REGISTRATION DOCUMENT AND FINANCIAL REPORT - Iliad

6. OVERVIEW OF THE GROUP’S BUSINESS
6.4 EXTENT TO WHICH THE GROUP IS DEPENDENT ON PATENTS OR LICENSES, INDUSTRIAL, COMMERCIAL OR
FINANCIAL CONTRACTS OR NEW MANUFACTURING PROCESSES
However, if any of the agreements were not renewed and the Group had to find alternative solutions, it considers
that the existence of many alternative operators already offering dark fibers provides satisfactory assurance that a
replacement solution could be found before the expiration of the IRU agreements, particularly at the local level
where many sections of dark fiber have been laid in recent years.
Furthermore, the Group believes that the IRU agreements reduce the risk of Group liability for damage caused by
the fibers of its network. It does acknowledge, however, that certain sections of the network which are laid on
publicly owned land may be subject to certain restrictions related to the use and occupancy of public property.
Finally, in accordance with the provisions of the IRU agreements signed with Neuf Cégétel, Neuf Cégétel and the
Group are committed to jointly financing the construction of a new fiber route in the event of physical problems
(such as a power failure caused by natural hazards, civil engineering works, etc.) affecting a section of Neuf
Cégétel’s optical fiber network that is covered by the IRU agreements.
Freebox modems and Freebox DSLAMs
The Group uses the services of various equipment assembly companies located in France, Eastern Europe and
Asia to assemble Freebox modems and Freebox DSLAMs with generic electronic components purchased from
third party manufacturers. The choice of the components, the construction of equipment and the development of
the software used by the Group for its business do not depend on intellectual property rights such that the
Group’s growth would be adversely affected were it to be deprived of access to such rights. The Group considers
the components used in its equipment to be highly standardized and therefore easily interchangeable. In the event
of breakdown at the factories responsible for assembling the Freebox modems and DSLAMs, the Group also
considers that it could use the services of other equipment assemblers. However, any such substitution of
components or assemblers could be on less favorable financial terms and result in additional costs for the Group.
To minimize any risk of suspension or slowdown in the installation of its Freebox DSLAMs or delivery of its
Freebox modems to customers, the Group aims to maintain constant inventory levels sufficient to meet the
Group’s estimated needs for two months.
6.4.3 Dependence on new operating processes
Apart from the technical processes involved in local loop unbundling and the DSL technology itself, which is
highly advanced, the Group does not consider itself to be dependent on new technical processes necessary for
carrying out its business.
The roll-out of the Group’s FTTH program breaks down into three separate phases – (i) “horizontal” roll-out, for
example in Paris’s underground tunnel network; (ii) “vertical” roll-out, consisting of laying optical fiber in
buildings; and (iii) the connection of the subscriber’s home to the network. For each of these phases, the Group is
dependent on authorizations granted by the different entities concerned. For the first phase, authorizations are
generally required from the local authorities to access and occupy public land. For the second “vertical” roll-out
phase, the Group requires the approval of building owners, joint owners or property managers. Lastly, the
homeowner’s agreement is required to connect the subscriber’s home.
The government has announced a number of legal and regulatory changes designed to establish a framework
requiring operators to share the optical fiber laid in buildings and giving occupants the right to have optical fiber
installed in their building if they so wish.
6.4.4 Dependence on the Group’s main customers and suppliers
As the Group’s service offerings are mainly targeted at the consumer market, the bulk of its revenues are
generated through sales to individual customers. No customer individually represents a significant portion of the
Group’s revenues.
The main contracts entered into with Group suppliers relate to the Group’s network and can be divided into
several categories:
• contracts for the use of dark optical fibers, allowing the Group to operate its network;
Iliad – Registration Document 2007 - 43