Infrastrutture Wireless Italiane S.p.A.

Good afternoon. This is the Corusco Conference Operator. Welcome and thank you for joining the INWIT Q1 2022 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 join us for Q1 2022 results conference call. 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 of the presentation. Following the presentation, as usual, we will be happy to take your questions. Over to you, Giovanni.

Thank you, Fabio, and welcome, everyone. Just over two months ago, we presented a strategic update confirming our business plan targets with more visibility on growth also supported by the positive external scenario and a further acceleration in 2022. Today's results show a further step up in revenue growth, earning expansion, and cash generation. All metrics are materially up year on year at top level in the industry in organic terms. We achieved the 9% growth cruising speed needed to meet our 2022 guidance. And we expect limited volatility across quarters. This is consistent with our business model. On industrial KPIs, new sites and new POPs, we continue to expand our infrastructure. POPs growth was 9% year on year although new ads were light in Q1. This is due to timing of new contracts in a context of still positive structural demand. Current pipeline allows us to say that from the second quarter of the year, we will show a material improvement in new sites and new POPs. We continue to benefit from positive trends in wireless infrastructure services. The Italian market needs to improve coverage to allow for 5G densification, with positive implications for towers. Location owners need dedicated coverage with us. To capture this demand, we count on an ecosystem of macro grid and micro grid and established commercial relationship with all players. We are a clear beneficiary of the current inflationary trend and our MSA is best in class. We see benefits already in this quarter. Finally, Important tenders of Next Generation EU are now live. We are working hard to support clients and play an important role. So, a material acceleration of financial KPIs to 9% revenue growth and a solid pipeline of new sites and new pops allow us to continue to be confident on our outlook. Let's move forward. to page four, ANCORs. ANCOR POPs are up 8% year on year on the back of the new sites and of the common grid. We added nearly 3,000 new tenants over the last four quarters. This is a key feature of Hingwith, the partnership with Tim and Vodafone in the technological shift to 5G and the network optimization. After a strong Q4 with 170 new sites, Q1 2022 was softer. The lower pots in Q1 are related to timing, not underlying trends. Operational plans continue to be strong, as visible in the delivery pipeline and in line with the contractual commitments of MSAs. We are working to reduce quarterly volatility of industrial KPIs. We have a new organization and processes in place. We confirm the expectation of an acceleration of new sites and new ports in Q2 2022. aiming to reach more than 500 new sites in the current year. Turning to our other client on page five. Tenancies by other clients were up in double digits, in the double digits year on year for a total of more than 1,300 in the last 12 months. This is one of the best organic performance trends in the sector. Structurally, our assets are attractive to all operators in the market because of their location and technology. Beyond MNOs, there is a wide client base interested in placing active equipment and sensors on our towers for a limited incremental cost and low electromagnetic spectrum. After a pickup in the later part of the last year, Q1 new apps were below our expected run rate, discounting mainly two factors. In fixed wireless clients, as reported by the press, there were several corporate and organizational changes, which slowed down the contractualization of new pods. We believe this is temporary, and our discussion with clients confirms it. Also, we keep on working to strengthen our organization and processes on the technology and commercial front. The objective is a more stable delivery of new POPs going forward. Regarding MNOs, we continue to add POPs in towns below 35,000 populations. No material updates on the remedies front. As you know, our short-term and medium-term targets are derisked from this factor. There could be upside in case of a quick resolution of the ongoing legal dispute in Bruxelles. Finally, based on the current pipeline, we expect Q2 new POPs to be more than 400. a material acceleration from Q1 and more in line with our run rate. Moving to new services on page six. New services was a key contributor to grow in 2021 and a similar trend is expected for the current year. There are synergies between in-width ecosystem of macro grid towers, and microgrid for dedicated coverage. Thus, repeaters and more cells, a material opportunity to provide better coverage on high density areas in need of optimal network capacity and ultra-low latency. We are well-positioned to capture this demand because of our location and relationship advantage with our two anchors. Early results are evident from the revenue run rate. It's more than doubled over the course of the year because we added more tenants onto our installed base and added new assets. There are more than 3,000 locations in Italy which will need to be covered by 2026, and we target about one-third of the market. Over the course of Q1, we added new projects mostly in the healthcare and entertainment verticals. Also, there is a material opportunity in rail and road infrastructure coverage. Today, we cover about 1,000 kilometers of road and highway tunnels, and we monitor the market for additional opportunities. Going forward, We expect a further pickup in new services, which will grow at rates above Inuit average in the coming years, also supported by the next generation EU. With this, I hand it over to Diego to discuss our edge in the inflationary environment. Thank you.

