Infrastrutture Wireless Italiane S.p.A.

Good afternoon. This is the Coru School Conference operator. Welcome and thank you for joining the Inuit Second 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.

Thank you. Good evening, everyone. Thank you for taking the time to connect the English Second Quarter 2021 results presentation. With me today are Giovanni Ferrigo, 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. As usual, the presentation will be followed by a Q&A session. Over to you, Giovanni.

Thank you, Fabio, and welcome, everyone. It has been a busy last three months. We delivered a solid set of financial results in Q2 as we continue to make progress from an operational perspective. Beginning with financials, Q2 showed a clear acceleration. Organic revenues increased by 4.5% year-on-year. ABDAL growth was up 6.9% with expanding margins. Recurring free cash flow increased by 15%. Industrial KPIs continue to grow. We added new tenants. We deployed new macro sites. We added new DAS remote units and continued to optimize ground leases. The pace of new tenant addition is stable, quarter on quarter, while discussion on the remedies process continues. We also closed a very important investment agreement, entering a new market segment for coverage of highway infrastructure, investing in existing dust, providing connectivity to about 1,000 kilometers of tunnels across Italy. This confirms our leadership and innovation capabilities, positioning us in Addison's market segment with interesting prospects from the coming years. More in the short term, we confirm our expectation for the year. The time effect of new POPs is mitigated by the other actions on revenues and lower ground leases. Based on Q2 results, we expect Revenue and EBITDA on the low end of the guidance range and EBITDA and free cash flow on the high end of the guidance range for 2021. Today's figures and the new agreement announced reinforce our structural growth story and outlook, helped by the positive external scenario in Italy after the simplification decree and the positive investment cycle driven by next generation EU. Let's now move to KPIs on page four. Anchors continue to show a positive trend, growing quarter on quarter. Team members of the fund make progress in the optimization, expansion, and densification of their network in line with MSA growth expectations. In line with our guidance, Q2 also recorded an acceleration in the number of new sites. The pace of growth has changed. We have gone from about 70 new sites in 2020 to 130 in just this quarter, and more than 400 in 2021, adding another growth in gene. New tenants from other parties were 290 in the quarter. We made progress with MNOs in size below 50,000 people, 55,000 people, where the remedies don't apply. We updated the commercial agreement with Iliad and added more POPs than in the previous quarter, a trend which will continue in Q3 and Q4. The review of the remedies process is ongoing. limiting the matching of demand and offering towns above 35,000 people in a fast and material manner. We are following the discussion around the remedies, which continue with the involvement of all parties, and are hopeful that an agreement will be found so that we can unlock the strong demand we see for our sites. There is a clear match between our specific location and market needs. So, again, we think this is a timing and process topic. We also experienced a relatively soft fixed water access demand for specific customer situations, which we consider temporary, also linked to the timing effects of next-generation European funds. Fixed water access demand continues to be a key driver. We have a strong pipeline of significant projects and expect to be able to share even more good news in the short term. Turning to slide five. An important element of our business model is our ability to optimize the returns on our assets. In-width tenancy ratio is among the highest in the industry. and continues to grow, adding recurring revenue stream to our asset base. Plus, there is a potential for improvement in ground lease costs. With Inuit's real estate team, we have a strong track record and see further opportunities ahead. So, we continue to deliver a material expansion for margin for tower. Over the past year, we created value for more than €1,000 per sales in terms of additional EBITDA. Let's now look at the new services on page 6, starting with DAS. We keep adding remote units and securing locations in key verticals, including public administration, healthcare and transportation. In the quarter, we added 350 dust remote units. At the same time, our regular discussion with operators created an opportunity to accelerate investments in a very interesting market segment, a first time for Inuit and a competitive advantage. We secured a portfolio of dust systems from Volafone, covering important locations on about 1,000 kilometers of motorways and road tunnels. We will be managing dedicated coverage of a critical transportation infrastructure. We will invest to renovate and upgrade the assets, providing mobile connectivity and coverage, a key vertical which will benefit from next-generation EU funds. As you know, coverage of dedicated transportation infrastructure is one of the market drivers for the tower sector in Italy. given the opportunity to increase network quality. This project, with a 70 million euro investment and MSA with Vodafone, allows us to cover a new market segment on assets which are very difficult to replicate and have significant potential for new tenants. There will be a positive financial impact from day one, with a growth trajectory as we reach run rate and execute our commercial plan. In the medium term, this adds visibility to DAS revenues and their contribution to our business plan, positioning us as a leading player in a new segment. Moving to the next slide for an update on the next generation European funds. We discussed our next generation EU funds are a tailwind to our business, improving the investment cycle in wireless infrastructure and macro sites, speeding up the development of DAS. Today, we would like to provide more details around the process and the specific application to win with. On macro sites, there are 7 billion euros in terms of 5G and broadband. More in practice, The plain Italy 5G and the plain Italy at 1 giga are particularly relevant for us. There will be more resources for 5G. Fixed wireless access will reach more towns more quickly. Industry 4.0 and digitalization investments will speed up the development of DAS, since more mobile connectivity will be needed. So, How do we expect to access the next generation European funds via call for tenders, taking part in a competitive bidding process, and through public-private partnership by seeing an agreement with a public institution and promoting a specific project? So, directly or through our clients, we expect the next generation EU will support our outlook. In terms of timing, The next milestone is towards the end of the year and into 2022, when we will start applying for these projects. Most of the funds will be deployed by 2023, and projects need to be completed by 2026. Again, we feel it's important to highlight the consistencies of our core assets and strategic focus with next-generation EU funds. Our new commercial agreement on transport infrastructure confirms this. With this, I hand it over to Diego. Thank you. Please, Diego.

