GO
Loading...

From erotica to T-Mobile: Iliad’s telecoms odyssey

Iliad stayed true to its disruptive reputation on Thursday when it confirmed that it had made an offer to take over the U.S. telecoms provider T-Mobile.

The French company has come late to the party , Sprint of the U.S. and Softbank of Japan have already made bids for the U.S. company, which is the fourth-largest provider by subscribers.

Despite offering $33 per share to Sprint's $40 bid, and sending its own stock significantly lower – by mid-day on Friday its shares had slumped 7.6 percent - Iliad's latest move brought the regulatory issues surrounding the Sprint's deal back to the forefront. Indeed, Iliad believes it would stand a better chance than Sprint as it would face less competition concerns in the U.S.


Eric Piermont | AFP | Getty Images

Read More Iliad offers $15B in cash for 56.6% of T-Mobile, at $33 per share

But the strategy is leaving some analysts flummoxed. In a research note released on Friday, BNP Paribas describes Iliad's approach for T-Mobile U.S. as "bizarre", highlighting the "weak strategic rationale". It argues the French group would be better off pursuing opportunities in its home country.

CNBC takes a closer look at Iliad's backstory:

Xavier Niel: A self-made entrepreneur

Iliad is the brainchild of French self-made technology entrepreneur Xavier Niel. With a net worth estimated at $8.7 billion, according to Forbes magazine, Niel is a key figure in the French entrepreneurial landscape.

Precocious and interested in technology, he launched his first business in 1983 aged 16 which created an erotic messaging services on the Internet's French ancestor, Minitel. His activities then quickly expanded into peep-shows and sex shops.

In 1991, Iliad is created and Niel's focus turns to telecoms. But Niel also possesses other activities. He is a co-owner of the French media group Le Monde and is also a strong advocate for entrepreneurship in France. He is, for instance, financing 90 percent of the 70 million euros ($93.7 million) development of Paris's 1000startups incubator, scheduled to open its doors in 2016/2017.

Furthermore, he co-founded a start-up fund, Kima Ventures, of which he is the majority stakeholder, and an information-technology school, that is completely free of charge and open to all between the ages of 18 to 30 who wish to learn computer sciences skills, including coding.

Iliad: A perpetual disruptor

Since its creation in 1991, Iliad has unleashed a series of innovations, mainly through its Free and Freebox subsidiaries.

In 2002, it unveiled the world's first Triple Play box – which includes internet, TV and telephone – before delivering a series of other firsts on the French market: including the first unlimited telephone package, first ADSL TV package, first unlimited international phonecalls package.

Read MoreTelecom disruptors

Ten years after its first disruption, Niel pushed Free into the mobile phone space, severely under-pricing the existing providers by launching "low-cost" mobile services with plans ranging from 2-19.99 euros a month ($2.7 to $26.80 a month).

Free, which overtook Bouygues as third biggest mobile provider in France by subscribers, is also rumored to be interested in acquiring Bouygues. But a deal has yet to be secured despite the government's push for a sectoral consolidation.

"We are happy with a four-actor market," Xavier Niel said to Fidelity France in early July, "We love competition. So when you love competition, you don't want the market to consolidate".

However, for BNP Paribas, a deal between Iliad and Bouygues would have led to "material synergies and had strong industrial impact". It believes that acquiring T-Mobile U.S would curb the group's ability to invest in its network in France which would "be unlikely to find favour with the French regulatory authorities".

Similarly, Credit Suisse flagged in its note dated July 15 that in the absence of a deal with Bouygues, "there is some downside risks to [the group's] capex estimates".


Read MoreBouygues 'real winner' from Alstom deal?

Follow us on Twitter: @CNBCWorld

Contact Telecom

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    To learn more about how we use your information,
    please read our Privacy Policy.
    › Learn More