Infrastrutture Wireless Italiane S.p.A.

This is the course co-conference operator. Welcome and thank you for joining the in-week first quarter 2021 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 afternoon, everyone, and thank you for taking the time to connect in with first quarter 2021 results presentation. With me today are Giovanni Sirigo, 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. The recession will begin by pointing out the main industrial and financial trends for the quarter before summarizing the long-term opportunity that Inuit represents.

As usual, the presentation will be followed by a Q&A session. Come on.

Okay. Okay. Thank you, Fabio, and welcome, everyone. Since we last spoke in March, Inuit has continued to show progress in its industrial metrics. We delivered a sound first quarter. Hospitalities reached more than 1,200. This is an improvement, quarter on quarter, due to better trends from home-court tenants. DART ceremony units for micro-coverage grew by more than 400, reflecting growing market interest. Cost focus continued to deliver, with more than 400 actions of ground release, lease, renegotiation, or acquisition. In terms of financials, organic revenue growth was stable at more than 3%. Revenue round rate has slightly improved compared with Q4 2020. The impact of new POPs is gradually translated into revenues. Now, our focus is on gaining further momentum on revenue growth, quarter after quarter, with a clear set of programs to achieve that. Margin and cash flow expanded significantly, confirming a key feature of our business model, which shows growing predictable cash flows. Over the past two months, the external environment has continued to improve, showing significant opportunities ahead. There is a positive investment cycle coming and possibility for reforms which could simplify the end-to-end deployment process. A positive outlook for the tower sector and Inuit. As we look in the coming quarters, Our focus is on accelerating growth with three clear programs in mind. First, rollout of new sites. Second, release of third-party demand. And third, ramp up of DAF revenues. Now, looking at our main KPIs on slide number four. The development of KPIs, which recorded a high volume of new POPs, show different trends. Anchor continues to accelerate. Tim and Vodafone advance in the upgrade, extension, and densification of their network, in line with MSA's growth expectations. We expect a continuous positive trend in the coming quarters. We will roll out more new sites, which quickly translate into revenues with a tenancy ratio of 2. Third-party bots were more than 350. MIX is still mostly in favor of fixed wireless operators. We also recorded more IoT sensors by not-mobile clients, which is another opportunity for future growth. Our priority is to improve MIX with more MNOs. Looking at this in more detail, demand is strong. We have a significant order book. The process for sites above 35,000 inhabitants is regulated by the remedies and the monitoring prestige. Since October, operators have made available more than 500 sites in line with the requirements. But, as we shared before, this process has been slower than expected. The process is new and complex. There are multiple parties involved and different elements to balance. in order to ensure demand and offer are matched. There are also technical, commercial, and regulatory factors to consider. The process is currently being reviewed by all parties to improve its effectiveness. It's a priority for all. We see strong interest for our location. We remain positive about the opportunity with third parties. and improving the process will help in towns with population of above and below 30,000 inhabitants. We are focused on releasing this demand by improving the process, which is new and complex. It's just a matter of time. Moving on, fixed value access demand continues with new pops from all operators. For these clients, Q1 tends to be a soft quarter, and we expect more hospitalities in the remainder of the year. To summarize, we made progress and have identified the next steps to accelerate revenue growth. Turning to some of the structural features of our business model on page five. I would like to highlight some basic but important elements of our business model. beginning with our tenancy ratio, which is among the highest in the industry and also continues to grow. We can achieve this thanks to our two tier-one anchor tenants and the role of neutral loss, which is a unique combination. Also, Fixed Water Access clients are very supportive from this point of view. If we add to this feature the potential for improvement in ground-risk costs, We have a further path to operating leverage, driving margin expansion to top levels in the sector. On ground lease cost reduction, INVIS real estate team is proving successful. We have a strong track record and are gaining traction rapidly with further opportunities ahead. As a result, gradually, we will deliver a material expansion of margin per tower. We keep on adding new revenue streams to our cost base, which is becoming more and more efficient. Over the past year, we created value for nearly €1,000 per site in terms of additional EBITDA. Moving to the new services on page 6. We are continuing to make progress on new services, with more than 400 new small cells and thus remote units in the quarter, up from just 100 in the fifth quarter of 2020. We secure the top location in Italy, for example, key transportation hubs, stadiums, and cultural centers, as well as others that you see on this slide. To do so, we have a dedicated sales organization targeting corporations, the public sector, and location owners. Our commercial proposition is simple, as that brings several advantages for indoor coverage. Best connectivity, improved accessibility since no password is needed, multi-operator capability, strong security of data, and the ability to enable smart applications and IoT. This is appreciated by location owners, It improves productivity and satisfaction levels for users. It also enhances the value of real estate and enables the use of new digital services within the location. As the installed base is growing, so will the revenues. In the coming quarters, we expect a wrap-up of DAF's revenues. This will be done with new remote units, as well as an improvement in the number of tenants on the existing ones. which will be reflected in an increase of tenancy ratio. Now, let's focus on the next generation EU funds, which we expect will support investment in both macro-sites and on the small-cell and DAS. Moving, please, to the next slide. In with business plan that we shared in November has clear growth pillars. There is a direct fit between the main investment area of Next Generation EU and our specific track record. Let me share a few examples. On macro side, there are 7 million euros in terms of 5G and broadband. This supports our client's investment plan. There will be more resources to roll out 5G and fixed water access services. will be able to reach more towns in remote location and more quickly. More examples are possible in small cell and dust. As shown in previous slide, we already have a track record in key verticals from industry 4.0, which will receive 19 billion, to healthcare, 4 billion on digitalization and transportation, more than 25 billion. There will be additional funds to location owners, including national or local public agencies and private companies. Manufacturing and warehouses will become digital faster. Hospital and cultural sites will need indoor and outdoor connectivity. Road infrastructure will transition to digital maintenance and monitoring. These sectors of the economy will transition more quickly to becoming modern, smart, green and connected. This transition will create a natural need and urgency for more indoor and outdoor coverage. Directly or indirectly, next-generation EU funds will increase the visibility on the growth trajectory of dust and small cells. We have a dedicated team in place and are already working to support our clients, location owners and operators in the best way to take advantage of this opportunity. As for the next steps, we expect the initial portion of the funds to be distributed by ERN. Now, Diego will discuss our financial in more details.

