Iliad-UPC tie-up will make Poland a market to watch

Iliad is making good on its ambitions to enter the Polish fixed-line market, making an offer for number two player UPC worth the best part of US$2 billion.

The announcement of talks between Iliad and UPC parent Liberty Global almost went unnoticed, coming at the back end of last week amidst results presentations from both companies and the revelation that the French company’s owner Xavier Niel is looking to take it private. Liberty Global and Iliad both disclosed that the latter has submitted a non-binding offer worth 7.3 billion zloty (US$1.9 billion) for UPC, talks are ongoing, but a deal may or may not ensue.

The story is noteworthy though, because it not only highlights Iliad’s Polish ambitions, but also will have a marked effect on the structure of the Polish telecoms market as a whole…should it go ahead, of course.

Iliad is a recent entrant into Poland, having acquired mobile operator Play less than a year ago. At the time it talked up its newly-increased presence in Europe’s mobile market, Play having added 15 million customers to its footprint, but also made it clear that it was not all about the wireless space. “Iliad wishes to…facilitate Play’s entry into the fixed-line services market to benefit both the retail and business market in Poland,” said Iliad chief executive Thomas Reynaud.

Fast forward a few months and the telco is already looking to make that ambition a reality.

Play is Poland’s second-largest mobile operator with an 18% market share at the end of last year, according to the country’s regulatory body the Office of Electronic Communications, known locally as UKE. It is – for now – significantly smaller than market leader Orange with a 34% share, but has just overtaken former third-placed operator T-Mobile, which holds a 17.1% share.

The picture is similar in the fixed-line space, with Orange serving 24.3% of the market and UPC coming in second at 15.9%, followed by a range of smaller players with sub-10% market shares.

It is pretty clear then why Iliad is eyeing up UPC. The combined entity would be a solid second-placed full service operator, well-positioned to eat into Orange’s market dominance as well as to stay ahead of the chasing pack.

As we have noted before, there remains plenty of room for growth in the Polish fibre market. The FTTH Council Europe recently listed it as one of the countries in Europe with the most work to do to achieve full fibre coverage; as of last September it still had 8.7 million more homes to pass.

Meanwhile, Iliad is busily adding fibre connections to its footprint in its home market, France, and is on the verge of launching fixed-line services in Italy, albeit later than planned. It is a company with experience in challenging the status quo across fixed and mobile markets; no wonder UPC Polska looks like a tempting prospect.

For now this is all conjecture. Iliad and Liberty Global have still to hammer out the details of the deal and reach an agreement that suits both. Should a firm takeover deal emerge, there will still be boxes to tick, including convincing the regulators to allow it to go ahead. But if it does come to fruition, Poland will quickly become an interesting market to watch.