Thank you, Giovanni, and good evening, everyone. Our second quarter results show that we are delivering revenue organic growth improvement to 4.5% year-on-year, up from 1% a year ago and 3.2% last quarter. and we made continued progress in profitability and cash flow generation. Last quarter, we presented clear programs to accelerate revenue growth, and today we can see the initial benefit of those programs. Organic revenue run rate improved by nearly 3 million euro, quarter on quarter, at about 193 million. New point of presence continue to add to the top line. And further acceleration is expected in the second half of the year. Organic growth at 4.5% year-on-year was mostly driven by the MSA revenues. All those were up as well, despite some residual impact from Q1 2021 termination. New services are up more than 50% year-on-year and will pick up further pace in the coming quarters. also supported by our investment in dedicated highway coverage. Current visibility confirms key sources of further revenue acceleration in line with 2021 guidance. Q2 has some Q1 new pops turning into revenues, benefits from new sites, thus revenue ramp-up, and improvements in timing between new tenants, contractorization, and revenues. Turning to margins, groundless costs continued to come down. These supported EBITDA growth at 7% year-on-year and EBITDA margin expansion to 66%, a record high for Inuit, up 2 percentage points year-on-year and 1 percentage point on the previous quarter. In short, a solid set of financials with positive trends in main indicators. A quick comment on net income. up as compared with the previous quarter due to higher interest, due to a one-off non-cash items, and lower taxes, as I will detail more in the next slide. Taxes have been an additional lever to be more efficient, together with ground leases and the optimization of our financial structure. In the second quarter, we finalized the two tax schemes announced in the past March and paying the upfront component of both for a total of 334 million euros. The financial impacts are confirmed. The two programs will create 350 million euro total MPV or 210 million euros in the business plan horizon 2022 to 2026. When finalizing the process, we also took advantage of an opportunity to have initial P&L benefits in 2021. Cash flow benefits are confirmed as previously announced. They will begin in 2022 and materially reduce our tax cash-outs. As an additional guidance, please consider the following. We expect an effective tax rate in the high single digits next year, rising to the mid-teens in 2026. In terms of total cash out in 2022 and 2023, we expect to be paying between €20 and €30 million, going up to more than €70 in 2026. From 2027 to 2039, both P&L and cash benefits will be reduced, as only one of the two tax schemes will still be operational. Let us now move to cash flow on page 10. Cash flow generation continued to be solid in the second quarter of 2021, with 19.1 million euros recurring free cash flow, up 15% year-on-year. Total recurring free cash flow in the first six months of the year was 184 million euros, supporting our 2021 guidance in the high end of the range, 350 to 365 million euros. Sorry, 355 to 365 million euros. As we shared with you back in May, networking capital improved and stood at 28 million euro positive in Q2 or 10 million euro positive in the first half of the year. The current capex continued to be limited and these costs were further contained. Cash conversion was strong at 50%, confirming a structural feature of our business model. in which cash flow is highly predictable and committed for 50% of total growth. Let me also take the opportunity to remind you that our business plan targets 700 million euros recurring free cash flow by 2026 as a combination of top line expansion and least cost efficiency. More on the financial structure on slide 11. Net financial position in Q2 is a result of organic cash flow generation and the two material cash outlays, a dividend payment for €284 million and prepayment for tax scheme for €334 million. Net debt increased to about €4.1 billion, including the IFRS 16 liabilities, or 5.9 times leverage, in line with our expectations. This peak in leverage is temporary, and we will go back to our deleveraging path beginning with next quarter. Our financial structure, recently optimized, was further fine-tuned with a loan by the European Investment Bank supporting our growth cap. As indicated in our industrial plan, the EBITDA growth will progressively reduce leverage and create about €1 billion worth of resources by 2023, Optionality to capture further growth opportunities or additional shareholder remuneration. Coming up, Q2 financials reflect solid growth. Our programs to accelerate revenues, already visible this quarter, will continue to support us in the second half of the year, where further acceleration and more organic growth is needed. With this, back to Giovanni on slide 12.

