French telecoms billionaire Xavier Neil — who controls Ireland's Eir — has made a significant move for his hedge fund to take the Paris-listed telecoms group Iliad private — but the consequences, if any, for the Irish broadband and mobile phone operator remain unclear.
After multiple owners in the past 20 years, an initial stake of over 64% in Eir was sold three years ago to Mr Niel’s hedge fund, NJJ, and to the listed telecom Iliad, in which Mr Niel owns 71%
Iliad owns a number of telecom firms, including in its home country of France, but also in Italy, as well as in smaller markets such as Ireland.
The billionaire is now taking Iliad private by buying out the 29% he does not already own after customer losses and heavy spending sent its shares into a steady decline. His bid values the whole of Iliad at about €10.8bn.
Iliad was the non-State owned pioneer which shook up the French market more than two decades ago with its low-cost cable TV and internet services. Lately the industry’s focus has shifted to combined fibre broadband, mobile and TV, forcing Iliad to redouble its network investment.
And the industry has fallen out of favour with equity investors in recent years as it gears up for big spending on 5G wireless and fibre networks.
Deals for European companies in tech, telecom and media have surged in the last two years, with buyers agreeing to spend about $124bn (€105bn) so far in 2021, keeping pace with last year’s record.
“Telecoms is already a low growth industry and Iliad will also inevitably face that,” said Bloomberg Intelligence analyst Erhan Gurses.
Rock-bottom interest rates have made it cheaper for owners to withdraw their businesses from the constant scrutiny of equity markets. Iliad’s shares have lost almost a third of their value in the past 12 months.
The pandemic-driven surge in home working has driven home the importance of the networks that drive the digital economy, yet phone companies’ profits have barely budged due to fixed-price data plans and fierce competition.
Following his 2008 deal, Eir has been run by chief executive Carolan Lennon and non-executive chair David McRedmond.
Eir said earlier this year it had invested in customer services after it was heavily criticised when its call centres were overwhelmed at the onset of the Covid-19 crisis. It has also spent a significant part of a total €500m it plans to invest in fibre networks.