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Iliad makes $4.2 billion bid for Polish telecom Play

France’s Iliad moved to become Europe’s sixth-largest mobile phone operator on Monday with plans to purchase Poland ‘s Play in a 3.5 billion euro ($4.2 billion) deal.

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iliad and Play share a similar success story as the most recent entrants in the mobile market in three major European countries. Together, they have 41 million subscribers in France, Poland and Italy. iliad will be the best industrial partner to accompany Play’s growth in the mobile market and optimize its entry into the fixed market. iliad poland

Iliad, which has already agreed to buy 40% of Play from two shareholders, said it had now bid for all of the operator at 39 zlotys per share, a 38.8% premium to Play’s Friday close.

It said the deal, its third move outside France after buying a minority stake in Ireland’s eir and launching in Italy in 2018, gives Play an equity value of 2.2 billion euros and an enterprise value, including debt, of about 3.5 billion euros.

This deal is a major chapter in our internationalisation strategy. It will make us Europe’s sixth-largest mobile phone operator,” Iliad CEO Thomas Reynaud told reporters.

With 38 million inhabitants, Poland represented a dynamic telecoms market with huge growth opportunities, he added.

Iliad will have 41 million subscribers in France, Poland and Italy with the addition of Play. It has 20 million in France after its Free brand opened up the mobile market nearly a decade ago with low-cost offers on fixed telephone, internet and TV.

Reynaud declined to comment on further geographical expansion but said in France Iliad will launch a corporate telecoms business and accelerate in fibre, and in Italy it will offer high-speed Internet.

The acquisition will be financed by debt and cash. The transaction is underpinned by iliad’s financial strength and will reinforce its growth profile and cash-flow generation.

1. Launch of a public tender offer for Play and purchase secured of a 40% controlling interest from Play’s two reference shareholders iliad poland

The Strategy Committee of HoldCo and the Board of Directors of iliad have approved the launch of a public tender offer for all of the shares making up the capital of the Polish telecom operator, Play, for a cash amount of PLN 39 per share (representing a total of c. €2.2 billion for 100% of the share capital and an enterprise value of c. €3.5 billion). iliad has signed a binding agreement to purchase a 40% controlling interest from Play’s two reference shareholders for the same unit price (i.e. PLN 39 per share), which will give iliad the majority of seats on Play’s Board of Directors.

At PLN 39 per share, the offer represents:

– A premium of 38.8% over the most recent closing share price
– A premium of 44.7% over the volume-weighted average share price for the last 7 days
– A premium of 32.9% over the volume-weighted average share price for the last 30 days

The deal remains subject to obtaining clearance from the relevant regulatory authorities and notification of the planned acquisition will be submitted to the European Commission

2. Play – a growing, innovative and profitable telco that is a perfect strategic fit with iliad iliad poland

• Like iliad, Play has seen exceptional growth over the past 15 years. It is the most recent
entrant in the Polish mobile telephony market, having entered in 2007, and today it has
15 million subscribers and a 29% market share, making it the leading mobile telephony operator
in Poland. Play currently employs some 2,800 people.
• Two groups have a lot in common: both have been game-changers in their markets
and have opened up mobile usages by proposing offerings accessible to everyone. Over the
years, iliad and Play have developed the same culture of growth and agility. Both groups now
have powerful brands that are highly respected in their countries and convey the values of
innovation, simplicity and value for money.

• Play, a profitable player on a growth trajectory. Over the last 12 months, Play generated
€1.6 billion in revenues1 (up 2.0% year on year at constant exchange rates), €523 million in
EBITDAaL2 (32.1% margin), €359 million in OpFCF (22.0% margin) and €269 million in FCF
(before its dividend payment).

• iliad – an industrial partner to help drive Play’s growth. iliad’s expertise and experience will
help Play grow in the mobile market and facilitate its entry into the fixed market. iliad will also
help accelerate the digital distribution of Play’s offerings. All of these developments will be
carried out drawing on the skills of Play’s management teams iliad poland


3. A business combination that is in the best interests of both iliad’s and Play’s shareholders

For iliad’s shareholders:

• For iliad, the acquisition represents a unique opportunity for growth and for entering the Polish
telecom market. With 38 million inhabitants, Poland is central Europe’s largest market. It is the
sixth-largest economy in the European Union and has seen steady growth for 28 years; per
capita GDP has risen 6% on average per year over the last twenty years.
• Through this acquisition, iliad will cement its position as a pan-European telecom player,
operating in three of Europe’s largest telecom markets: France, Italy, and now Poland. All three
of these countries are in distinct stages of expansion and have clear growth prospects.
• The acquisition will be accretive for iliad’s shareholders in terms of both EPS and FCF per share
as from the very first year.

For Play’s shareholders

• The tender offer will give Play’s shareholders the opportunity of receiving PLN 39 per share,
representing a 38.8% premium over Play’s most recent closing share price and a 32.9%
premium over the volume-weighted average share price for the last thirty days. This premium
is notably justified by Play’s intrinsic quality and the value of its mobile passive infrastructure.
• The offer gives Play enterprise value multiples (on a last-twelve-months basis) of
6.8x EBITDAaL and 9.9x OpFCF3 before taking into account the synergies generated by
integrating Play into the iliad Group.

4. iliad and Play – two groups with solid financials

This growth transaction is underpinned by the iliad Group’s financial strength. iliad’s leverage ratio would increase from 2.2x at end-June 2020 to 3.2.x on a pro forma basis, but the Group intends to gradually deleverage following the acquisition. In addition, iliad will continue the process launched by Play’s existing management and shareholders of spinning off and selling its passive infrastructure.

iliad’s projected acquisition of Play will be financed by debt and available cash, with acquisition financing already secured with a pool of international banks.
In view of Play’s profitability and the financing conditions underlying the acquisition, the deal will be accretive for iliad’s EPS and FCF per share as from the first year. It will therefore enable iliad to maintain its financial and strategic flexibility, a reasonable leverage ratio and its dividend policy.

Thomas Reynaud, iliad’s Chief Executive Officer, said: “This excellent alliance constitutes a new
growth driver for the iliad Group and gives it access to one of Europe’s high-potential telecom markets. Pooling the expertise of Play’s and iliad’s teams will reinforce the iliad Group’s fundamentals through a combination of growth and innovation. The transaction will make iliad the sixth-largest telecom operator in Europe4. Fully committed to implementing its Odyssey 2024 Plan, iliad is a solid group that is pursuing its expansion with confidence.”

Jean-Marc Harion, the Chairman of Play’s Management Board, said: “This alliance with the iliad
Group marks an important chapter in Play’s history, as it will accelerate its business development in fixed services. Play and iliad share the same values and overall corporate vision. Our Board of Directors has unanimously approved the deal, firmly convinced of its strategic fit and value creation potential for Play’s shareholders.”

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