Business

‘Peep show’ Frenchman Xavier Niel makes surprise move on Eir

Niel learned the art of computer programming as a teenager in the 1980s

The founder of French broadband internet provider Iliad, Xavier Niel. Photograph: EPA/POOL Philippe Wojazer

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Joe Brennan
Sat Sep 16 2017 - 06:15

France’s richest technology billionaire knew sex would sell on the internet even before the World Wide Web was invented.

Xavier Niel learned the art of computer programming as a teenager in the 1980s after his father gave him a Sinclair ZX81 – a machine with enough memory to store a short e-mail today.

Using Minitel, France’s forerunner of the internet, the budding entrepreneur set up adult web chats, known as “Minitel rose’ while still at school, before investing in peep shows and the like.

In 1993, Niel founded WorldNet, France's first internet services provider, three years before incumbent France Telecom got in on the action. He went on to sell it in 2000, on the eve of the bursting of the dotcom bubble, for the equivalent of €58 million.

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Two years later, he launched Free, the world’s first triple-play package of phone, internet and television for a cut-throat €29.99 a month. He rattled the French market in 2002 with the unveiling of Free Mobile, offering unlimited calls and data for €19.99 and wooing customers by goading those on packages costing as much as €65 at rivals that they were little more than “suckers” or “milk cows”.

It worked. Free Mobile has almost 13.2 million customers and its Paris-listed parent company Illiad’s value has surged by 80 per cent in the past five years to €13.2 billion. Niel holds a 52 per cent stake.

Now Niel has designs on Eir, Ireland’s dominant telco almost two decades after it was privatised by the State.

This week, we reported that Niel was in talks with a group of New York hedge funds and a Singaporean sovereign wealth fund that took control of Eir in recent years. This could lead to the Parisian taking a majority stake in the Irish company.

Could this spell a new era of competition in Ireland’s phone market?

Eir has been around the block. The group racked up €4.1 billion of debt amid five ownership changes before it was forced into the State's largest-ever examinership filing in 2012 – resulting in €1.8 billion of its borrowings being written off and a band of its most senior lenders, led by US investment giant Blackstone, seizing control of the business.

Various owners had used the company as an ATM, stripping hundreds of millions of euro as they loaded it with borrowings and scrimped on investment.

Anchorage bought out Blackstone in 2015 and has been supportive of Eir as it invested heavily in fibre in recent years. It had little option; it was the only way to reboot revenues that had been flagging for almost a decade.

Could Niel provide funds to cut Eir’s remaining €2.3 billion debt and help line up finances for a possible contract under the National Broadband Plan – rather than fund a partial exit for the company’s current shareholders? That would be quite a departure for Eir.

Aside from telecoms, Niel co-owns French daily Le Monde, having participated in a rescue of the newspaper in 2010, much to the frustration of the country's then president, Nicolas Sarkozy, who was given to describing Niel as "peep show man". He also controls the rights to karaoke classic "My Way" (immortalised in English by Frank Sinatra, but originally composed in French).

The 50-year old’s colourful past includes an arrest in 2004 for alleged involvement in a prostitution racket linked to his part ownership of a French adult shop chain. Charges were ultimately dropped but he received a €250,000 fine and a suspended two-year sentence for embezzling funds.

“I’ve done a lot of stupid things in my life,” he has said.

Here’s hoping he won’t have to write off his Eir experience as one of them.

MOY PARK

Poultry giant Moy Park, one of the North's biggest private sector employers, has found itself processed and repackaged by its Brazilian parent this week just like one of its breaded chicken nuggets.

Embattled Brazil-based parent JBS put the business on the market in June to appease creditors and ratings firms after the value of its bonds tumbled. Brothers Wesley and Joesley Batista, who control the Sao Paulo firm, had confessed to bribing government officials. JBS had only bought the firm from Brazilian rival Marfig two years ago for $1.5 billion (€1.25 billion).

It emerged this week that JBS had found a buyer – US chicken company Pilgrims Pride, in which the Brazilian group has an almost 78.5 per cent stake, for $1 billion. It's essentially a transfer of funds from the US to Brazil, where JBS has agreed to pay its banks 80 per cent of the proceeds of any asset sales.

Moy Park's creditworthiness thus remains tied to the junk-status rating assigned by agencies such as Standard & Poor's to JBS, where developments took a turn for the worse this week as CEO Wesley Batista was arrested by Brazilian police probing insider-trading allegations.

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