Thank you, Diego. I would like to provide an update on our sustainability plan, something that we will do regularly twice a year. We set ambitious sustainability targets in November, including to be carbon neutral by 2025, as we support all operators in the digitalization of Italy. The first six months of 2021 recorded tangible results in a number of areas, We engage sustainability rating agencies proactively and already obtained upgrades by Susta Analytics and FTSE Russell. We approved a stakeholder engagement policy and a diversity and inclusion policy. We reached more than 60 hours for training on average for per employee. We approved a climate strategy and made progress towards a higher use of renewable electricity, now at 75%. On the innovation front, we have advanced studies on IRC application of road monitoring with important highway operators. We covered 30 hospitals with our DAT system, supported fixed-water access players in extending coverage to scarcely populated areas, and supported mobile connectivity for schools and smaller communities. Our ESG engagement with investors is more and more frequent, and we look forward to continuing the dialogue on a regular basis. Let me now share how everything we have shared with you reflects in our guidance on slide 13. We are on a clear growth trajectory supported by an attractive combination of factors. Strong demand, 5G rollout and densification, better coverage of the Italian landscape via fixed water access and dedicated coverage for transport infrastructure. The visibility at this point in the year allows us to reiterate the guidance for 2021. We expect that Revenues and EBITDA at the lower end of the range, mainly due to timing of POTS growth. New tenancies grew materially over the past few quarters. Demand is solid and volume can still be improved. We expect a bit dull and recurring free cash flow at the high end of the guidance range for the year on back-off costs and networking capital optimizations. We remain positive on our medium-term outlook, supported by the rollout of new sites, demand of new POPs, need for dedicated infrastructure coverage, less bureaucracy thanks to the simplification degree, and more investment with next-generation EAU funds. So, in conclusion, in slide 14, INWIT showed Progress on several fronts so far this year. We added more than 2,400 new tenants, 160 new sites, 750 DAS remote units, and completed about 900 actions on land renegotiation and buyout. In the second quarter, organic revenue growth stepped up to 4.5%, and EBITDA margin reached a record high of 66%. We expect these good trends to accelerate further in the second half of the year, as implied by our full year guidance. We reached an important new agreement in a market segment with good prospects, dedicated highway coverage. The tower industry evolves and presents new opportunities and we are committed to continuing innovating and to maintain our leadership. With this, we thank you and we will now 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 one on their touchtone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone who has a question may press star and one at this time. The first question from the English conference call is from Sam McAuth with XM. Please go ahead, sir.

Thank you so much for the question. Two, if I can. You've always talked about having neutral working capital over the medium term, so I just wonder... could quantify how much positive working capital you're thinking about for free cash flow this year and whether we should expect that to unwind next year. And then secondly, just on the Vodafone acquisition, I was hoping you might be able to give us some specifics on the year one numbers and then what you mean by an investment plan in terms of rough quantum of investment and then whether the 10 million revenue is just on one anchor tenant or whether that does assume multiple tenants. Thank you so much.

Yeah, good evening.

