Infrastrutture Wireless Italiane S.p.A.

Good afternoon. This is the Coru School Conference Operator. Welcome and thank you for joining the Inuit 4th Quarter and Full Year 2020 Financial Results Conference Call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Fabio Ruffini, Head of Investor Relations. Please go ahead, sir.

Good evening, everyone. Thank you for taking the time to connect the INVIS full year 2020 results presentation. With me today are Giovanni Terrigo, our Chief Executive Officer, and Diego Galli, our Chief Financial Officer. Before we begin, Please allow me to draw your attention to the safe harbor statement on page two of the presentation. Today's session will begin by discussing the key strategic and financial highlights of the year, to then move to an assessment of the current environment and near-term outlook. Presentation will be followed, as usual, by Q&A session. Over to you, Giovanni.

Thank you, Fabio, and welcome, everyone. I would like to start from where we left in November, when we shared the business plan and highlight again the key features of the new Inuit. Inuit has the best quality assets in the market, which is a key competitive advantage, an ideal position to capture growth opportunities, the rollout of 5G, and an overall digitalization of society, two tier one anchor tenants, team Vodafone, and a neutral loft role in the market, translating superior organic growth in terms of revenues and free cash flow generation. A plan to reduce leverage progressively, which will give us additional opportunity. In 2020, there is no doubt that we have grown up. We are better equipped to capture the exciting opportunities that the market and industry present, also in the framework of the next generation EU. The look of the investment cycle is improving on digitalization, green transition, transportation, and healthcare. A move to modernize the Italian economy in which Inuit plays a central role. And it has been a very busy year on all fronts. Going to slide four. We deployed a new team, organization, and governance structure since day one. We invested in human capital and further aligned management incentives to the market. We made significant progress to separate our operations and back offices from teams. We signed several new commercial agreements. We changed our operational process to support the new MSAs and comply with the remedies and opened the transfer register. We also successfully entered the debt capital market for the fifth time. Through this project, we consolidated a platform as an independent infrastructure player capable of playing a leadership role in enabling the digital transformation for the anchor tenants as well as the other operators in the market. the market, looking at a summary of our solid results. Slide number five. We delivered a robust Q4 with an acceleration in organic revenue growth of over 3%, compared to just under 2% in the third quarter. Hospitalities in the last quarter were a record height of 1,000, twice as much as what was achieving Q3 and guidance, achieving a total of 1,500 in the second half of the year. Further progress was made in the new services, small cell and DAS, bringing total new remit units for the year to more than 1,000. Cost optimization was very solid. with more than 600 renegotiation and land acquisition in the quarter. I'm satisfied with this result, which meet the 2020 guidance, allows us to confirm the dividend proposal of 30 euro cents for share and a solid entry point into 2021, and which give us confidence to confirm our midterm guidance. These results were achieved in a difficult contest due to the pandemic, as you know. We didn't record any significant impact from COVID. Our infrastructure helped companies and individuals to better cope with their challenges, something that we are proud of. Now, looking at our main KPIs on slide six, we are pleased with the development of the main KPIs, especially the step change in new hospitalities, approximately 1,000 in the quarter, with new POPs more than doubling quarter on quarter, thanks to the progress in the common grid. Also, new POPs with other parties were up 12% on a yearly basis, when compared like for like with the end of 2019. This trend is driven by the prevalent role of the fixed-wallet asset and interesting growth opportunity in the Italian market. There are several operators, OpenFiber, Eolo, FastWeb, Lincoln, which are our clients and are deploying fixed water access services to bring high-speed broadband in the low-density areas. As the next steps, we are focused on improving the revenue mix through more MNOs. Also, because of the rapid increase in demand, we are also focused on shortening the end-to-end delivery cycle. Another positive to underline is that our tenancy ratio is up to 1.91 of the highest in the industry. We are very much on the right growth trajectory. Moving on the new services on slide seven. We are making solid progress on new services with more than 1%. 1,100 new small cell and DAS remote units in the year, up 33% as compared with 2019. Over the course of 2020, DAS advanced especially in verticals such as health and education. We entered the industry 4.0 vertical with a highly automated Phyllis Morris Electronic Cigarette Plant in Bologna. We signed a contract to make the new underground metro in Milan 5G ready, and we are ramping up the repeater business with over 1,000 bank branches covered as of December with the top Italian banks. We are confident about the outlook for DAS. There is a growing market awareness and demand from location owners. We are ready to capture the opportunity with the dedicated sales organization in place. Also, the Next Generation EU funds add 200 billion euros to support projects in a variety of areas related not only to 5G, but also to healthcare, education, public sectors, transportation, industry automation. which are all segments already in our track record and strategic focus. Now, Diego, please, we'll discuss our financials in more detail.