Thank you, Giovanni, and good evening, everyone. Our results show a slight improvement in revenue, an expansion in profitability, and a further optimization of capital structure. Beginning with organic revenues at 190 million euro, they were up 3.4% year-on-year and improved by about 1 million euro on the previous quarter. This growth was sustained by MSA revenues as the new tenancies were progressively reflected in the P&L. Revenues in Q1 were impacted by a technical element as the MSA fees are now accounted flat across the year. Previously, they were accounted based on the calendar days of the quarter. This factor accounted for broadly 800,000 euros lower MSA in Q1 revenues when considering the quarter-on-quarter sequential growth. Similar growth in HOLOS. there is a slightly higher rate, which will continue growing quarter after quarter. In Q2, the tenancies achieved in the past quarters will contribute more to the P&L. Quarterly figures reflect the impact of a specific set of hospitality termination, more than 300, exercised a contract expiry. This is a one-off, and we don't expect similar magnitude of termination in the near future. New services were slightly up quarter on quarter, following the good progress of the previous quarters, and grew by approximately 50% year on year. Looking forward, we target a further improvement in revenue growth, and we have clear programs in place. First, the rollout of new site programs. We expect about 100 in Q2, more than 400 in the year. that we lost both anchor tenants and turned quickly into revenues. The contribution to growth from these new sites, from new sites actually, was marginal so far, while it will provide an additional benefit to the P&L going forward. Second, the release of third-party demand, unlocking the opportunity with M&Os and shortening the time lag between demand, contracts, and revenues. spurred the ramp-up of DAS revenues through new locations as well as increasing the tenants on existing ones. Moving to margins, EBITDA improved from 90% to 91%, with operating expenses coming down quarter on quarter as expected. Leasing costs continued to gain efficiency, with a nearly reduction of 7%. We are now just slightly above €49 million per quarter, as compared with nearly €53 million in the second quarter of 2020. This led to a material growth of EBITDA net of leasing costs up to 8% year-on-year, with a margin of 65%, improving by one percentage point quarter-on-quarter. Again, this is the result of our distinctive features, high tenancy ratio, high revenue per site, a lean organization, and low rental costs. Let's now move to look at our strong cash conversion on slide nine. In the first quarter of 2021, we reached recurring free cash flow of 93 million euro, or a cash conversion of 54% on EBITDA. The figure is helped by the absence of cash taxes in Q1, as tax payments fall in the second and last quarter each year. The operational drivers of cash generation were an improving EBITDA, the low recurring capex, following a significant amount in Q4 last year, and an efficient cost base for ground leases. I would also like to point out that the €18 million networking capital move is temporary in nature, and will progressively be normalized in the coming quarters of 2021. As a reminder, the cash and P&L benefits of the tax schemes we approved will be visible only from 2022 onwards. And we do confirm our expectation of a 46% cash conversion for the current year. I would like to draw your attention now to the structurally strong cash conversion of Inuit. As you see, on the bottom of the slide. This is based on low recurring capex at approximately 2% EBITDA, a neutral working capital cycle, and relatively low ground leases. Cash conversion will improve to 62% in 2023, up to €600 million, because of strong organic revenue growth, ongoing cost optimization, and lower cash taxes. More on the financial structure on slide 10. Over the first quarter of 2021, we reduced the net debt slightly, from 3.7 to 3.6 billion, on the back of a growing cash balance. Financial leverage is down to 5.2 times in terms of net debt to perform EBITDA. Regarding the short-term evolution of leverage, please bear in mind that we will have two significant cash-outs in Q2, the good with tax scheme repayment and dividends. Our debt structure, already quite simple, has been further improved by the recent transactions in April, including the first sustainability-linked term loan. We achieved multiple objectives, a lower cost of debt, now at 1.7%, longer debt maturity at 6.4 years, and an increased portion of fixed debt to 80%, as promised. In terms of leverage trajectory, we confirm our expectation of creating about €1 billion worth of resources by 2023, optionality to capture further growth opportunities or additional shareholder remuneration. In conclusion, from a financial standpoint, the beginning of the year shows a stabilization in revenue growth at more than 3%, an improvement in run rate, strong results on costs and margins. Our short-term focus is on revenue acceleration based on clear programs in place. With this, back to Giovanni on slide 11.

