Free Mobile founder defends group’s role

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Xavier Niel, the French telecoms billionaire, sought to counter criticism that his launch of an ultra-low cost mobile phone network had damaged the country’s industry by announcing he had invested €950m last year and created 1,000 jobs.

Mr Niel has come under attack from Paris ministers and French telecom rivals such as Vivendi’s SFR and Bouygues Telecom after he was allowed to launch a fourth mobile operator, Free Mobile, by the previous centre-right government – even though he only had limited network coverage.

His listed holding company, Iliad, said on Tuesday that it had invested 30 per cent of its 2012 revenues on boosting its network coverage in France to 40 per cent as defined by Arcep, the country’s telecoms regulator.

Iliad’s claims about network coverage have been challenged by its rivals even though Mr Niel has been supported by Arcep audits.

The company’s comments came as it reported a 50 per cent rise in sales in 2012 to €3.15bn. Free Mobile won 5.2m subscribers during its first year of operation, equivalent to 8 per cent of the French market.

Group net income fell 26 per cent to €186.5m as a result of higher capital spending but earnings before interest, tax, depreciation and amortisation rose 10.6 per cent to €921.4m.

While Free’s launch in January 2012 has driven down mobile phone prices for French consumers, rivals say this has come at a cost as they have been forced to cut jobs because of falling domestic profits.

The issue is acutely sensitive for France’s Socialist president François Hollande, who won power in May promising to halt the relentless rise in French unemployment.

Free Mobile currently has a roaming agreement with France Telecom, the country’s biggest telephone company by customers, which allows it to piggyback on the bigger operator’s network. However, the French competition authority said last week that the roaming deal must come to an end by 2018.

It also called for greater scrutiny of Mr Niel’s claims to be building a functioning network in response to fierce criticism from SFR and Bouygues, the country’s second and third-biggest operators.

Free’s arrival had prompted speculation that France’s operators would be forced to merge because of the damage to profits, but French ministers have opposed the idea in the short term.

Instead, companies are talking to each other about network-sharing deals to reduce the heavy investment needed in France. Both France Telecom and Bouygues have expressed interest in teaming up with SFR.

Iliad shares, which have risen almost 50 per cent in the past year, closed up 5.4 per cent at €157.85 in Paris trading. Mr Niel owns about 65 per cent of the company, which has a market value of €9.3bn.

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