Thank you, Giovanni. Good evening, everyone. I'm pleased to share with you the results for the new Inuit. We show revenue growth, strong profitability, and strong cash generation. Looking at the quarterly figures, I would like to firstly draw your attention to revenues at 190 million euro, up 2% on the previous quarter on reported basis. In organic pro forma terms, we went up year on year from 1% growth in the second quarter to over 3% in the fourth quarter, allowing us to enter 2021 with an improving trajectory EBITDA margin stood at 90% in the quarter, a touch softer than our standards due to specific items, but we confirm our expectation for a 91% EBITDA margin run rate beginning in 2021. Let's focus now on EBITDA net of leasing cost, which is the main performance indicator of our efficiency. Here we record clear progress. with a reduction of least cost of 5.5% or almost 3 million euro over the past two quarters, showing the strength of our real estate team and optimization programs. As we can see in slide 9, these results translated into us meeting the guidance shared with you back in November. Revenues were in line at more than €663 million, reflecting progress in terms of new point of presence and services. EBITDA was strong at €604 million. And EBITDA was close to €419 million, exceeding our €415 million guidance. And let me highlight our remarkable margins. 91% at EBITDA level, and 63% at EBITDA level. As a result of our high tenancy ratio, hence high revenues per site, combined with a lean organization and low rental costs. I would like now to spend a few words on inflation, confirming that an inflationary environment has a benefit to our TNL. thanks to our MSAs with Tim and Vodafone, which are 100% CPI-linked, with 0% floor and no cap. In short, every 1% in extra inflation brings approximately €5 million to EBITDA and recurring cash flows. Interests are currently 60% fixed, and we are targeting to reach 80% fixed by year-end. Still a couple of clarifications on financials. Total interest includes the IFRS 15 component and $40 million of financial charges. Looking at the reported net income, it includes the effect of high amortization due to the Vodafone merger PPA. Excluding this item, the resulting adjusted net income would be approximately $223 million or 35% margin. Let's discuss now how we generate a significant amount of cash on slide 10. In 2020, we reached, regarding free cash flow, of 272 million euro. Better than expected. A cash conversion of 45% is among the best in the industry already. However, let me remind that it will improve further to 60% in 2023. up to €600 million in 2023 because of the strong organic revenue growth, of which more than 50% already committed, ongoing cost optimization, and lower cash taxes. This cash generation profile translates into an attractive shareholder remuneration as per our recently updated guidance, with a dividend per share of €0.30 in 2020 and with a progressive growth of 7.5% per year. More on the financial structure on slide 11. We reduced gross debt from 4 billion in Q2 to 3.7 billion euro in Q4, with a financial leverage of 5.4 times net debt to perform EBITDA. As for the short-term evolution of leverage, please bear in mind that we will be facing two cash outlays in the first half of 2021 for the goodwill tax scheme advance payment and for the dividend payments. Our debt structure now is extremely simple. Next debt maturity in 2025, average cost at approximately 1.8%. In terms of leverage, we expect a reduction from 2022 to the tune of 0.4 to 0.5 tons per year driven by the EBITDA growth. In 2023, as shared in November, leverage is expected at 4.6 times, freeing up around 1 billion worth of resources, which will give us the flexibility to finance further growth, either organically or VM&A, or to return more cash to investors. Now onto the opportunities to optimize our tax profile. So, on slide 12, we laid out all the details of the tax optimization opportunities we take to unlock additional value. First, we confirm the tax scheme announced in November on the €2 billion worth of goodwill coming from the Vodafone merger, with the benefit of €150 million MPV. This is already included in our business plan. Second, the recent budget flow in Italy has created an additional opportunity, which applies only to assets and goodwill as at the year-end 2019, which amount to 1.4 billion euros. This is another way for us to create value that we are applying to the full extent. In this case, the advance payment is 3%, meaning 42 million, And the benefit is in 18 years. We are talking about an IRR of over 80% and 200 million euro over the period. There are all the details in the slide. Let me just highlight that the total net cash benefit of more than 600 million euros or around 350 million euros in net present value terms. In conclusion, from my perspective, in the last nine months, we have delivered the revenue acceleration. We have rapidly realized significant groundless cost reduction. We have optimized the financial structure with two successful bond issuance. We have a lot material tax opportunities and savings. And last but not least, we have generated a significant amount of cash. With this, back to Giovanni on page 13.

