REGISTRATION DOCUMENT AND FINANCIAL REPORT - Iliad

4. RISK FACTORS
4.1 RISKS RELATING TO THE GROUP AND ITS STRUCTURE
responds to technological or other changes, as well as the functionalities and features of its products and services.
It will have to develop new products and services that are attractive to its customers. The Group may not succeed
in making these improvements or developments in a timely manner, which would have an adverse effect on its
business, financial position and results of operations, and on its ability to meet its objectives.
4.2 RISKS RELATING TO THE GROUP’S ACTIVITIES
4.2.1 Risks relating to the growth of the Internet market in France
A major portion of the Group’s revenues depend on the number of subscribers to its Internet access service,
which is closely linked, directly or indirectly, to the increase in France in the number of Internet users in general
and the number of broadband users in particular. The level of future revenues generated through subscriptions is
therefore difficult to predict. If the number of Internet users in France does not increase as quickly as expected,
the Group’s business, results of operations and financial position could be seriously affected and the Group could
be unable to meet all or some of its objectives.
4.2.2 Risks relating to the difficulty in upgrading the capacity of the platform for online access to the
Group’s services in line with the growth in Internet traffic
Until now the Group has been able to upgrade the capacity of its technical platform for online access in line with
the growth in Internet traffic. Given the generally accepted forecasts for the growth of Internet traffic in France,
however, and the objectives that the Group has set for itself in terms of both increasing the number of users of its
services (particularly for broadband Internet access) and expanding its network, the Group will require the
resources necessary to provide a corresponding increase in the capacity of its access infrastructures. There can be
no assurance that the Group will be able to obtain such resources.
4.2.3 Risks relating to the rapid changes in pricing and technical aspects of Internet access offerings
The Internet access services market is characterized by very rapidly changing pricing structures (such as usagebased
charges, unlimited use packages and free access) and technical access methods (such as dial-up access,
ADSL, etc.). The Group’s access services are currently available on or through almost all the pricing terms and
technical methods described below. The development of new pricing structures and access methods based on
different economic models, unforeseen changes in the relative importance of the various existing access service
offerings or growth in use of existing replacement technologies could undermine the economic assumptions on
which the Group’s development plan is based. This in turn could have an adverse effect on the Group’s business,
results of operations and financial position and on its ability to meet its objectives.
4.2.4 Risks relating to competition
Internet
Competition for Internet access services customers is intense and is likely to increase significantly in the future.
The Group anticipates that competition in its market will increase due to (i) the continued growth of Internet use
in France, (ii) the further increase in the number of strategic and capital alliances among the Group’s
competitors, (iii) the introduction by some of the Group’s competitors of pricing policies intended to counter
Free’s aggressive offerings and (iv) the presence in the market of certain multinational companies with greater
economic resources than those of the Group.
Telephony
The fixed telephony sector in France is a mature market and therefore not likely to undergo rapid expansion. It is
heavily dominated by the incumbent operator. Although the Group considers that it possesses a number of
competitive advantages in this market, including in particular the use of its own network, it cannot guarantee that
it will manage to continue to develop its fixed telephony business as planned in a sector where the players are
principally multinational companies whose financial resources exceed those of the Group and whose capacity for
investment, particularly in advertising, presents a considerable advantage.
Iliad – Registration Document 2007 - 5