Thank you, Diego. I would like to move to our long-term growth trajectory based on our key strengths. These are supported by further growth drivers. Strong demand with rising needs for data usage. 5G rollout and densification. Better coverage of the Italian landscape also via fixed water access solution and encouraging science on micro coverage. We are also seeing support from the external environment and improving investment cycle. A clear fit between next generation IFU farms, our track record and strategic focus. and potential for simplification reforms in Italy. A few concluding remarks on page 12. In conclusion, a year after the new Inuit was born, we are confident in our future. The industry is evolving from a competitive and technological point of view. We evolve with the industry and want to affirm our role as one of the leading tower companies in Europe, in which has the best quality asset in the market, an ideal position to capture growth opportunities, a focus on organic growth, a clear and attractive shareholder remuneration policy, and a plan to reduce leverage gradually creating optionality. We believe this to be a unique set of features. After a sound fifth quarter, we have a clear path and set of actions to further acceleration in 2021. Thank you. And now we are ready to take your questions.

Excuse me. This is the Carco 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 Fabio Pavan of Mediobanca. Please go ahead.

Yes, hi, good afternoon, and thank you for taking my two questions. The first one is on the MNOs. We have seen the improvement is still limited, so I was wondering what makes you confident that the trend will accelerate in coming quarters, and also was wondering when the review of this process will be completed. And then the second question is on the electromagnetic limitation. We have learned that this limitation could be lifted under this assumption. What would be the impact on your business, which I guess could be positive? Thank you.

Thank you, Fabio. Okay, let me see. We can, I can answer because in MNO's growth, okay, one of the most important our customers is Iliad, that is our customer from 2019. 2020 has been a transitional year because there is a strong demand, but the transplanting process has been, is very complex because there is multiple There is a lot of, let me say, parties involved. There is some regulatory items and legal, and some technical commercial issue that is on the table in this moment. We strongly believe that the interests of Inuit aliens are totally aligned. It's a big opportunity for us. Iliad announced an important investment in Italy for building their network, and we are ready to upset, let me say, their, let me say, rollout. In terms of electromagnetic limits, okay, the new industry minister Colau announced many times that probably the most severe law that is present in Europe, that is in Italy, will be changed. For us, it is an important opportunity because in this moment, the limits, electromagnetic limits, are really a problem for us to roll and accept our, let me say, customers. So I'm very confident that within the end of the year, something will change, and Italy will have the same limits that are common in the other European countries. Okay?