Thank you, Diego. Few words on sustainability. We start a journey with the definition of the new plan in November. Now we are detailing the plan with yearly goals and objectives. I would like to focus on two specific areas, people and environment. We are committed When we are committed to having a diverse workforce, I am convinced it will make us more competitive. In fact, 45% of our new hires have been women. To facilitate the transition to remote working, we made sure everyone was equipped with the right tools to work from home in a safe and comfortable way. We believe in continuous improvement and had more than 4,000 hours of training in 2020. As regards the environment, our main target is to be carbon neutral by 2025. We will provide you with updates on our intermediate steps, beginning with our 2021 objective to source 60% of our energy from renewables. This year, we will also take part in the carbon disclosure project for the first time and are working on the inclusion in sustainability indices. Now, a summary of 2020 on page 14. We are satisfied with significant progress in 2020 on all fronts. In terms of integration, we built the new INVIDE. We stepped up the commercial effort with the growth of new pots in acceleration during the fourth quarter. We increased our tenancy ratio to 1.9, one of the highest in the industry. We also made progress on ground lease costs and optimized our financial structure. This project allows us to continue executing on our plan, generating cash flow as expected, and enter 2021 with a positive trajectory. 2020 marks the first step in achieving the business plan objectives and allows us to confirm our guidance. Going to the next slide, in my final remarks, I would like to remind you of our business plan targets, which we are confirming in the framework of the following elements. First, INWIT has a set of proven strengths, as we have shared with you today, also evidenced in our results. Second, the improving market dynamics and additional internal value drivers are already activated. We are supported by the improving investment cycle with the next generation EU being a key catalyst. All this underpins the target we shared in November, which are summarized here, of which 2020 was the fifth step of execution. Thank you. Now we are ready to take your questions.

Excuse me, this is the Coruscall Conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touch-tone telephone. To remove yourself from the question queue, please press star and 2. Please pick up the receiver when asking questions. Anyone who has a question may press star and 1 at this time. The first question. is from Ranjit Roshan with Deutsche Bank. Please go ahead.

Great. Good evening. Thank you for the questions. Two for me, please. We saw a very nice pickup in the pop ads in Q4. I think you had previously guided to greater than 1,000 for the second half you delivered out this quarter. Whilst we did see an acceleration in the organic growth, I would have thought that maybe the increase in the KPIs may have translated into a higher organic growth. So I was just wondering, is there anything you could say around the pricing trends for the third party POPs, please? And secondly, again, going back to the run rate, a very good sustained run rate in the lease optimization. If we were to annualize the second half performance, I mean, that would see a material increase pick up in the years ahead. And I know you've guided to 6,000 cumulative by 2023. Should we assume that that is more front-end loaded? Because I think previously the assumption was it was back-end loaded. But are you finding the easy winnings now in negotiating on the lease side? Thank you.

Yes. Thank you for the questions. On the first one, yes, the acceleration of new point of presence is really good and is better than we expected. And now we are facing and addressing this rapidly increasing demand. These volumes are a record high for the company, never achieved before. And we see two areas where we are focused on for accelerating the translation of the accelerated volume in revenues. And there are two areas. The first one is shortening the cycle, the end-to-end cycle, and shortening also the time between contractualization and invoicing. The second area that is a focus area is to further improve the mix, the mix of new tenants, because we are very happy with the demand of fixed wireless access. that is very strong and it's also, how can I say, quicker to satisfy. And now we do expect and we are working on to complement it with a stronger new point of presence related to OROS, to MNOs, to mobile equipment. So these are the two areas which will help and support us to accelerate the conversion, the speed of conversion of the higher point of presence in revenues. So it's the speed of acceleration, the focus to address the point that you correctly raised. On the least cost, actually, the speed of acceleration is very, very good. So the plans and the programs and the teams are working very well. The results are tangible and already visible in the P&L. It's too early to change our plans. The teams are targeted to go on fast and we will see in the future. But for now, both revenues and cost, there is only one input to go as fast as possible, as quick as possible.

