REGISTRATION DOCUMENT AND FINANCIAL REPORT - Iliad

6. OVERVIEW OF THE GROUP’S BUSINESS
6.1 PRINCIPAL ACTIVITIES
hardware specifically suited to the Group’s service offerings and using cutting-edge technologies such as the
Freebox modem/DSLAM unit, and in the development of innovative software solutions (such as billing software,
Cisco SS7 interconnect software, etc.). By relying largely on its internal resources in this way, the Group has
been able to optimize its capital expenditures from the outset.
Understanding of key regulatory issues
The Group has demonstrated its understanding of regulatory issues by establishing a constructive dialogue with
the French Telecommunications Regulatory Authority (ARCEP), particularly in the context of the local loop and
interconnect working groups set up by ARCEP. The Group has also shown its ability to take full advantage of the
appeal procedures offered by ARCEP in order to defend its interests. Iliad believes that it has a good overall
understanding of the current legislative and regulatory environment, as well as of the proposals under discussion
which could have an impact on its activities as an Internet service provider and telecommunications operator.
A proven ability to generate profits in periods of high revenue growth
The Group has posted profits each year since 2001, despite its significant investments in interconnection and
LLU operations and the intense competition in its markets. It has demonstrated its capacity to finance the
majority of its capital expenditures and new business start-up costs internally, while continuing to pay dividends.
With its high-performance network and large customer base, the Group believes it will be able to continue to
pursue its strategy of profitable growth.
The ability to build on its experience
As the different parts of the Group’s network complement and are integrated with one another, Iliad is able to put
its experience in certain areas of its business to work in the development of other services. By way of example,
the Group’s expertise in fixed telephony acquired in the course of restructuring and running One.Tel enabled
Free to launch the first available fixed telephony over ADSL services for the consumer market beginning in
August 2003, without changing the prices of its broadband Internet access offering.
An experienced management team with complementary skills
Over the last few years, the management team has succeeded in positioning the Group as the leading alternative
Internet service provider in France, while sustaining profitability and pursuing a strategy of internally financed
growth. This success is due largely to the experience and highly complementary skills of the management team
in the following areas: knowledge of the Internet and telecommunications sector, understanding of key regulatory
issues, consumer marketing know-how, strong technological expertise, sound financial management and
commitment to a graduated investment policy.
6.1.3 A network servicing the Group’s Internet and telephony operations
In order to access the Internet, data must be routed between the user’s computer and the Internet. Such Internet
access is traditionally provided by Internet service providers using interconnect services, i.e. by connecting to the
incumbent operator’s network or to that of other licensed operators.
After Free was established, the Group believed it was critical to have control over as many network elements
used for connecting its subscribers to the Internet as possible. This decision meant that Free could operate its own
network infrastructure, which quickly resulted in an influx of recurrent revenues from its “Pay-as-you-go”
services and ensured the Company’s profitability (largely as a result of reducing its spend on interconnection
charges).
The Group began its network roll-out strategy in December 1999 when it obtained licenses awarded under
Articles L.33-1 and L.34-1 of the French Post and Telecommunications Code (which in July 2004 was renamed
the Post and Electronic Communications Code), authorizing Free Télécom (known at that time as Linx) to build
and operate a telecommunications network and to provide telecommunications services to the public. Free’s
strategy was based on accessing and operating optical fibers already installed by other operators, particularly by
concluding long-term Indefeasible Right of Use (IRU) agreements for dark optical fibers. This enabled Free to
optimize its capital expenditures and guarantee a rapid interconnection with the incumbent operator’s network.
22 - Iliad – Registration Document 2007