Thank you very much.

The next question is from Roshan Ranjit of Deutsche Bank. Please go ahead.

Great. Thank you for the question this afternoon. Two for me, please, and maybe just to follow up on the previous question. Last quarter, you were saying initially a lot of the OLO growth is going to be dominated by FWA. So is it possible to get a split of where we stood this quarter versus last quarter? I think last quarter you said it was broadly two-thirds FWA growth. And to your point around the third-party demand, you talked about a cruising run rate, quarterly run rate of 1,500 pops being added. This quarter, we saw a strong contribution from the anchor tenants and a slightly lower contribution from OLOs. So are you confident that this third-party demand will be there in Q2 for you to hit the 1,500 quarterly run rate, please. And secondly, just a quick one. You talk about this contract termination. Is it possible to get a bit more detail there? Was it a FWA or was it a MNO? And are these normal occurrences? I mean, for me, it's the first time I've heard about this, but it's just baked into your guidance. Thank you.

Thank you. Thank you, Roshan. So, yes, the mix of OLO was mostly due to fixed wireless access in the previous quarter, and it's the same in this quarter. The vast majority MNOs are limited in the quarter. And in terms of cruising speed, what is... going on, as Giovanni said, is the fact that the remedies process is taking longer than expected. It's new and complex, but there are a lot of activities going on, discussion and work to make it work better, because it's the interest of all parties to make it more effective. So we do expect to see some progress starting from Q2, and this will contribute to the overall MNOs and new POPs in the quarter and going forward. With regard to the terminations, they are mostly MNOs. It's a one-off in the sense that we've got good visibility in advance on terminations. And it's MNOs, let me say, related to not high-value locations. So I would say middle value, mid-value. And yes, they were included in our plans.

Great, thanks. So just to push a bit more, are you still sticking by this 1,500 quarterly run rate, full run rate from Q2? Is that still the case?

That's absolutely the target, what we're working on, and it's supported by the fact that we do expect progress on the remedies process that will also flow through the hospitalities with MNOs below the 35,000 inhabitants.

Okay, great. Thank you. Welcome.

The next question is from Andrew Lee of Goldman Sachs. Please go ahead.

Yeah, thanks for taking the question. Just one for me, really, which is it's clear that the... process of converting the KPIs of OLOs into actual revenue-generating units has been a bit slower than you expected. You mentioned high demand in your earlier comments. I just wondered, the process is slower than expected, but is the demand you're seeing so far in the year in line with guidance ahead, below, or can you give us a comment on that versus your original expectations? Thank you.

Thank you, Andrea. Yes, we have an important order book with very interesting demonstrated by MNOs and fixed-reliance operators that I repeat in Italy is a characteristic of Italy because there are four fixed-reliance operators that are pushing a lot to digitalize the remote, let me say, village cities, okay?

And with regards to the process, yes, we already shared in the past is the time lag between the contractualization, the contracts, and the finalization, and therefore the invoicing and revenues is basically more than a quarter, so longer than expected. There are external factors and internal factors. Clearly, the external is the time for permits. Clearly, the overall electromagnetic limit is part of the context in general. And there are internal ones. And among the internals, we need to consider that we scaled up really dramatically the volume of activity. Now we are running and talking about cruising speed. Our current cruising speed is more than 1,000. That is not comparable with the cruising speed of one year ago or even six months ago. So, clearly, we are working, and now there is room to improve and optimize the internal process and shortening the time lag or the cycle lead time. Let me also add that this time lag is more visible now that we are in dramatic acceleration. But we'll smoothen on over time, and when we will achieve a steady state, and the steady flow of new contracts will regularly and smoothly flow into the revenue cycle quarter by quarter. So there is also, can I say, a mathematical impact, if I can call it like that, from the acceleration of this quarter. Thank you. Thank you.

