Iliad profit rises as network expansion wins customers

PARIS (Reuters) - French low-cost telecoms group Iliad (ILD.PA) delivered a 16 percent first-half profit increase, the company said on Monday, as it increased mobile network coverage to win more business from rivals.

Iliad, which shook up France's mobile market in 2012 with cheap, no-contract plans, also confirmed its goal to improve operating profit by 10 percent this year.

Some 400,000 new customers signed up to its Free Mobile service in the second quarter, beating analyst expectations for 372,000 new customers, according to Berenberg.

Free, which competes with market leader Orange (ORAN.PA), Numericable-SFR (NUME.PA) and Bouygues Telecom (BOUY.PA), increased its market share by a percentage point in the period to 16 percent.

First-half sales rose 7 percent to 2.2 billion euros (1.62 billion pounds), while earnings before interest, tax, depreciation and amortisation (EBITDA) rose 16 percent to 725 million euros. Net profit also rose 16 percent to 162.9 million euros.

"Our profitability is improving because of our ability to carry more of our own mobile traffic, as well as the growing size of our user base," Iliad Chief Financial Officer Thomas Reynaud said in an interview.

As Iliad builds out its network, it pays less to Orange, which has been carrying Free's mobile traffic under a national roaming agreement since 2012.

More than 70 percent of Iliad's mobile data traffic is now carried on its own network, Reynaud said. Iliad still relies largely on Orange to carry most voice calls, especially those made with older 2G phones.

Iliad had erected 5,266 mobile antennas as of June 30, with a target of 6,000 by year end.

French telecoms regulator ARCEP is working with Iliad and Orange to ensure that the 2018 expiry of their roaming contract goes smoothly and that Iliad is capable of serving customers without Orange's help.

(Reporting by Leila Abboud and Joseph Sotinel; Edited by Laurence Frost)