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Mobile roll-out cuts profit at French telecom Iliad

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(Globalpost/GlobalPost)

French media and telecommunications group Iliad, which shook up the mobile market with a cut-rate offer that attracted 5.2 million clients last year, posted Tuesday a 26 percent drop in its 2012 profit owing to roll-out costs, while second-half results were better than expected.

Iliad, which owns the telecoms operator Free, reported a 2012 net profit of 186.5 million euros ($240 million), down from 251.8 million euros in 2011, but shares in the group leapt by more than 6.35 percent on the Paris stock exchange to 159.20 euros, while the market was off by 0.56 percent.

The group invested almost 950 million euros in its operations last year, or 30 percent of sales, and chief executive Maxime Lombardini told AFP that it planned to maintain "a similar amount for 2013" to underpin the group's "very strong growth."

Core earnings before interest, taxes, depreciation and amortisation (Ebitda) gained 10.6 percent, which Lombardini said was "fairly exceptional for the first year of mobile activity."

Sales were almost 50 percent higher at 3.1 billion euros after Free added the mobile service to its fixed-line, television and Internet access operations, while aggregate Ebidta climbed to 921.4 million euros, which included a loss of 46.1 million from the mobile unit.

The operating result also included an average charge of 500 million euros per year that Free pays to Orange, the mobile unit of France Telecom, to piggy-back on its network.

Lombardini said his company intended to continue investing in its own network, and fired back at French ministers Arnaud Montebourg and Fleur Pellerin, who slammed Free as a "stowaway" company that unfairly benefitted from a network paid for by the incumbent national telecoms operator.

"We could use a lot more stowaways that reinvest 30 percent of their capital each year," the Free CEO said.

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http://www.globalpost.com/dispatch/news/afp/130319/mobile-roll-out-cuts-profit-at-french-telecom-iliad