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Mediapart
Dim.29 mars 201529/03/2015 Édition du matin

The day that French internet boss Xavier Niel made his fortune

|  Par Laurent Mauduit

Xavier Niel earned significant amounts of cash in his early business career through investing in sex shops. But the billionaire’s real money was made in the telecommunications industry through his development and ownership of internet service provider Free. Here, in the second part of Mediapart's investigation into the influential businessman, Laurent Mauduit examines the crucial day on which Niel consolidated his control over the company that was to make his name and his fortune.

Partage

Part one of Mediapart's investigation into the boss of Free showed how Xavier Niel had begun to amass the beginnings of a fortune thanks, in part, to his investment in sex shops in Paris and Strasbourg. At their peak these shops were earning Niel around 15,000 euros a month in cash.

But this was only the start of the entrepreneur’s money-making success story. The big money – the kind of money that has made him France's 12th wealthiest man - was to come not from the sex shop industry but from new technology, and most importantly from his stewardship of Free, which is today France's second biggest interest service provider and now a successful mobile phone operator too.

As with the rest of his early professional career, Niel, who is an indirect shareholder in Mediapart (see box marked boîte noire at the foot of this page), is not keen on discussing how he came to have almost total control of the company that spawned Free and made the businessman’s fortune. But thanks to court documents from the time, Mediapart has been able to piece together some of the most important details. The story behind how he became a billionaire goes back to one crucial day, March 13th 2002.

It was on that landmark day that Xavier Niel went from owning an already sizeable 58.94% controlling share of the company Iliad, the parent company of Free, to a huge 77.93%. To put this into context and to underline the dominance of Niel's position after the transfer of shares, the next biggest individual shareholder had just a 2.42% stake while all the institutional investors put together mustered only 6.9% between them.

 Niel's stake in Iliad gave him near-total control and a chance to develop the business further in the future, to become the success story that it is today. But not everyone was to prove satisfied over the transfer of shares that took place on March 13th 2002. One man who became disgruntled was Xavier Niel's former business associate, Fernand Develter.

 It was Develter who had introduced Niel to the world of sex shop investment back in the early 1990s.  It was Develter, too, who had set up Fermic, the company that in 2000 was to be rechristened Iliad. Fermic had been created by Fernand Develter and his old colleague from banking days Michel Artaud - the company name came from the first letters of their names. However by 1990 Fermic, which offered a mixture of stock price information services and dating services on the Minitel network, was performing poorly and losing money. Xavier Niel was thus able to buy a 50% stake in it for a nominal fee, and began to develop the firm. After 1993, when business in dating services began to decline, he focussed Fermic on other areas, such as producing a reverse telephone directory service.

Partage

In the interests of total clarity, it should be noted that Xavier Niel owns a part of Mediapart's share capital, though it is a small and indirect holding. When Mediapart was launched in 2008 the aim of the founders was to guarantee its independence. So alongside the citizen-investors and the employee shareholders they, the founders, control a majority of the share capital. A “Society of Friends” company was also set up which received financial support from 88 people. Xavier Niel is one of those 88. He contributed 200,000 euros to this company, which makes up 12.68% of the money raised by the “Society of Friends”. That company's stake in turn owns 12.99% of Mediapart's share capital. Niel does not take part in management meetings of the “Society of Friends”, nor as a result is he involved in Mediapart's management meetings.