Thanks for the question. So working capital, we do expect working capital to be on a run rate neutral or slightly positive going forward. And on the position of the highway and tunnel, the 10 million run rate implies two tenants. We will achieve the run rate in a couple of years. the strategic asset for us. We do see it honestly as a booster of revenue and business acceleration, but also really an asset for strategic developments. And in terms of investments, we'll be investment to refresh, upgrade, and for some of the assets to make them available for more tenants. um we we it's going to be how can i say any kind of investment that together with the 70 million is part of our capex budget as shared in our business plan i may remember that in our business plan uh capex for us are broadly 25 percent of the total of the total plan that's included included in your existing capex budget that's very helpful thank you thank you

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

Yes, hi, good evening, and thank you for taking my two questions. The first one is on the guidance. You were saying midterm is confirmed, so can you elaborate a little bit more on that? In the light of 21 updated guidance, what we should expect for revenues, BDA, and free cash flow when looking at 2023. The second question is a follow-up on what you were mentioning relates to Iliad. If I understood properly, you managed to sign to reach an agreement in small centers, while on the remedy side, still there are discussions ongoing what what is the reason why you continue to be confident that an agreement could be reached? Thank you.

Okay, thank you, Fabio. Okay, starting from the positive quarter, where we increased the revenues of 4.5%, this is, let me say, an engine that will, let me say, will help us to go to maintain our guidance. That is another, let me say, pillar of our growth, as we show in the presentation. And so, as I said, we confirm the guidance for the revenues for this year. And for the medium term, we think that the, let me say, the DAS, the European Funds Project, and ILIA that will come again to, in the cities, over 35,000 inhabitants, will permit to us to maintain our medium-term guidance. Okay, other things we do? The second one is Iliad, okay, starting from good news, in the municipalities under 55,000 inhabitants, we deployed more than 100 hospitalities. So we unlocked, let me say, this segment of the market. Over, there is an issue of, let me say, antitrust authority in Bruxelles. is continuing, but we are at the moment totally focused at under 55,000 inhabitants, and there are important agreements with Iliad to continue in the rollout of hospitalities in this segment that it's a really good deal for us has been unlocked, okay?

Yeah, and if I may complement with regard to the first point related to the guidance for the midterm. I may compliment from a financial perspective. I would like to underline that we have achieved 4.5% year-on-year growth despite the limited contribution from an important client. So far, we have activated two important growth levers, common grid and fixed forest access. In the last quarter, we added the growth lever of coming from new sites, and in the next, we will see also the acceleration in dust. So, by the year end, all the growth levers will be activated, and they will have potential to achieve further speed. Then, we remain positive, as Giovanni said, about the evolution of the remedies, which will add up to the current trajectory. Also, let me highlight that for the other items and the cost and cash items, least cost, tax and interest, we are performing in line, if not better and faster than originally planned, which is further supporting our recurrently cash flow generation. Thank you.

Extremely clear. Thank you very much.

The next question is from Ranjit Roshan with Deutsche Bank. Please go ahead, sir.

Great. Thank you. Evening. Two questions for me, please. Just looking at the new OLO pops, we've seen a slowdown in the ads this quarter, and I think you mentioned some timing effects there. You also mentioned a greater contribution from the ad this quarter than we did in Q1. So is this less FWA contribution in Q2 versus Q1? And is it possible to get the mix of ads this quarter? I think previously it was heavily skewed towards FWA. So are we moving towards the M&O split now? And secondly, there's been a lot of news flow over the last couple of weeks around the emission limits. Could you just outline the timeframe as to when the upcoming decisions in Parliament are due and what your expectations of the higher limit is, given that I think it's been tabled now for five or six years. Are we actually going to get an increase this year? Thank you.

Okay, yes, I confirm that the demand is, let me say, But at the moment, there is a temporary issue because due to the, let me say, PNRR or next generation funds, the fixed-value assets operator are, let me say, redesigning their program. So we hope in the second part of the year, we will realize all the hospitalities. So we are positive in this. About EMF, okay, the amendment has been postponed by the government. That was fully of other, let me say, amendments. So within the end of the year, probably there will be a decision in this, let me say, very important But I remember underlining that our plan has been built with the actual limits, and so every good news could be an opportunity for us. Regarding the fixed-wire access demand, there is an important order book, let me say, from an operator. that we can, let me say, in the next days we will show who is and the results of this agreement that can confirm that I said previously, that we are positive in the fixed water access demand in our sites, under 35%.

thousand inhabitants okay because uh that is not uh okay where remedies not not apply okay okay sorry so just follow up so on the 290 at this this quarter you said that fwa is i guess temporarily delayed given the new generation fund so are we talking i know 75 of those are from mno's is that is that fair this quarter

Honestly, we don't provide these kind of splits or also commercial implications. I think that from a qualitative point of view, what you said is spot on. Okay, great. Thank you. You're welcome.

