Iliad is starting to look very light on infrastructure

French telco Iliad has confirmed a deal to sell 51% ownership of its fibre assets to InfraVia for roughly €300 million.

As part of the deal, Iliad spun off its fibre assets into a company which will now be known as Investissements dans la Fibre des Territoires (IFT). The enterprise value of this venture will be €600 million, which will now be 51% owned by French private equity firm InfraVia.

The separation of network infrastructure from retail business units is becoming an increasingly attractive strategy for the telcos. As the value and ROI of the network will no longer be tied to the commercial performance of the retail business following a separation, it looks like a much more attractive investment to companies like InfraVia.

InfraVia is a company with notable experience in the telco world. The firm is an investor in Cignal, an independent telecom tower companies in Ireland, as well as Celeste, a digital infrastructure-provider in France and data-centre company Etix Everywhere.

While this is further evidence of the attractiveness of the connectivity industry for long-term investors, it is also demonstrative of the financial strife the telcos find themselves in.

In pursuit of investment to fuel the next generation of connectivity, Iliad has resigned itself to selling off 51% of its fibre company. Free, Iliad’s mobile brand, will act as the anchor tenant of the network though IFT is now free to engage other operators to offer the same services.

Elsewhere in the Iliad universe, the team also found it necessary to sell passive infrastructure assets for its mobile network. In May 2019, Iliad signed a deal with tower company Cellnex. Cellnex would receive 5,700 sites in France currently operated by Free and 2,200 Iliad sites in Italy, as well as 70% of the new company that will manage the sites. The deal brought in €2 billion for Iliad.

The telcos are in a difficult position. Key revenue streams have been destroyed over the last decade, voice and SMS for example, though these are the companies which are being asked to invest more in network than ever before. Divestment, partial or full, in assets such as towers or fibre networks is becoming an increasingly common way to balance the equation, but this might be a case of ‘short-term gain, long-term pain’.

In selling assets, the telcos will have to accept they will be tenants on this infrastructure in the future. The consequence of this trend will not be seen for some time, but owning infrastructure is certainly a more sustainable and healthy position to be in than lease agreements.