France's Iliad seeks to revive sales with high-end set-top box

By Mathieu Rosemain and Gwenaëlle Barzic

PARIS (Reuters) - Telecom operator Iliad unveiled on Tuesday a new high-end set-up box with luxury audio speakers and embedded video applications which it sees reviving sluggish sales in France.

Iliad's triangle-shaped white box, dubbed Freebox Delta, includes a Netflix subscription and Amazon's voice assistant Alexa among its key features, on top of six audio speakers developed by French luxury manufacturer Devialet.

The model, which also has improved internet speed and data storage, comes eight years after the previous set-top box boosted sales for Iliad, which pioneered offers bundling television, internet and voice services.

"Our idea is to offer a product that is unique and adds value to the Freebox we invented several years ago," Iliad's founder and majority-owner Xavier Niel told reporters.

Iliad's previous set-top boxes all played the role of cash-cows for the telecoms group, helping finance the company's low-cost mobile offers since obtaining a licence in France in 2012.

The protracted price war that followed has weighed on mobile revenues and the margins of its rivals Bouygues Telecom, Altice Europe's SFR and Orange.

But the fierce competition has now extended to the fixed business and started to bite Iliad which lost subscribers in the second and third quarters in its broadband and mobile businesses.

The stock was up by 4 percent at 1408 GMT, reacting positively to the presentation of the new box. It has shed about 36 percent of its value since the start of the year.

The Freebox Delta is offered at 49.99 euros ($57) per month, roughly 10 euros more than the previous version. But the real price tag includes a four-year subscription to the embedded Devialet speakers, costing 10 euros more per month.

The new box is therefore about 20 euros more than the average triple-play equivalents offered by Iliad's rivals, including market leader Orange.

Yet the added services, which include an alarm system and a camera that detects suspicious movements, are weighing on margins, Niel said.

"We're losing a tiny bit on our margin but this is deliberate and voluntary because this is our DNA and this shows what we're capable of doing," he said.

Niel declined to provide a sales target for the Freebox Delta but confirmed the 2020 target of an operating free cash flow of about 1 billion euros in France.

($1 = 0.8769 euros)

(Reporting by Mathieu Rosemain and Gwenaelle Barzic; Editing by Sudip Kar-Gupta and Ed Osmond)