The next question is from Jacob Bluestone of Credit Suisse. Please go ahead.

Hi, thanks for taking the questions. I had a question on disconnections. I think you had relatively high disconnection quarter, and I think you mentioned in the presentation that you didn't expect that to recur. So can you maybe just give us a little bit of color around why you had high disconnections and why it gives you the confidence that you won't see these kind of levels again? Thank you. Yeah.

Terminations are related, as I said before, mostly to MNOs. It's a one-off impact. There is a cycle where we've got good visibility of terminations. I would say it happens. It's part of the course of the business. But we don't expect this level going forward. It was included and expected and included in our plans. And in terms of value, again, the value is the number is more than 300. The value is the kind of locations at mid-value, so not, let me say, top level in terms of pricing for an MNO location, for an MNO equipment.

Got it. Thank you.

The next question is from Simon Coles of Barclays. Please go ahead.

Thanks for taking the question. If we just think about the revenue guidance for 2021, if we extrapolate today, that would suggest you need to find another $25 million in revenue growth from the rest of the year. I was just wondering how you see the mix, because obviously there's a lot of focus on this OLO growth. But given the MSA and the anchor tenants on TI and Vodafone are accelerating very quickly, Just trying to understand the flex in the guidance, really. Are you comfortable that most of the growth is actually already committed from, say, TI and Vodafone? And so anything else that comes from the OLOs picking up as you hope to improve the remedy process and so on, that's what drives you to the top end of guidance. So yeah, just trying to understand your comfortability on the guidance for this year on revenues. Thank you.

Thank you, Simone. Okay. As I said, guidance is absolutely confirmed. Okay. And let me say, in the fifth quarter, we did a step up, but we have to continue for the next quarter with a different combination of new sites that is important target for us, And you said it's very important from a revenue point of view, because immediately the new sites carry new revenues immediately. They're increasing the hospitalities in the existing sites. We have a report on the book. We have to push in our indoor solution, DAS. We have a lot of, let me say, proposition in the market. And let me say, continue, continue, continue. to join and working with our customers that are the OLO, fixable access operators, and let me say MNOs. This is our trajectory to gain and to confirm absolutely our guidance.

Okay, thanks. Can I just follow up? Because if I think back to the business plan, half of the growth you were giving in the sort of three-year plan was already contracted. Can we sort of get an indication of how much you think is contracted this year already, and that's why you have such good visibility on hitting the guidance, no problem. Thank you.

Yeah, similarly, it's more than 50% in the year already contracted with the anchor tenants.

Perfect. Thanks very much. Welcome.

The next question is from George Yerodiakonou of Citigroup. Please go ahead.

Good afternoon, guys. Two questions from my side, both follow-ups on some of the previous questions. The first is on the withdrawals. I was just curious whether we have already seen the revenue impact of that in Q1 or whether it's something that could follow in the coming quarters. I'm conscious of the fact that obviously there's been some organic growth to replace it, but just to see whether when we're tracking growth from third parties, whether that could be something that affects particularly given the mix. And then my second question is on the remedy process. And I appreciate that you commented earlier that already in the second quarter you expect to see some improvements in third-party demand. I was curious if that already means that the remedy process is working and these relate to MNOs. And if not, what will be a period where you will have better visibility as to whether these bottlenecks can be addressed. I'm also asking this question, if you don't mind, as a follow-up. When you discuss this with your prospective customers, is there patience from their side? I mean, do you get the feeling they could wait for this? Because obviously they've committed a rollout program. Is there a possibility that by the time these bottlenecks are addressed, the demand may not be there? Thank you.

So, on determination, we have seen some of the impact in the quarter. Not yet 100%. We will see the 100% in Q2.

And about the remedies process, okay, we will see some progress within the Q2. I underlined that the demand, the ILIA demand of hospitality is very, very interesting, so it's a common interest to push, to solve, to go on in the rollout of the hospitality that ILIA need to build their own network. Okay?

The next question is from Sam McHugh of Exxon, please go ahead.