The next question is from George Ierodiacono with Citi. Please go ahead.

Good evening and thank you for taking my questions. It's just a couple of follow-ups. The first one is just to understand the situation with Iliad in the event that we don't get any changes to the electromagnetic emissions. Can you give us an idea of the progress you describe that you are seeing in the denser areas and whether uh you think by the end of the year regardless of what we get in terms of emissions there could be a resolution there if not do you mind just specifying when do you expect that to be resolved um and my second question is on the lease optimization um that uh clearly is running ahead of plan this year i'm just curious whether um you have any thoughts about the midterm potential uh do you are you considering perhaps committing more capital towards groundless optimization? Are you seeing more opportunities than what you envisaged maybe 12 months ago, or is it just a case of executing faster than expected? Thank you.

Yes, thank you.

Let me start from the second one on groundless cost, where actually, yes, we are doing very, very well and faster than expected. It's going well on both. Groundless cost buyout, ground buyout, as well as renegotiation. And honestly, renegotiations are doing very, very well. So, with no capital implications. So this is going, honestly, better, and it's starting to give us the confidence that we can achieve faster and lower cost than originally envisaged.

Okay, about Iliad's question. Okay, I'd like to underline that we are locked together with Iliad, the segment of the market of the site, let me say, 135,000 inhabitants. We are pushing a lot. we are not waiting for the political revolution of electromagnetic field limits because there is not a correlation between the two arguments in our business plan. But let me say, if the limits will increase, it will be a good opportunity for us on top of our business plan.

If I could ask just a clarification on that. In the previous conference call, you mentioned that there are certain actions you are trying to coordinate in order to, you know, improve the situation. Have you seen any progress on that front? Do you feel we're closer to finding a resolution? Or is that still something which is eluding you for the time being?

Under 35,000 inhabitants, the remedies don't apply, so we are hand-free, let me say, and so it's a commercial issue that we can work with Iliad to share the best position, the best location, the best price, and so on, and we are going on. Over 55,000 inhabitants, there is, let me say, the remedies apply in a very strong way, So we are waiting that, let me say, this issue will solve because there is some technical, commercial processing teams that today have not been solved. But let me say we hope that in a few months this issue definitely will permit to us to realize an interesting number of hospitalities in these municipalities that are very important, okay, on top of our, let me say, business plan.

Thank you. Thanks.

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

Hi, everyone. Thanks for taking the question. It's just on sort of developmental capex. So at the business plan last year, you said 600 million cumulative, let's say 60 million of that is maintenance. And I think you said a broadly flat capex profile as well. So that would sort of suggest maybe 180 million per year for developmental capex. You're running quite a way below that. So I was just wondering if you could give us some more colour on how you think capex will be spent this year? Should we still expect it to be in the same sort of buckets? I think you hinted just now that 25% on small cells is still valid, but is that over three years or is that valid in each individual year as well? Just trying to get a better picture on the mix of capex and how much you might actually spend this year would be very useful.

Thank you. The current year cap will be impacted by the purchasing of the tunnels we have just announced. So that will be a booster of revenues, but also will bring forward some CAPEX. Overall, on that, yeah, the current view is broadly one-fourth of the total CAPEX. We expect probably to be in line or slightly higher, considering the opportunity that we see also related to the recovery funds.

Thanks, and is it still the same sort of outlook on land buyout? That was 25%, but I think you just said renegotiations are going pretty well, so maybe it sounds like that could be better.

On Let Me Out, it's an interesting point because the speed of investment is a mix of different components, in particular a mix of opportunities. And honestly, we don't want to push too hard also for not somehow inflating the market. Considering how well the renegotiations are going, I would say that probably the numbers that we shared on one-fourth of the total investment is the cap, let me say, at the highest level. Maybe we can be a little bit lower.

Okay, thank you. And then the sort of 200 million a year that was implied for total capex, is that still valid? Because it seems like you're running way below that.

Yes, they are. Thank you very much.

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

Good evening, everyone. Just two questions from me. Firstly, they're both around the points of presence associated with your guiding to the lower end of the range on revenue growth. So firstly, just to clarify, the lower points of presence is purely related to the Iliad logjam on the larger density cities, straight towns. And so given that that, I guess, will inevitably be resolved, it has to be resolved, I guess, it's just a phasing issue. And then the second question is just on The transition or translation between adding KPIs and revenues coming through, which you'd also highlighted, had been slowed due to public administration and also you guys struggling to process so many KPIs. Have you accelerated that now back up to full speed, or are we still working on that? Thank you.