Thanks. So just to follow up, on the revenue side, you're saying that you are shortening the period between when you start billing the customer from when you install the POP to when you send them the first bill. Is that right?

Yes, we are shortening the period, actually the end-to-end, honestly, from the demand to the invoicing, but also from the contractualization of the installation and the invoicing. And how can I say, I would say in other industries, in other parts of life, somehow it's a good problem to have when you have such an increase in demand and then all the end-to-end company machine, let me say the factory, the end-to-end factory, has to step up to cope with increasing sales, actually. Okay, that's great. Thank you.

The next question is from Jacob Bluestone with Credit Suisse. Please go ahead, sir.

Hi, good afternoon, or good evening, I should say. Thank you for taking the questions. I've got two questions, please. Firstly, on the intake of OLO tenancies, could you maybe just give a little bit more color around the sort of mix of MNOs versus fixed wireless access? I guess that sort of follows on from the pricing trends in the previous question. And then just secondly, could you give us an update on your latest thinking around the billion euros of excess capital? Is there anything that since you last presented to us back in November, is there anything sort of incremental to add and interesting opportunities that have come up? I'm just curious about your latest thoughts on the use of that excess capital. Thank you.

Hi, Jacob, it's Fabio here. Can you please repeat your second question? Thank you.

Yes, so it was a question about the use of the billion euros of excess capital that you expect to generate over the next three years, just what your latest thinking is around how you might deploy that cash returns versus M&A, basically.

Yeah, with regards to the first one, actually, we don't disclose the mix. the details of the mix between fixed wireless access and mobile equipment. Though, let me say that as we just commented, we see high numbers on fixed wireless access. So the mix is a little bit skewed towards fixed wireless access. That, again, is good news because it's something that is in demand very strong and also driven by by COVID and the need to cover the low density areas with broadband. Though we are working to rebalance, not reducing fixed wireless access, but increasing further the MNOs. In terms of pricing, the pricing is broadly, fixed wireless access is broadly one third of the MNO prices. And in general, on prices, we don't see any particular pressure. So prices are stable. There are a lot of variables we do consider and actually are stable. They are differentiated based on the capacity that is used. And that's why fixed wireless access is cheaper than mobile equipment because fixed wireless access equipment do occupy much less space both from an infrastructural point of view, as well as from the electromagnetic perspective.

Okay, about the second question. Okay, as Diego said, we will reduce the leverage and free up around 1 billion euros of resources by 2023, as we shared with you in November, if you remember. And let me say, It will be a little teaser that we will put on the table of board of directors to discuss the utilization. We study some opportunities in the market or otherwise we will increase the shareholder accumulation.

Thank you. That's helpful.

The next question is from Simon McHugh with Exxon BNP Paribas. Please go ahead.

I'm going to be quite boring and keep on the topic of fixed wallet access versus the OLOs. So when I look at Q4 versus Q3, I don't know if you could give a bit of color about kind of the mix of SWA versus OLO. Should we think about the acceleration in the quarter-on-quarter being predominantly just fixed wallet access growth, so more of the mix in Q4 versus Q3? And then I guess to follow up, what kind of measures to accelerate OLO growth I don't know if you could be a bit more explicit on kind of what you think you need to do to tap into the wind and Iliad growth in Italy. Thank you.

Yeah, honestly, yes, absolutely. The acceleration in Q4 is mostly given to fixed wireless access. And with regards to MNOs, actually, it's Iliad. And we need to think that there is also FastWeb, FastWeb Lincoln. I think it's a question of, I'm going to say, time to process the different kind of product. So the demand is there. The plans, honestly, also from the operators are quite clear in terms of building their own network. So the demand is there, the pipeline is visible, and we are focused on matching the demand with the supply. and speeding up the operational process, the delivery process to transform the demand, the contracts, and then contracts in revenues.

No, maybe you could, I don't know if you could give us an update. You know, the remedy when you merged with Vodafone forced you to open up these 4,000 sites. Yeah. I don't know if you could give us any comments here on like how many of those are ready. Are you seeing any uptake on those particular sites or is that something that we could expect to come in the next 12, 18 months?

Yeah. Yeah. So with regards to the remedies, the process started back in November, in October. So the sites are made available on the transparency register in line with the procedure. And also there, there are some improvement opportunities to make the process smoother. It's something really set up in October. So that's the focus, to make the process smoother. And we would expect Anyway, the new contracts and the new hospitality is related to the remedies already in 2021.