Thank you, guys. First one is just on cost savings. I think you said you're ahead of your least cost saving target. I just wanted to understand why. Is it because you found more expensive sites to acquire first up? Or are you optimizing just more sites than you expected? And in that instance, what is the constraint on going faster on least optimization? Do you think you can continue this process, basically? Then secondly, would a lifting of the EMF rules make this transparency register issue with Iliad go away and also help with the conversion of KPIs to revenue quicker? I wonder if it would be kind of a fix-all for you on those things. And then just the last question on the disconnections again. Just would like to understand why wind you think disconnected? Did they come back and try and negotiate on price? Or was it just a hangover from consolidation and they were just waiting for the contract to end before leaving? Thanks very much.

Yes, I take the first one on cost. Yes, the program is going well. The team in charge is a mix of people from Vodafone, Towers, and Inuit. They started working together very well. There is a regional network of agencies, strong governance, and the base is steady, sustained. So the results are already visible, and we do expect to continue with the same rate that is a mix of renegotiation and land buyout. Yes, we want to keep the pace, if possible, to go even faster, though we need to play carefully, particularly on the land buyout, because we need to keep the market well, how can I say, in control without firing up any pressure on the price pressure. So we are happy with the current pace, and we are aiming to continue it.

Okay, about AMS limits, okay. We will see some benefits in the medium term, because at today, this kind of limit, let me say, is the most difficult problem to solve. And starting with the new limits, probably in the medium term, we see some benefits in terms of tenancy ratio, hospitalities, and so on. Okay.

And with regard to the last question, yeah, we think nothing, honestly, not much to read behind it. It's a tale of programs that probably... have been just finalized. It's something that, again, was visible to us since time, and really no further insights or comments from our side. Thank you.

Thank you, Alex.

The next question is from Stefano Gamberini of Equitasim. Please go ahead.

Good afternoon, everybody. A few questions also from my side. First of all, regarding the recovery fund, could you elaborate a little bit more about how does it work? You underlined that at the end of the year the funds could arrive. Are you bidding or are you preparing some projects in order to receive this money? Are they mainly related to DAS or what else? And in this case, is there the risk that having this money, then at the end of the day you have not to ask rent from your tenants. The second question regarding the trend from your competitors in Italy, they are declaring a growth from Iliad to 200 new pops during the first quarter and no ask, no demand from FWA. Could you comment on that, why there is this difference? Probably because your network is better placed and demand from FWA is mainly concentrated on your assets. And the third, regarding terminations, you see some other risk of other situation that you said was peculiar, but is there some other situation where some other termination could emerge? Thanks.

Okay, thank you, Stefano. Starting from the second question, the fixable access operators are really a very important actor in our order book. They are asking a lot of the hospitality. I remember that is a very important characteristic of the Italian market. Okay, there is... Open Fibre, Fastweb, Linkam, and that is a very, very important, let me say, pushing by them in terms of hospitality. About the third question, okay, we have two, let me say, different, let me say, environments. With the 5G rollout, we will participate indirectly because the operator will be, let me say, involved in the rollout and to keep the European found for the digitalization. Then there will be the public administration tool. So we are ready. We propose our solution to the public administration tool to, let me say, combat, let me say, the digitalization of the country. And third, there are the location owners that surely will ask to us to improve the indoor coverage to habilitate, for example, Industry 4.0, healthy transportation, and so on. we are ready directly or indirectly to participate to this very, very, very important investment cycle that is coming on.

Stefano, sorry. One of your questions was around terminations. If you could please repeat that.

Thank you. Yes. In your view, are there some other risks of situations that are similar because you stressed that these 300 termination are mainly a one-off.

Okay, clear. Yes. No, we don't see any significant risk. We have an historical trend for the last several quarters with very, very limited, if not nil, terminations. This has been a specific one-off. Yeah, sorry, just one thing on fixed wireless access. You made a specific comment to Q1 that actually has been a little bit softer than Q4. We have seen a little bit of seasonality, and we don't expect, again, we expect to pick up again, as Giovanni was saying, in the next quarter. I think it's interesting in the quarter to mention that we had... also other kinds of hospitalities related to what we call OTMO, so other than mobile operators, related to IoT sensors and mostly related to energy utilities company, which is a line of business we will take care more also in the future. Thank you. Welcome.

The next question is from Ben Rickett of New Street Research. Please go ahead.