Yes, thank you for the question. You know, the first one, yeah, basically you're right, most of the, I wouldn't call it gap, but the further step up is related to Iliad. And with regard to the second question. Yeah, on the timing we are improving, actually. We do see, I mean, month by month, we do see an improvement in the time to translate new contracts into revenues. And also both the simplification degree will help, so we've got a positive view on that, as well as the new sites. which will translate in additional revenue faster.

Okay, thank you.

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

Hi, thanks for taking the questions. I've got two fairly quick ones. Firstly, just in terms of your guidance, can you just confirm if you're assuming any material contribution from the Vodafone transaction? I think it closes in Q3, Q4. So just if you can, I mean, maybe it's too small to matter, but if you can just sort of clarify that. And then just secondly, I think you said you had 100 Iliad remedy sites in cities of about 35,000, because that's where the remedies apply. So if you could just clarify what that 100 Iliad tendencies referred to. Thank you.

Starting from the first one, yes, we will see some impact of the purchase of the assets of the tenants already in the second half of the year.

And about the hospitality, 155,000 inhabitants for Iliad, I absolutely confirm the numbers, 100 in this quarter, and we hope accelerating the others. Okay?

And if I can just ask two follow-ups actually, just on the remedy sites, I think in year one, you were meant to make 900 available and then year two, 700 available. Is that roughly what in theory is available, putting the sort of roadblocks to the side? And then just secondly, just in terms of the size of the Vodafone acquisition contribution, I mean, is it just that because it's 10 million a year, you know, sort of sticking an extra quarter, you know, before it's even ramped up? It's just too small to make a material difference, even if you include it, so if you maybe just put a number on it.

Yeah, on the tunnel, on the highways, top line contribution, there is a run rate, so we take some quarters to reach the run rate. And clearly, the speed honestly will depend also on how good we will be in adding in the, I'm going to say, a modernization process and adding the second tenant. But yes, it will take some few quarters.

Sorry, Giacomo, your first question, if you can repeat, please.

I think we missed your first question. It was just how many sites are actually available for Iliad as opposed to how many have they signed up for? Is it around 1,500? Okay.

About the remedies, we are totally compliant with the remedies. Let me say, today we publish more than 750 sites. sites where we can host Iliad. And so, let me say, we are going all waiting for, let me say, Iliad decision about the site that we are proposing through the monitoring trustee register.

Got it. Thank you. That's very helpful.

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

Good afternoon, everybody. A few questions also from my side. First of all, regarding what is your contingency plan in the case that the postponement of this agreement with Iliad will continue, considering your target of 7.8% revenue growth to 2023 and how you can substitute this trend regarding Iliad. The second, regarding the new sites, how many new sites will be installed by the end and if you can also supply us a target for next year. And then I have a question regarding the electrical magnetism pollution limit. the government will increase these limits, you underline that you have advantages. On the other side, if I'm not wrong, there are some MNOs underlying that they could save a lot of investment in this case for 5G rollout. So could you help me to understand where is the advantage on your side considering that keeping the current limits probably you should put more sites for MNOs in terms of 5G rollout. Many thanks.

Thanks for the question. As I said before, we do achieve 4.5% growth in this quarter with the limited contribution from Iliad. And so far, we have the growth is coming basically from the common grid and fixed value services, which have been most of our new tenants in the last quarter. Then, starting from this quarter, we start seeing the contribution of new sites, which have been 130 in the quarter and will be 400 by year end, which will add a significant additional growth lever together with that acceleration. That acceleration is further boosted by the acquisition of the tunnels from Vodafone. So gradually, we are at the point where we achieve 4.5% with, how can I say, our growth lever is not yet at full speed, actually. There is a material speed that actually has still to come, as I said, from new sites. And we do expect also, as Giovanni mentioned, a very good contribution from fixed-valence access related to specific commercial agreements we are discussing. So we do see the growth engines coming through one after the other, fueling our growth, adding And that's where our confidence comes from in terms of achieving the targets of growth for the next years. The positive expectation about Ilias above 35,000 is honestly something that we'll add, that we will welcome, and we'll add up an additional layer to the multiple steps I mentioned. we have already activated, and as I said, will display their full, how can I say, energy power force in the next quarters.