Super, thank you very much.

Welcome.

The next question is from Luigi Minerva with HSBC. Please go ahead, sir.

Yes, good evening. Three questions for me, please. The first one is on the 1,100 new small cells and dust. obviously a good acceleration also on that front. Can we extrapolate this number for 2021, for example? Is it a normalized pace to have on a quarter-by-quarter basis? And the second question is more medium-term, and it's about the change in the market following the acquisition of the Hutchison sites by Cellnex. And How do you see this having an impact on dynamics and whether you think it can have an effect on your mid-term organic growth? And lastly, a question on the goodwill and the tax legislation. Now, the law decree 178-2020 currently applies only to the 2019 goodwill tax. But do you expect it to be extended at some point to the 2020 goodwill, which would imply that you can have further upside because you haven't used all of the 2020 goodwill with the 185-2008? Thank you.

About DAS and small-cell, we are seeing a very interesting issue from the market. There is a very interesting quantity of demand by the location owner, so we confirmed this trajectory that we had in the last two quarters. There is a lot of, let me say, possibilities, and in this moment we are totally involved in the hospitals and universities, for example, but we start with the luxury hotels, and so we confirm absolutely the trend. About the Selnex acquisition of the Hutchinson Hotel, Towers, let me say wind, today is hosted in our towers since a long time and they are very, very integrated in the network. As you know, their network has been recently restructured. They swapped the vendors in the radio access and optimized it. And so really, I don't expect that they will pursue another cycle of change. There is a such move as high switching cost, which has an impact on the customer satisfaction. I remember that the wind customer came from two dramatic years, and now the natural is one, probably the best natural in Italy, okay? So finally, a repeat, an important concept. Our network is made up of the best location, so our sites are not easily replicable. In terms of competition, we compete with Semnex normally in the market. So let me say we don't expect the competitive dynamics changing or to change. So this is Diego for the field.

And with regards to the goodwill... Honestly, the new budget law was very, very, very positive surprise. The 3% advance payment is quite low. And as you correctly pointed out, we have not used the full goodwill related to 2020. And that's honestly one of the reasons why we have not done it, because yes, there could be and uh okay i said there is there is there are arguments to to to expect to to think that there will be new laws in the future similar to um the one that has been already just just issued so in short uh it's reasonable to expect that that will happen again honestly even though sorry let me caveat it you know tax planning in italy is uh is a little bit difficult to be done but what what's happened uh from a historical point of view, the good treatment of good will honestly let us think that there could be further opportunities in the future.

Okay, thank you.

The next question is from Georgios Yerodiakono with Citi. Please go ahead.

Yes, good afternoon and thank you for taking my questions. My first question is just to get a bit of a clarification around the CPI numbers that you provided. And it's very useful that you gave us an indication of what the impact is on an EBITDA level. Is it possible to give us any indications around the timing on which you renegotiate the rate for future years? Is it with a year's delay? Is it ahead? Just to get an indication of if we track inflation, when should we expect that to impact your financials? And my second question is just on the EU funds that you mentioned earlier. I was just curious if you could give us some color as to how the dispersion of these funds work, and if you could perhaps give us an indication of where you see the benefits in your case. Is it possible that MNOs can absorb these funds within the existing plans they've agreed with you? or if we see them absorbing some of these funds for mobile infrastructure, we should automatically assume that they are going to increase our commitments. Thank you.

So with regards to inflation, basically there is a one-year delay. So let me say 2020 inflation is reflected in 2021 prices, or 2021 inflation will be reflected in 2022 prices. That's the basic mechanism.

Okay, about the 200 billion of which 20 are 5G. Okay, we can, let me say, if you want detail, the amount for each branch of the business in digital digitization, innovation, competitiveness and culture, there are about uh 46 billions so we are totally involved in this green revolution and ecological transition there are 70 billions okay and our sustainability program let me say engage us infrastructure for sustainable mobility 32 billions let me say hospital airport industry 4.0 sports drones for monitoring and so on. This is a chance for us. Then there is education and research, 28 million. We are an actor in the coverage universities, inclusion and cohesion, and health. As I said previously, we are a very, very important actor in the indoor coverage in the hospitals to ability the 5G verticals.

If I could ask you a clarification, how do you expect these contracts to work? Would it be tenders that you go and participate in? Is it going to be fairly centralized so there will be major contracts that we can track, or is it more done on a case-by-case basis?

