REGISTRATION DOCUMENT AND FINANCIAL REPORT - Iliad

6. OVERVIEW OF THE GROUP’S BUSINESS
6.2 PRINCIPAL MARKETS
In the fixed telephony market, customers are gradually moving from fixed to mobile telephony and from
switched voice services to Internet telephony (Voice over IP, or VoIP). According to ARCEP, in the third quarter
of 2007, there was a 1.6% year-on-year increase in call originations from fixed lines powered by the rapid
increase in VoIP originations which now represent 18.6% of total call originations from fixed lines (both retail
and corporate). Excluding IP communications, the volume of call originations from fixed lines decreased 9.8%
year-on-year.
According to ARCEP, call originations from fixed lines have stabilized over the last three years. This is because
the increasing volume of IP call originations offsets the decline in PSTN call traffic. At September 30, 2007, the
number of IP call minutes surged 79.1% year-on-year, and now represents one-third of total calls made from
fixed lines, compared with 20% a year earlier. An IP subscriber uses telephony services more than a
“conventional” telephony customer (4 hours 41 minutes of calls per month versus 2 hours 55 minutes for a
conventional customer, i.e. a difference of more than two hours). IP calls represent over one-third (34.9%) of all
national calls between fixed lines and almost half (49.2%) of international calls. International calls using IP
technology are included in most multiplay packages.
The year-on-year increase in the volume of VoIP calls at September 30, 2007 was 127.28%. This pace of growth
reflects the increase in the number of subscriptions to IP telephony services which surged 75.5% over the same
period.
The success of IP telephony has also boosted volumes of international calls due to the attractive prices that this
technology offers. At September 30, 2007, the year-on-year increase in international calls was 36% (source:
ARCEP).
Alternative telephony operators providing both ADSL and Voice over IP services – such as the Iliad Group
through its subsidiary Free – stand to benefit from these trends.
6.3 EXCEPTIONAL FACTORS WHICH HAVE INFLUENCED THE GROUP’S PRINCIPAL ACTIVITIES OR
PRINCIPAL MARKETS
No exceptional factors have influenced the Group’s principal activities or principal markets.
6.4 EXTENT TO WHICH THE GROUP IS DEPENDENT ON PATENTS OR LICENSES, INDUSTRIAL,
COMMERCIAL OR FINANCIAL CONTRACTS OR NEW MANUFACTURING PROCESSES
6.4.1 Dependence on patents and software licenses
The Group uses licenses for software owned by third parties, particularly relating to the distribution of
audiovisual content. However, the Group also develops its own software and has always given priority to
developing equipment and software (particularly based on open source software such as Linux) through its
research and development teams. For its ANNU service, up until 2007 the Group held a license to use France
Télécom’s subscriber database. Since that date, contractual relations with France Télécom have been governed
by an agreement implementing ARCEP’s decision on the terms and conditions of transferring subscriber lists in
connection with the provision of information services. Among the trademarks used by the Group’s companies,
only the One.Tel trademark is covered by a license for use in France. This license was granted in 2001 by the UK
company, Centrica Telecommunications Ltd., for a ten-year term in consideration for an annual fee based on the
number of One.Tel’s billed customers but capped at €250,000. However, Centrica waived the fee under this
license until August 31, 2004.
6.4.2 Dependence on supply, industrial, commercial or financial agreements
Network operated by the Group
Through its subsidiary Free, the Group has entered into agreements granting it Indefeasible Rights of Use
(“IRU”) relating to the dark optical fibers it uses. Under these long-term agreements, the Group has acquired the
indefeasible right to use these fibers for a given period, without having to obtain any right-of-way easements.
Most of these agreements were signed with the Neuf Télécom group and with local authorities. In June 2004,
Free signed an agreement with Neuf Télécom to extend the term of most of these IRU agreements until
December 31, 2030. The Group considers the risk of non-renewal of these agreements to be very low, in view of
the over-capacity of dark fibers already laid by Neuf Télécom and local authorities.
42 - Iliad – Registration Document 2007