About the EMF limits, okay, if these limits will be relaxed or increased, for us, let me say, it will be an acceleration, the plan, because, let me say, the 5G rollout by operators will accelerate strongly is less capex because we can host more, let me say, MNOs in our towers with less capex. So the of single towers increase, finally. And there is, let me say, a long term where the data consumption and the will, let me say, will act the new POPs due to the capacity issue. And so, let me say, we continue in this right trajectory. So, acceleration of 5G rollout, less capex, more marginal margin, and long-term, let me say, increase of new sites and densification due to the capacity needs.

Thanks a lot.

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

Yes, good evening. Just two questions which are more on the medium-term outlook, if I may. The first one is about the impact from the Recovery Fund. I noticed that the language of the policymakers is kind of switching from achieving full digitalization for a certain amount of the population to actually achieving digitalization for full geography. I'm wondering if this change in emphasis from population coverage targets to geography coverage targets can have positive implications. I imagine it will have. So I'm just wondering if you have thought about it and if you can share some thoughts about this and if you can see some impact on your medium term potential growth. The second question is on Open RAN. I think both your anchor tenants are starting to experiment and testing with Open RAN. So again, if I can ask you your thoughts about it and the implications for your business model from Open RAN. Thank you.

From the second question, Open RAN, sure, we are ready. I want to underline that yet today, small cell and DAS are active, let me say, elements of the network that we are, let me say, managing. And, let me say, we are ready because today we are doing something interesting in terms of radio frequency design for DAS environment. And, okay, we are ready. The future says that the mobile operator will, let me say, the border of the mobile network operators will be the data center, where will be concentrated the intelligence of the network, and outside, with Open RAN architecture, will be probably outsourced to the tower cost. We are ready, we are a interesting team of radio frequency engineers, So, let me say, in terms of future, I think that the operator, the Operan solution is a greenfield, let me say, opportunity for the legacy operator. Let me say, they need, I think, two years to start this process. So, I personally, I see not before 2023 the starting of Operan. let me say, engagement of the tower codes in managing Open RAN architecture. About PNRR or European funds, okay, let me say, this helps us a lot because, let me say, there will be dedicated investments in a super wide area where no operator will invest. And so this is a good opportunity for us because In terms of our neutral lost, let me say, interpretation, we will be able to give this kind of solution to all the mobile operators and fixable access that want to commercialize the service in these very, very remote areas. And so, let me say, a rule really more efficient where we won't to be the actor, the principal actor, okay?

And if I may, Giovanni, on this last point, is it part of your kind of, you know, long-term outlook or you see upside?

Yes, let me say, we are studying, we are proposing the projects to the Ministry. We start to analyzing The tenders, the solution, okay, it's too early to, let me say, to answer to your question. We start the process. We are in the process. And let me say, within the end of the year, the first process will be presented and approved, and so I can answer better to your question.

Great. Thank you very much.

The next question is from Ben Rickert with Blue Street Research. Please go ahead.

Hi. Good afternoon, guys. Thanks for the question. I just had a quick follow-up on the previous question around active RAN. I was wondering, have you already started discussing this with your anchor tenants, the prospect of transferring ownership of the active RAN, and are they receptive to that concept. And then a second question, again, just coming back to the remedies. I'm just trying to understand what happens if an agreement isn't reached on the remedies. So there's a commitment of 900 sites by October. If that isn't met, does the European Commission become involved again? You know, are the penalties and who are those payable by? Yeah, that's great.

Thank you. Starting from this question, okay, we are not already in touch with operators, mobile operators, that they start to experiment this kind of solution. But let me say, the architecture is very, very close to the XRAN that we are using for that solution. So, we are studying, we are testing some, let me say, processes. And at the right moment, we will discuss with the anchor tenants this incredible opportunity for the TowerCo. Regarding the remedies, if the issue will not be solved, the authority will decide for a formal decision about Iliad requests, our answer and so on. So I think that I hope to solve the issue before, but the process implies that there will be a final, let me say, decision by European antitrust authority.

Thank you. And would that happen in October at the first deadline?

Really, I don't know. I cannot answer.

Okay. Okay. Thank you.

