Friday 18 October 2019

Eir's Niel has to show he's still got what it takes

Xavier Niel, owner of Eir
Xavier Niel, owner of Eir

Carol Matlack, Angelina Rascouet and Daniele Lepido

Xavier Niel is in demand these days. The founder of French telecommunication group Iliad, and owner of Eir here, joined technology icons including Facebook founder Mark Zuckerberg at a meeting with President Emmanuel Macron at the Elysee Palace last week.

A day earlier, Mr Niel was thronged by admirers attending a conference at his Station F tech-startup incubator on Paris's Left Bank.

"Everybody wants their photo with him," said Erel Margalit, an Israeli venture capitalist. "He's created an icon of innovation."

Mr Niel earned his fame, and an estimated fortune of €5.2bn, with a simple idea: offer below-market rates for internet and phone service, including mobile subscriptions for as little as €2 a month. Since signing up its first customers 16 years ago, Iliad has grown to a €5bn a year business. But trouble is brewing at Iliad.

Earlier this month, the company reported disappointing quarterly numbers, including its first-ever loss of broadband subscribers. Shares plunged. Though the stock recovered in subsequent days, it's still down 27pc this year. Mr Niel is among those affected because he's Iliad's controlling shareholder, with a 52pc stake.

Iliad's rivals - Orange, Altice's SFR, and Bouygues - are fighting back with lower-priced plans and other promotions.

Orange and Bouygues each gained more than 50,000 broadband subscribers in the first quarter and SFR more than 70,000, while Iliad lost 19,000.

Iliad may symbolise an affliction that business-school professors call 'Founder's Syndrome', in which startups cling to strategies set by their creators rather than responding to change.

"This was a high-growth company, but the signs of a slowdown were a long time coming," said Erhan Gurses, a Bloomberg Intelligence telecoms analyst. "The low-hanging fruit is no longer available."

To recharge growth, the company is starting up a loyalty program for subscribers and plans a new promotional policy that will reach 100 percent of the market.

"We will target both churners and subscribers whose promotion period is ending, to take them step-by-step toward full pricing," CEO Thomas Reynaud said on a May 15 conference call.

What could also help Iliad would be a merger trimming the number of French operators from four to three, easing the price- cutting that's crimped profitability. Telecom regulator Arcep last week rekindled talk of a deal by dropping its long-standing opposition to consolidation.

Iliad is meanwhile taking aim at Italy's €16bn mobile market, launching a monthly subscription for a package of unlimited calls and 30 gigabytes of data at just €5.99 a month - thought to be the cheapest in the developed world.

Iliad's success hasn't just been based on low prices, unlike French rivals it offered only a few subscription plans. Simplicity is also part of the deal. Now Mr Niel will find out if his ideas can survive the journey across the western Alps. (Bloomberg)

Irish Independent

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