Iliad may take major stake in Ireland’s Eir

Xavier Niel, chairman and majority shareholder in France’s Iliad group, is in talks to take a controlling stake in Ireland’s fixed/mobile incumbent, Eir, through his investment vehicle, NJJ Capital, according to reports in the Irish Times.

That should make the other Irish MNOs, Vodafone and 3 Ireland (which acquired Telefonica’s O2 Ireland), quiver. Both those operators are already bracing for the disruptive impact of Iliad in Italy, where Niel is looking to repeat the disruptive success of Iliad’s Free Mobile launch in France, which has provoked price wars and consolidation.

Iliad acquired spectrum in Italy which had to be divested as a condition of Hutchison 3’s acquisition of Wind. Now it may have its eyes on Ireland. Eir, the fixed line incumbent, rebranded its mobile business in July under its core brand (it was formerly known as Meteor). NJJ Capital is also the majority shareholder in Monaco Telecom and Swiss operator Salt Mobile.

It has had a turbulent history of different owners and stakeholders since it was privatized in 1999 and its current largest shareholder is US hedge fund Anchorage Capital Group. Reports in local newspapers earlier this month said Anchorage was looking for an exit, which could be a sale or a flotation.

In a statement to investors yesterday, Eir’s holding company said “major shareholders” had been approached by a potential investor who “may wish to make a significant investment”. No further detail was released by the operator.

If Niel succeeded in taking a controlling share of Eir, he would have some of the same advantages he had in France – including a strong broadband base (Eir has 2m customers across its services) on which to backhaul small cells and WiFi homespots, greatly reducing the cost of delivering wireless access and supporting multiplay bundles. Like France, Ireland has only three MNOs, and limited growth.

In Italy, the challenge is tougher because Iliad will not have that wireline base, so it will harder to disrupt pricing with a WiFi-first model, and the market is far more price competitive than France was when Free hurled its bombshell.

Nevertheless, the existing MNOs have been taking pre-emptive action ahead of the likely launch date of late 2017 by Iliad. Vodafone Italia plans to launch a low cost MVNO service this year, and Telecom Italia has already established one, called Kena Mobile.

In Italy, the merger of Wind and 3 Italia was only green-lighted by antitrust authorities if spectrum was divested to support a new entrant, which turned out to be Iliad. The merged 3 Italia/Wind served 33.7% of the country’s mobile customers at its formation, putting it ahead of Telecom Italia’s TIM with 32.4% and Vodafone at 26.4%.

Iliad is paying €450m between 2017 and 2019 for 35 MHz of paired spectrum – 5 MHz in the 900 MHz band, and 10 MHz each in 1.8 GHz, 2.1 GHz and 2.6 GHz. It is also buying “several thousands of macro sites” in densely populated areas, as well as several thousand more in rural areas (though there is also an option to replace the latter with a RAN sharing agreement with the 3/Wind operator). Iliad has also negotiated a five-year roaming agreement, renewable for another five years, for the merged entity’s 2G, 3G and 4G networks.