REGISTRATION DOCUMENT AND FINANCIAL REPORT - Iliad

4. RISK FACTORS
4.1 RISKS RELATING TO THE GROUP AND ITS STRUCTURE
4. RISK FACTORS
The Group carries on business in an environment which is undergoing rapid change and which poses a number of
risks for the Group, some of which are outside its control. Investors are advised to give careful consideration to
all the risks set out below and to all the information contained in this registration document. The risks and
uncertainties set out below are not the only ones facing the Group. Other risks and uncertainties of which the
Group is not currently aware or which it does not consider to be significant could also have a negative impact on
its business, financial position or results.
4.1 RISKS RELATING TO THE GROUP AND ITS STRUCTURE
4.1.1 Dependence on managers and key employees
The Group’s success is highly dependent on maintaining its relationship with Xavier Niel, an Iliad director and
the Group’s majority shareholder, and with the other managers and key employees. The Group has a culture
which fosters teamwork and motivation. Its key employees have an ownership stake in Iliad’s share capital,
which significantly contributes to employee loyalty. However, there can be no assurance that these key
employees will remain with the Group in the strong growth environment that currently exists and is expected to
continue.
In order to guarantee the long-term future of its business, the Group takes particular care to ensure that the
engineers and technicians working on its platform and network, and on designing and developing the Freebox
modem and Freebox DSLAM, are skilled in a number of different areas. The Group’s future success will depend
in particular on its ability to attract, train, retain and motivate highly qualified employees and managers.
However, since competition to attract employees with such qualifications is intense, there can be no assurance
that the Group will be able to do so.
The loss of one or more key employees or a manager or the Group’s inability to replace them or to attract other
qualified employees could have a material adverse effect on the Group’s revenues, results and financial position.
4.1.2 Dependence on the principal shareholder
Xavier Niel holds a substantial percentage of the Company’s share capital and is Senior Vice-President. He is
thus in a position to have a decisive influence over most of the Group’s corporate decisions and in particular
those requiring shareholder approval (such as the appointment and removal of directors, payment of dividends,
amendments to the bylaws and decisions concerning important Group transactions, including share issues).
4.1.3 Risks relating to the availability of equipment for the development of the broadband Internet access
offering
The Group considers that the components used in its Freebox modems and DSLAMs are standardized and
substitutable and that its component purchasing policy allows it to anticipate growth in demand for broadband
Internet access. Nevertheless, a shortage in the availability of these components or a significant increase in their
price could hinder the Group’s ability to provide new customers, in a timely manner, with the Freebox modem
required to access value-added broadband services, which could have an adverse effect on the Group’s growth.
4.1.4 Risks relating to the impact of acquisitions or investments
As part of its external growth strategy, which may take the form of acquisitions, partnerships or alliances, the
Group may make acquisitions or investments in any of its business segments. Part of these acquisitions or
investments could be paid for by the issuance of Iliad shares, which would result in dilution for the Group’s
existing shareholders. Such acquisitions and investments, whether paid for in cash or shares, could have an
adverse effect on the market price of Iliad’s shares.
4.1.5 Risks relating to the need to improve the technical features and functionality of the services offered
by the Group
The Internet market is characterized by very rapid changes in technology and in the types of services and features
offered to customers. To remain competitive, the Group will continually have to improve the speed with which it
4 - Iliad – Registration Document 2007