Iliad Won't Bid For 4th 3G License If Tender Not Amended

PARIS -(Dow Jones)- French telecom and Internet operator Iliad will not bid for the fourth license of the third-generation mobile telecommunications network in the country if the government tender offer is not amended, its Chief Executive Michael Boukobza said Wednesday.

Iliad has set a target of signing up more than 2.8 million subscribers to its high-speed ADSL Internet service by the end of 2007, while continuing to increase the share of its "unbundled" subscribers to 80%, up from 76% at the end of 2006.

Unbundled customers offer higher margins because they can access more services, such as pay-per-view television. Partially unbundled subscribers still have to pay former monopoly France Telecom a monthly bill of around EUR14 for their phone outlet, while fully unbundled customers, such as those in Paris, pay nothing at all to France Telecom.

"These growth targets are ambitious, but are not a ceiling," Boukobza said, adding that they exclude any potential acquisitions.

During a press conference, Iliad said it was interested in Club Internet, an internet service provider put up for sale by Deutsche Telekom, and disclosed that Iliad had taken part in the first round of bidding for it. "We are taking part in the procedure, we couldn't not look at this" opportunity, Boukobza said.

However, Iliad declined to confirm reports that the company is in talks with private equity firm Cinven Group Ltd, which owns cable operator Noos-Numericable. Recent press reports have said Cinven could be prepared to make a EUR5 billion bid for Iliad, which is two-thirds owned by Chairman Xavier Niel.

"What we can say is that Xavier Niel intends to remain a shareholder in the company, but he would submit all interesting offers to the board if any are made," Boukobza said, adding that he "doesn't comment on rumors."

Iliad will not bid for the fourth third-generation mobile phone license if the French government does not lower the price, if payment cannot be made by installments or if Iliad cannot find a partner to share the costs, Boukobza said. "Iliad shareholders will not pay EUR619 million," for the license.

EUR619 million is the same price as the one paid at the end of the 1990s by the other three third-generation mobile telecommunications operators in France: Vivendi's SFR, France Telecom's Orange and Bouygues' Bouygues Telecom.

Iliad estimated that the costs to buy the license and expand the network would be around EUR1.5 billion and it would rather find an industrial partner to share them, Boukobza said.

"There are some talks but they're not that advanced for us to make an official announcement," he said.

Boukobza, 29, confirmed he would leave his position as chief executive of the company by the summer for personal reasons that he declined to elaborate. He'll be replaced by Maxime Lombardini, former head of development at Television Francaise 1.

La Tribune Wednesday reported that Boukobza's sale of EUR25 million worth of Iliad's shares has angered Chairman Niel.

But Boukobza denied that there was any dissent among Iliad's management over strategy. "I agree with the group's strategy and its management," he said.

At 1315 GMT, shares were trading 5.9% lower at EUR72.24 in an overall bearish market.

-By Nathalie Boschat, Dow Jones Newswires; +331 40171740; nathalie.boschat@dowjones.com;

(END) Dow Jones Newswires "

Posted to the site on 14th March 2007