Morningstar | Iliad Reports Mixed 2018 Results; Shares Undervalued
We were relieved that Iliad finally reported 2018 results and they were decent. While revenue remains weak and actually declined in France, its EBITDA margin improved. We are maintaining our EUR 143 per share fair value estimate and narrow moat rating. We continue to believe the shares are undervalued. The firm lost wireless and broadband customers, both year over year and sequentially, ending 2018 at 13.4 million and 6.4 million, respectively. However, Iliad continues to improve its wireless mix as it moves subscribers from its low-priced service to its high-end offering, which is helping lift average revenue per user. While we expect the firm can return to subscriber growth, the improvement in mix should allow revenue growth even if its wireless base stays flat.We also anticipate the broadband base can return to growth as it increasingly pushes faster fibre to the home, or FTTH, service. It grew its FTTH base 77% to almost 1 million in 2018 and we expect it can continue to add over 100,000 FTTH customers per quarter. The firm is also offering several new broadband packages that should help entice broadband customers to upgrade rather than leave.
Offsetting the weakness in France, the firm reached 2.8 million wireless subscribers in Italy at the end of the year after just seven months of operation. This led to Italian revenue of EUR 125 million in 2018, which allowed the firm to grow revenue 0.6% for the year. We were pleased to see Iliad raise its prices in Italy to EUR 7.99 per month, which should allow better returns. Even with the higher price, we expect it can continue to grow its wireless subscriber base, though at a slower rate than this first year.
Impressively, Iliad generated an EBITDA margin of 35.5% versus our projection of 35.0%. This improvement was due to good cost control in France, which allowed its EBITDA margin in the country to reach 37.9%. We expect a bigger EBITDA loss in Italy in 2019, which should push the firm’s EBITDA margin lower in 2019. After 2019, we expect a steady recovery in the EBITDA margin as Italy gains scale, marketing is scaled back, and cost-cutting continues in France.
Iliad is an operator in the French internet access & telecommunications markets. Co. divides its operations into three business segments: Broadband, Traditional Telephony, and Retail Telecom. Broadband includes Internet service provider operations, hosting services, user assistance operations & operations related to the rollout of the FTTH (fiber-to-the-home) network. Traditional Telephony includes switched landline telephony (One.Tel and Iliad Telecom), directory services (mainly the ANNU reverse look-up directory accessible by Minitel, telephone, Internet and SMS text messaging) and e-commerce operations (Assunet.com). Retail Telecom offers various mobile phones & services to customers.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.