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

Hi, good afternoon. Thanks for taking my questions. Regarding Iliad, you unlocked the market in the cities with less than 35,000 inhabitants. I was wondering, just to clear any risk, if there is any risk limiting your ability to host Iliad coming from the remedies that are said next? agreed with the Italian antitrust authority in the context of the acquisition of the Acheson Towers. So I understand you have a superior quality of the locations, but do you see any risk? And in particular, do you see the risk that Celnex experience the same delays you are experiencing with this kind of regulatory remedies in these less than 35,000 inhabitant cities? The second question is on the other than mobile operator. I saw in the presentation you are citing the IoT sensors. What is the level of revenues? Do they contribute to your top line in terms of, let's say, rental fee? And who are the clients? What level of demand are you seeing from these clients? Thank you.

Okay, Iliad and, let me say, Senex. The remedies for us are over 55,000 inhabitants. For Senex, it's under 50,000, 55,000 inhabitants. So, let me say, we are not, we have not been affected by any, let me say, any factor, let me say, in terms of more acquisition by TELNEC. Under 55,000 inhabitants, where we are hand-free, let me say, we are doing a lot of, as I said, a lot of hospitalities, and let me say, there is no let me say, conflict with Celnex in terms of hospitalities that they do for us. So, let me say, no impact. About the IoT, okay, let me say, the IoT is very important because in the PNRR and in the European Fund, there is a special chapter for this. We are experimenting a lot of this. The most important are with the municipalities about energy. And, okay, it's at the moment our proof of concept, but we are totally convinced that is a open street that we have to ride. And I'm convinced that, as I said in the presentation, the monitoring of the infrastructure that are The roadway, highway, train, and so on will be an important source of revenues in the few years in the future.

Thank you very much.

The next question is from Andrea De Vita with Banca Acros. Please go ahead, sir.

Yes, good evening. Thank you for taking my question. Just a couple of ones, please. The first is, again, on the tunnel antenna deal. The idea is whether you consider this as a potential new business line with other opportunities coming in the future. So to be clear, are there any other portfolio coming from ways or from right ways or other infrastructure-related antennas that could be interesting for you. So what is this portfolio compared to the total market in terms of share? And the second question is, again, on other ancillary potential business. So I've seen the right way, for example, considering hyperscale and the edge data center. So I would like to understand whether you are exploring – the edge computing, edge data center as well as the potential business for you. Thank you.

Starting from the second question, we presented a big data center concentrated, I think, in four or five cities. We are, our, let me say, target are, let me say, distributed mini data center in thousands of, let me say, sites. The most important we consider about in the future 5,000 of this where there will be the possibility to habilitate the new services that need the low latency because let me say the edge computing will offer 5G vertical services and so let me say it's totally different the model and we are totally convinced That will be an interesting solution for the mobile operators. Okay. For the tunnels, okay, it's a new segment for us. We are totally, let me say, convinced that we will increase the tenancy ratio. We will upgrade the technical, let me say, the situation that we buy. And let me say, it is, it will be, sorry, a relevant source of revenues. We permit to habilitate the, not only the IoT world, but the evolution of the monitoring of the infrastructure. And let me say, in the second, let me say, part, we can host the digital audio broadcasting. For example, this is a huge problem for the radio now. As you know, all the new cars that will be built from this year must have the DAB solution. And so, let me say, we are totally convinced that And it is the transportation segment that will be totally covered by the PNRR and European funds.

Yes, the basic question is if there are other, so is it the first step? So I understand you will invest to upgrade and improve the assets you acquired. But if there are other assets of this kind, for example, railways, so if it is just, let's say, first step, to buy other antennas on this kind of transportation infrastructure. No, I don't have any idea of the share. So these antennas, how they compare with the total available in Italy, to be clear. So it's Vodafone, Eduopolis with CELNEX. So CELNEX entered in Italy acquiring initially the Italian Autostrade antenna. So this was seven years ago, if I remember well. So I don't know, are there other antennas for railways or for regional streets or something like that?

Okay, all right, starting, let me see, train, yes, we have, let me say, a design ready to cover all the high-speed trains train, let me say, corridors. This is absolutely our, let me say, target. It's a large market. There are a lot of standards in Italy that have a, let me say, security issue because a tunnel not covered could be a problem for the security, for the safety of the person. So it's a large market we are looking for. We are analyzing other opportunities. We are ready. We want to be, let me say, present and to, let me say, increase, upgrade all these implants if we are interested in them.

Okay. Thank you.

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Thank you.