2010 REGISTRATION DOCUMENT - Iliad

OVERVIEW OF THE GROUP’S BUSINESS
Principal activities 6
6.2.4 STRATEGY
Leveraging the competitive strengths described in Section 6.2.3 of this registration document, the Group’s strategy is based on the principles
described below.
Continuing to provide the most competitive broadband Internet access offerings in France
The Group plans to pursue its strategy of winning new ADSL broadband subscribers by combining a competitive pricing policy with a focus on the
quality of its services. As part of this approach, on December 14, 2010 the Group launched its Freebox Revolution offering which includes a wide array
of innovative services, such as calls to mobile numbers, a Blu-ray player and video games.
This subscriber recruitment policy forms part of the Group’s overall strategy to further enhance its profi tability.
Increasing the number of subscribers on unbundled lines (Option 1)
The Group intends to increase the number of subscribers on unbundled lines in two complementary ways. First, it plans to grow its market share
in areas which have already been unbundled by continuing to offer its Freebox and AliceBox services directly to new subscribers under Option
1. Second, it plans to encourage the migration of the maximum possible number of Option 5 subscribers (on non-unbundled lines) to Option 1
(unbundled lines) by expanding the density of its network. This network expansion will take into account any applicable technical restrictions and will
entail prioritizing the areas to be unbundled, focusing on those that already have a large number of subscribers, to ensure a rapid return on investment.
Given the difference in profi tability between unbundled subscriber lines and other lines, the expansion of local loop unbundling (to migrate existing
subscribers or win new subscribers) is intended to increase the Group’s profi t margins.
By raising the unbundling rate Iliad will achieve the objective of enhancing its underlying offerings. During 2010 the Group continued to extend its
network in order to maximize its unbundling rate, which at the year-end stood at 89.2% compared with 85.4% at December 31, 2009.
Promoting the use of optional value-added services
The Group’s strategy of profi table growth is underpinned by (i) regularly launching new free or pay-per-use services accessible through the Freebox
and (ii) increasing subscribers’ use of its existing services. Since its triple play offering was fi rst launched, the Group has added a stream of new
services – such as TV over IP, “on-demand” content, a Multi-TV service, and video games – and has made the available value-added services easier
to use. For example, in 2010, a catch-up TV offering was launched, which proved highly successful and now includes programs originally broadcast
by 34 different channels.
The Group has also integrated the latest technological innovations into the various generations of its ADSL modems in order to increase their userfriendliness,
including Power Line Communication (PLC) technology in the plugs on the Freebox HD and the Freebox Revolution, the latest-generation
WiFi (802.11n) and a Blu-ray player.
The Group considers that these services strengthen the appeal of its ADSL broadband offering and help foster customer loyalty. The Group’s strategy
is therefore focused on increasing the number of such services and making sure that they are easy to use, notably by simplifying interfaces and invoice
procedures.
Rolling out an FTTH network in areas with high subscriber density
In September 2006, the Group announced that it planned to roll out an optical fi ber network (FTTH) in order to provide a direct connection to the
homes of its subscribers living in densely populated areas, representing 4 million homes. The aim of this project is to:
(i) strengthen the Group’s strategic positioning in these areas, by setting up its own infrastructure and therefore operating totally independently from
the incumbent operator’s local loop;
(ii) meet the demand for increasingly higher broadband speeds in the coming years;
(iii) migrate existing subscribers to fi ber in order to increase the Group’s margins in light of the different probability levels achievable for subscribers on
the FTTH network compared with subscribers on standard unbundled lines.
Iliad intends to optimize its capital expenditure by focusing on areas with high subscriber density. In mid-September 2007, Free announced the
features of its FTTH very high-speed broadband offering (see Section 6.2.1.1.1.1) and the Group intends to continue to roll out this technology in order
to increase the number of FTTH-eligible households.
Rolling out a third-generation mobile communications network
On January 12, 2010, Free Mobile was awarded the fourth 3G mobile telecommunications license in mainland France under Decision 2010-0043
issued by the French Electronic Communications Regulatory Authority (Arcep). Under this decision, Free Mobile is authorized to use frequencies in the
2.1 GHz and 900 MHz bands to set up and operate a third-generation mobile communications network for public use.
Since this license was acquired Free Mobile has selected its main service providers for its equipment and implementing the actual rollout, as well as
the major lessors for its base transceiver stations, which means that more than 90 companies and 3,000 people are currently working on the Free
Mobile project.
In accordance with its commitments to Arcep, Free Mobile is aiming to achieve population coverage levels of 27% by early 2012, 75% by 2015 and
90% by 2018, and to launch its commercial mobile offering in 2012.
Registration document 2010 - 41