Okay, we are, let me say, remember we have two encore tenants and so we can join to them and in case we can participate to the standards of the public administration alone to push our solutions.

Okay, thank you.

The next question is from Stefano Gamberini with Equita. Please go ahead, sir.

Good afternoon, everybody. Just a Three questions from my side. The first regarding the trend both of macro sales and small sales during 2021. What I would like to understand is could we expect a further acceleration? You underlined that the fourth quarter was your record with 1,000 new pops. Could we expect an acceleration during 2021 considering your target to reach 20,000 new pops by 2023? Could we expect something in the region of 1.5 case per quarter during 21? Or for some reason, probably, the growth will be lower. And the same for small cells, because the last quarter, the growth was just 200,000 dust. Considering the target for 23, there should be a substantial acceleration between 600,000, 700,000 thousand per quarter. Sorry if I speak about figures, but just to understand if in 2021 we could expect a further acceleration on that point of view. The second regarding the 5G, how advanced is team involved on 5G coverage of the country and there don't seem to be any major commercial campaign for 5G growth in Italy. Am I wrong or not? And when do you expect that both Telecom and Vodafone will push on it? Last question regarding the pollution. What is the situation for electromagnetic pollution? Is the situation with, if I'm not wrong, around 500 municipalities that oppose the 5G due to this reason being solved or not? Many thanks.

Yeah, thank you. On the acceleration, yes, on the macro side, we should expect further acceleration. So we did 500, now 1,000. There will be further acceleration. In your right, let me say the standard cruising speed should be about 1,500 per quarter. So that's the target that we think we will achieve in a couple of quarters. With regards to small cell and DAS, I think we need to somehow balance Q4 and Q3. Q3 was very, very strong with 600 new remote units. Q4 has been a little bit softer with 200. So I think that considering the two, probably the kind of run rate we would expect for next year. Maybe a little bit faster, but not significantly faster. So we're talking about 400 per quarter on average.

Okay. about about 5g okay I remember that view that team evolved from spent 2.5 for billions for the use of the license for 19 years and so they are developing they are rolling the new technology they are building we see we touch the common grade that let me say will be available, the new 5G, let me say, world. Okay, I think that they start from the big cities. They are now, for example, Milan is totally covered. Now it will be the most important cities. About, let me say, the clean in the market, okay, you have to ask them why they are not doing. Let me say it. But keep in mind that they have some very, very strict license obligations where they have to be compliant. Otherwise, let me say, they use it or lease it. There is an obligation in this, in the use of frequencies. And sure, the EU funds will support them in pushing the new world of the 5G will be in terms of pollution. Okay, the 500 municipalities that live of fake news, the problem is solved because the authority give us the possibility to install the 5G in these municipalities. There is a cultural problem that we are trying to solve with some educational initiatives in the communities. Let me say that the most incredible fake news is that with the vaccine, let me say, will be inoculated the 5G in the human body and so everyone will be controlled. This is, let me say, the consistency of these people. And, okay, we expect now that the new trajectory of the new government will have to ask to, let me say, upgrade the limitation in electromagnetic limitation that we have today. So this is my considerations, let me say.

Okay, maybe thanks. Just a quick follow-up. When do you expect that these funds, these recovering funds benefits could arrive actually? In 2021 or probably next year for 5G development?

By the end of this year. Third quarter and principally in 2022. Okay. Thank you.

The next question is from Fabio Pavan with Mediobanca. Please go ahead, sir.

Yes, hi. Congratulations for the results, in particular for what concerns the acceleration and the new business. A couple of follow-ups. The first one is on the inflation. If I do my exercise properly, 1% increase in inflation with roughly speaking also mean 1% increase for what concerns the re-leveraged cash flow. Can you confirm this exercise please? The second point is we have been discussing a lot about FWA demand. What about the trend for indoor demand is still strong in this first part of 2021. And finally, if I may, I would love to hear your view on what has been announced by one of your competitors, meaning the intention to managing also the active part of the equipment in the Taurus business.

Thank you. Thank you, Fabio. Yeah, the 1% inflation translates in terms of benefit broadly 5 million in terms of EBITDA and recurring free cash flow, considering the initiatives we are putting in place to have fixed interest, so assuming a very limited impact on interest. And with regards to the active equipment?