Hi, guys. Thank you for the question. Questions on the business plan OLO target, specifically for 2023. I think you've suggested you're targeting 8,000 to 10,000 OLO tenants. Is that net of disconnections or does that number include disconnections? And then a second part to the question, how should we think about the split of those tenants between MNOs, fixed wireless access, and OTMO? Thank you very much.

Yes, thank you for the question. Yes, these connections are, determinations are included in our target, so the numbers are net of the determinations. As in terms of split, let me say the majority of the volume will come from fixed wireless access. So, for sure, more than 50% up to broadly two-thirds in the range between 50% to two-thirds of the volume will be coming from fixed-value success.

Brilliant. Thank you.

Welcome.

The next question is from Fernando Cordero of Banco Santander. Please go ahead.

Hello. Good afternoon, and thanks for taking my three questions. The first question is related with the small sales market. In that sense, you have said that you are relying or expecting additional push on that market, but particularly in indoor small sales solutions. I would like to know as well, Luis, are you carrying a look on outdoor solutions based on small sales, and at which extent that segment of the market is starting to be more visible or not? My second question is a follow-up on the electromagnetic emissions potential revision. And in that sense, also considering your 2021-2023 business plan, I would like to understand what would be the major impact if the current restrictions on electromagnetic emissions could be revised upwards towards the European benchmark. Is that impact going to come in your business plan So the cap is avoiding new sites to be built. It's going to be reflected in incremental revenues from new tenants. I would like to know where are your views on potential impact on your business plan. And the third question is, let's say as a collateral or trying to understand a little bit better the issue of these connections, I would like to understand which is the current length of the secondary tenants growth. And in that sense, in order to understand if that length of the contracts is the same for MNOs than for fixed wireless players. Thank you.

Okay. Thank you, Fernando. So, about small cell and DAS. Okay. Today, we are totally concentrated in the indoor because the business is asking to ask the indoor solution. And secondly, because to install and sell the outdoor small cell solution. We have to wait for the finalization of the 5G outdoor network by the operators, because there is a team of, let me say, interference that we have to solve with the operators. So we are waiting the completion of the 5G outdoor rollout. or by team Vodafone, and then we can start to install. We started in Milan with a few numbers and in Genova, but now that the operator's plan is, let me say, at an interesting speed, I think that by the end of the year, think that we can see some interesting numbers. Secondly, the impact of the NF, let me say, limits in the business plan. Okay. I think that there will be an acceleration of the business plan with an increase of the tenancy ratio, surely. And... Let me say, depending by the rollout of the operator always, because there is always a coordination with them. But to solve the MF limits, really speed our business plan, increase the tenancy ratio, and let me say, push up all the environment to create... the right solution for the digitalization of the country. The third question was?

Diego? On termination and contracts, our contract duration is at a minimum six plus six years. And as I said before, We have not seen in the past significant termination. We don't have visibility as well for the future. So that's to be considered a one-off event, which, as I said, has had an impact on the revenues in the court, and the full impact will be visible starting from the next one.

So just to confirm, the comment on visibility... So we have visibility that they will not be repeating themselves in the short term, that's what we meant. Fair enough. Thank you very much.

The next question is from Luigi Minerva of HSBC. Please go ahead.

Yes, good afternoon. I wanted to understand whether the delay in the regulatory process may actually have a structural negative impact on the demand from Iliad because they could get more sites from your competitor on a commercial basis without any problems. And so eventually they may find that they need less of the in-width sites. And perhaps related to this, whether there are any penalties that the European Commission can impose if the issues and the delays persist Thank you.

Thank you, Luigi. Then, okay, I want to underline that the Iliad demand is very drastic at the moment because it's based on our assets, the location and the structure of our assets. I'm convinced that in the second quarter we will start to touch something in terms of hospitalities for Iliad. So let me say we are pushing a lot to solve this theme and Q2 will show this step up. Secondly, in terms of compliance, we are totally compliant with the remedies. We have to publish 75 sites monthly, and we are doing it. So there is no, let me say, risk about penalties and so on. I am sure totally that we are absolutely compliant. This team is a temporary issue that we want all together to solve quickly. And I repeat, absolutely no risk in terms of penalties.

Thank you.

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Thank you very much.

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