GlobalData, said this deal could be the most challenging one yet. 

She said: "Iliad is an opportunist with a strategy that works best in over-priced, under-competitive markets without a strong value leader. Play has already leveraged that role in Poland for several years, and as a result this market now hosts some of the lowest 5G pricing levels in the EU, as well as a hyper-competitive mobile and convergence service landscape; it’s difficult to see Iliad’s opportunity opening here.

"Iliad’s immediate challenge will be to balance the cost of profitably maintaining a nationwide 5G network on one hand, with the requirement to compete against some of Europe’s most experienced home service convergence leaders, particularly Orange and Telekom," she continued.

"Furthermore, Iliad is a known force. Play’s rivals have had plenty of opportunity to watch Iliad’s market entry strategy in other European markets, firstly in Orange's home market and then most recently in Italy. They'll be armed and ready," she added. 

Play, which counted 15 million reported and 12.45 million active customers in its Q2 financial results, unveiled a 5G ready network last year. However, Poland’s 5G roll out has since faced delays with the spectrum auction annulled in May.

The same financials said Play’s network roll out schedule remained on target, with 8,225 sites operational at the end of June, an increase of11.4% YoY.

4G LTE population coverage reached 99% in the second quarter, of which 42% of sites were upgraded to 5G Ready at the end of June, providing 54.7% population coverage. Meanwhile, 5G Legacy was available in 58 cities covering 12.9% of population. Play’s market share stands at 29%.

On its fiber backhaul roll-out in progress, Play reported 145 new sites were connected in the first half of this year.

Over the last 12 months, Play generated €1.6 billion in revenues (up 2% year on year at constant exchange rates), €523 million in EBITDA (32.1% margin), €359 million in OpFCF (22.0% margin) and €269 million in FCF (before dividend payment).