* Record subscriber losses in mobile in Q2
* Cuts 2020 profitability target
* Confident revamped offers will drive up demand
* Stock has shed 42 pct of its value in 2018 (Adds founder’s quote, updates shares)
By Mathieu Rosemain and Gwénaëlle Barzic
PARIS, Sept 4 (Reuters) - French telecoms group Iliad , whose cut-price deals shook up the country’s mobile market, is now being beaten at its own game as a price war dented its market share in the first half of the year and led it to cut a key profitability target.
The 19-year-old company said it had 200,000 fewer mobile subscribers at the end of June than at the end of March - the first drop since the launch of its mobile business in 2012.
Iliad’s broadband business also shed subscribers for the second quarter in a row, the firm said on Tuesday. In contrast, rivals Orange, Altice’s SFR and Bouygues Telecom all gained ground over the same period.
Iliad shares have fallen by close to 42 percent this year, but were up 8.8 percent at 0955 GMT in volatile trading.
“We’ve had an appalling quarter, we can all agree on that,” founder and majority owner Xavier Niel told analysts in a call, while adding he remained confident the group had the capacity to yield “a great deal of cash flows” by 2020.
In a sign of the pressure on the French tycoon, two analysts asked if Niel would be ready to consider a sale of his company.
“It’s very nice of you to suggest I should retire. But I’ve never been in favour of retiring at 65, even less so at 60 or 52,” said the 51-year-old.
The current competitive environment in France has led Iliad to rejig its broadband offers, which it hopes will drive up demand in its fixed-line business, especially through the migration of customers to more profitable fibre technology.
The group expects its fibre subscriber base to reach 1 million in early 2019, up from 734,000 at the end of June.
In a call with analysts, Chief Executive Thomas Reynaud also pledged to reinvigorate growth with the launch of a new set-top box bundling voice, internet and TV services. The new box should be unveiled “in the next few weeks”, the group said.
The new marketing and sales approach yielded positive results over the summer, Iliad said, without elaborating.
In Italy, where it entered the mobile market with aggressive offers at the end of May, Iliad said it had 1.5 million subscribers in early August.
“Iliad is the main casualty of the aggressiveness of Altice and has not managed to eat into the customer base of Orange (and) Bouygues,” Kepler analysts said in a note to clients.
Paris-based Iliad said first-half revenue was stable at 2.4 billion euros ($2.8 billion), while consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) fell 1 percent to 866 million euros.
Due to fierce competition in the fixed-line business, the group said it was reducing its operating free cash flow target for France to around 1 billion euros from 2020, compared with more than 1 billion euros previously.
$1 = 0.8618 euros Reporting by Mathieu Rosemain and Gwenaelle Barzic, Editing by Inti Landauro and Mark Potter