REGISTRATION DOCUMENT AND FINANCIAL REPORT - Iliad

4. RISK FACTORS
4.2 RISKS RELATING TO THE GROUP’S ACTIVITIES
Television – audiovisual content
In the ADSL broadband television and video sector, competition was fierce during 2007, and is likely to
intensify. Although the Group considers that it has a competitive edge in this market, particularly through the use
of its H.D. Freebox, which protects the transmission of audiovisual content, it cannot guarantee that it will be
able to develop its audiovisual business as planned. Any such development will depend on the audiovisual
content being broadcast and on being able to expand unbundling into new areas.
Other Services
The ANNU service is based essentially on the lists of subscribers provided by telephone service operators and on
revenues from connections to the service via Minitel. Iliad can provide no assurance that its revenues from the
Minitel market, which are already in decline, will not fall more rapidly than anticipated.
4.2.5 Risks relating to security and confidentiality of information on the Internet
The need to secure communications and transactions on the Internet has been a major obstacle in the
development of the Internet in general. Internet use may decrease if the level of protection of communications
and transactions achieved proves to be inadequate or diminishes. The Group has taken and continues to take
significant measures to guarantee the reliability of its security system and to limit problems that may be caused
by security failures or a breach of the security system. Unauthorized persons may attempt to penetrate the
Group’s network security system and, if successful, may appropriate privileged information about the users of
the Group’s services or cause the service to be suspended. Some leading sites and suppliers of Internet services
have suffered from “denial of service” attacks – in which very large numbers of requests for information are sent
to the site with the aim of overloading its servers – or have been the victims of Internet viruses. Although the
Group is taking the necessary steps to protect itself against such attacks, there can be no assurance that future
attacks would not result in loss or damage for the Group, even if only in terms of image. Consequently, the
Group might be required to increase its expenditures and its efforts to protect itself against these risks or to
alleviate their consequences, which could have a material adverse effect on its business, financial position and
results of operations and on its ability to meet its objectives.
4.2.6 Risks relating to the roll-out of the optical fiber network
The roll-out of the optical fiber network is conditional upon (i) obtaining the necessary authorizations
(occupancy of public property, right of entry into buildings, etc.) and (ii) the completion of the work entrusted to
third party service providers.
Delays in obtaining such authorizations and in the completion of such work could hold up the roll-out schedule.
In the light of regulatory and operational uncertainties, the Group can provide no assurance that it will be able to
meet its objectives.
4.3 FINANCIAL RISKS
4.3.1 Foreign exchange risk
The Iliad Group’s functional currency is the euro. However, it purchases certain goods and services outside
France and is therefore exposed to foreign exchange risks arising from various currency exposures, mainly with
respect to the US dollar.
In 2007 the Group decided to set up a hedging strategy in relation to highly probable commercial transactions
denominated in US dollars expected to take place over the coming 18 months. The instruments used for this
purpose are zero-premium collars.
Detailed forecasts of the Group’s future purchases denominated in US dollars are drawn up as part of the budget
process. These transactions are hedged over a maximum period of one and a half years. Consequently, the
Group’s residual exposure after hedging foreign exchange risk on US dollar-denominated transactions was not
material in 2007.
6 - Iliad – Registration Document 2007