French telco Iliad set to beat cash flow target with Italian market boost

By Leo Marchandon and Alban Kacher

(Reuters) -Iliad will likely exceed its yearly operating free cash flow target of 2 billion euros ($2.3 billion) aided by improved demand in Italy and returns from selling a part of its stake in unit OpCore, the French telecom group said on Wednesday.

The company is exploring merger and acquisition options in France and Italy, and investing in data centre projects through OpCore.

Over the first nine months of the year, Iliad saw 25% growth in its free cash flow, chiefly driven by the Italian market where cash flow was 2.5 times higher than last year.

Combined with the proceeds from selling half of its stake in OpCore, this allowed the company to reduce its net leverage to a 2.3 multiple at the end of September. That compares to a net debt amounting to 2.7 times its earnings before interest, taxes, depreciation and amortisation (EBITDA) at the end of 2024.

Asked about a potential tie-up with rival Wind Tre in Italy, CEO Thomas Reynaud said Iliad had nothing to report for now, but remained open to any opportunity to consolidate the Italian market.

"If an opportunity for consolidation were to arise, we would look at it seriously," Reynaud said. 

Low-cost mobile operator Iliad's entrance to the Italian market in 2018 was part of EU antitrust remedies to clear the merger of CK Hutchison’s 3 Italia with Wind Tre in 2016.

The French group had sought to buy Vodafone's Italian operations in 2024 and tried to clinch a deal to combine with state-backed Telecom Italia earlier this year, but with no success.

Iliad's EBITDA after leases - a core operating profit measure used by many European telcos - rose 5.6% to 3 billion euros in the January-September period, driven by strength in France and Poland in particular.

In France, Free brand subscriber numbers grew slightly to 23.2 million. Customers in Poland increased to 15.6 million, while Italy added a net of 300,000 subscribers to 12.8 million at the end of the reporting period.

($1 = 0.8633 euros)

(Reporting by Leo Marchandon and Alban Kacher in Gdansk, editing by Milla Nissi-Prussak)