Okay, it's in progress. I think that will be in the future for our two anchor tenants and we'll manage with them this issue, okay? Sorry, Fabio, can you repeat the question about taxes that I didn't understand really? Sorry.

It was not about taxes. No, no.

Okay, sorry, sorry, I can't say, okay. Okay, with the open run, let me say, arrived in the market, probably the tower operator will manage all the outside equipments of the central units, and so will be probably the new, let me say, perimeter of the tower cause to manage the antennas that will not be so active. But I don't think that before three, five years probably we will not, let me say, be engaged in this new adventure. But okay, we are studying and we will be able in the right moment to manage this new, let me say, challenge. Meantime, we are training, managing the dust that really is active in small cells. So, okay, we are preparing for the new game of the tower. Interesting, thank you.

The next question is from Andrew Lee with Goldman Sachs. Please go ahead, sir.

Yeah, good evening, everyone. I just had two questions, one on the dividends, just following up on an earlier question, and second question just on... update on 5G implications for tenancy requirements. So on the dividends, just wanted to ask when you'll start to use dividends to sustain that six times net debt to EBITDA target if we haven't seen any M&A activity and really kind of what point do you stop waiting for M&A and pay out more dividends to keep that balance sheet as efficient as possible? Maybe you said that before, but just wondering when it comes and could that decision come by the end of this year to ramp up the dividends? And then secondly, I wonder if you're seeing any change in what operators are saying is the required increase in towers to deliver the densification for 5G? Just with regard to a couple of operator CMDs this year so far that have talked about a much sharper rise in in towels required to deliver 5G of around 75%, albeit with some active sharing included. Any comments on either would be greatly appreciated. Thank you.

On dividends, the last industrial plan, the last business plan set out a framework for the next three years, starting from the 30 euro cent and then the progressive growth. And that's, how can I say, in this framework, logically, for sure, we would expect a review in this three-year time horizon. Having said that, every year we review, we update the plan, and honestly, the industry is moving on very, very fast. So, how can I say, for now, the path is defined, and the key decision point is when there will be the headroom up to a material level that is the one billion availability in three years. At that point in time, there will be the decision about how to use that excess flexibility. So that's the trajectory, the path that has been agreed as part of the business plan. But let me repeat myself at the same time again, every year we review the business plan and things are changing fast. So that's the kind of framework I would set out to give a sort of logical steps for this element.

Okay, Bansai-G, okay, let me say, will be necessary identification. In our plan, we have more than 2,500, let me say, new sites committed. And so, let me say, we are working on. Okay, in this moment, the operators are pushing in the macro coverage of the main cities, doing a tune. of the effectiveness of the actual coverage, and so we are collaborating with them to really study where and how to densificate the network. It's a good opportunity for us, and keep in mind that not only the densification, but surely the 5G will need a very, very, let me say, performant indoor coverage where we are working on, and we are, let me say, an Italian championship champion, okay?

Okay, thank you.

The next question is from Giorgio Tavolini with Intermonte. Please go ahead, sir.

Hi, good evening. Thanks for taking my question. Just to follow up, please. One on the 5G. Did you have any opportunity to talk with the new government in order to understand if there is any chance to change the electromagnetic limits? I understand that last year in COLAO proposal, among the COLAO proposal, there was the realignment of the electronic magnetic limits to the European standards, and it was indicated among the initiatives to be implemented soon or fast. The second question is on tax-reliant benefits. I understand that the new one will bring 22 million euro savings, so less material than the 114 million annual savings. for five years in that case that you presented in November. But are they included in the equity free cash flow guidance or do we have to add on this number? So the 22 million savings on top to the current guidance? And the third one is on the development capex for 2021. You spent 102 million in 2020. So what could be a good proxy for indication for 2021? Thank you. Okay.

As you know, in Italy, the electromagnetic restrictions are one of the most severe that are in Europe. Germany is a lot more, let's say, available. We are pushing this to our, let me say, interfaces, but we have no visibility in terms of, let me say, facts. But, let me say, now, really, we hope that this, let me say,

limitation that exists from 25 years finally will be the same of the average in europe and and with regards to tax now the 22 million and this tax tax scheme was not included in the business plan so is yes it is light upside on into the business plan In terms of capex, we disclosed 600 million capex for the period 21 to 23. So that's the kind of level of investment that we would expect spread, I would say, broadly evenly in the next three years.

Okay, thank you very much.

Welcome.

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