Thank you, Giovanni. Good evening, everyone. In the quarter, we posted a 9% organic revenue growth, And before discussing quarterly financial, I would like to zoom in on one of the key drivers behind this result. In an inflationary environment, in-width AMCO MSAs are well-structured to offer both downside protection and upside potential, with a 0% floor and no cap. The positive effect of this structure in our accounts is only starting to be visible in Q1 2022, following the plus 1.9% average inflation in 2021, and will support us going forward. In terms of inflation impact on financials, I would highlight the following. Revenues and costs are all linked to CPI, which means that as inflation grows, we retain a meaningful margin. Energy costs are borne by our clients. They are a pass-through in our P&L, so no impact from the recent trend in energy prices. Currently, we are experiencing some headwinds in our capex costs due to the rising cost of raw materials like steel, though the impact is not material. These contractual provisions mean that for every 1% increase in inflation, We have a positive sensitivity of more than 5 million euros a bit dull. Our business planning assumptions are fairly cautious for inflation. We assume 1.9% average yearly inflation in 2022 and 2023, with an impact in 2023 and 2024 P&L. As you know, Italian CPI is currently running much higher. Let us now move to page 8 for the P&L. 2.1 results deliver the further acceleration in all financial metrics with better organic growth, margin expansion, and reduction in leverage. The in-week business model shows its resilience and is able to manage short-term volatility in the new pots. Organic revenue growth improved materially for the fourth consecutive quarters. going from 3 percent to 9 percent organic growth. And we are satisfied with these financial results, achieving already in Q1 the growth implied by our 2022 guidance. The coming quarters of the year will have a similar growth rate. We will keep on adding revenues to our run rate and keep decreasing speed in organic growth. Despite the growing comparison base, Growth in the quarter was focused on anchors, on the back of new sites and POPs in recent quarters, inflation, and more commitments. HoloTrends discount other technical services, such as upgrade and installation, which were particularly positive in the last quarter of 2021. New services were rather flat, and they are expected to pick up over the course of 2022. Post-control, particularly in ground leases, which were rather stable despite the asset expansion in the macro and micro grid, so cost control allowed us to further expand EBITDA margin to 67%. Net income growth at more than 50% was supported by an optimized cost of financing and lower taxes due to tax scheme with a tax rate of approximately 12%. and we expect the full-year 2022 tax rate to continue to be approximately 12%. Let us now move to cash flow on slide 9. Cash flow generation was solid in the first quarter, with recurring free cash flow up 36% year-on-year. This was achieved thanks to EBITDA growth, low recurring capex, and slightly positive networking capital. which more than compensated higher risk-cost payments due to the standard risk-payment cycle. As it is typical for Italian corporates, tax payments fall in Q2 and Q4, where we will see the benefits of the tax schemes. Gross capex includes cash-outs for the highway tunnel investments closed in July last year. Cash generation led to leverage reductions. from 5.5 times net debt to EBITDA at ERN 2021 to 5.3 times in Q1, which continues to be highly cash generative and to count on long-term high visible cash flow supportive of a leverage between five and six times. We progressively create balance sheet flexibility, half a leverage turn per year, which give us optionality to push on growth or to increase shareholder remuneration. In summary, despite temporary factors impacting industrial KPIs, a solid quarter from the financial point of view with acceleration in growth and margin expansion. Giovanni, back to you.

Okay. So the acceleration financially recorded in Q1 is consistent with our guidance. We continue building new sites, adding POPs and antennas on our microgrid for dedicated coverage, supporting organic growth. Inflation will have a positive net effect, and efficiency gains will drive double-digit EBITDA expansions. Recurring free cash flow will be up strongly on the back of margin growth and tax schemes, in which we deliver high single-digit revenue growth, double-digit margin growth, and having higher cash flow generation, combining strong MSA with inflation links, clear source of committed growth, and strong asset-attracting demand from all market players. Over the course of the past year, we made significant progress to build a platform for growth, which now is starting to deliver its full potential. Let's now look at our key attributes in the next page. Towers are among the few user proximate connected and equipped assets, and there are new opportunities to provide value-added infrastructural services. We have plenty of growth opportunities, and they are becoming more and more visible. Our track record has become more substantial quarter after quarter, reaching 9% revenue growth. Short-term, we are focused on execution, improving the run rate of industrial KPIs, and refining our operational and commercial processes to be able to serve the positive demand in the market in a more stable manner. We can count on best quality assets, macro and micro grids, working together to provide coverage, capacity, and enable advanced applications, indoor and outdoors. clear growth drivers with two anchors and multiple other categories of clients, a supportive external scenario with structural demand and next-generation EU funds, and optionality from capital allocation. With this, I 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 touch-tone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. In the interest of time, please limit yourself to one question only. Anyone who has a question may press star and one at this time. The first question is from Roshan Ranjit, with Deutsche Bank. Please go ahead.

Great, everyone. Thank you for the questions. I've actually got two very quick ones, hopefully. Firstly, you've decided to recreate the guidance more, I guess, the midterm guidance at this stage. Appreciate it. It's Q1. But that is running with your 1.9% CPI assumption for FY23. And currently, as you said, CPI in Italy is at 6.5%. So at what stage do you feel comfortable in moving that assumption up? I mean, I guess it will come later in the year. We're talking about a kind of Q2, Q3. What, I guess, is preventing you at this stage from lifting that higher? And secondly, just a quick one, on the lease negotiations, I haven't seen, maybe I missed it, the data points in your presentation. How many lease negotiations buyouts and negotiations did you do this quarter? And are you seeing a bit more maybe opposition from landowners in negotiating, given the higher inflation environment, or are they still very happy to negotiate with you and maybe even sell, more happy to sell the land to you? Thanks.

Thank you, Rocio, for the questions. Good evening. With regard to, let me say, inflation, Yeah, I think we will talk again in the next month and quarter. We, honestly, we wait for some, a few more months of actual data. And it's a data clearly, I mean, the number you mentioned is the actual so far. And I think we have been very clear in disclosing the impact of 1% inflation on our revenues and EBITDA. So, again, let's wait until some actual points and, yes, in the next future that will be reflected in our outlook. With regard to ground risk cost, yes, 360 in the quarter. Clearly, there is a lot of work clearly behind those numbers and a lot of work done in the in, let me say, a distributed manner by many people across the land. As you know, we've got a very fragmented owner base, so there are a lot of one-to-one deals which make the total number. There is a little bit of variability and volatility across quarters, though the environment is still positive. We are able to continue to maintain our cruising speed, our numbers. And let me say it's interesting to see that the cost, the total cost, despite the increased asset base, let's talk about additional sites, let's talk about the infrastructure related to tunnels, is still going down and actually we are already in line with the 2023 total cost target. So it's clearly, as we already shared in the past, is an action, a program, which is giving us very good results. Okay, thank you.

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

Yes, good evening. Congratulations for the results and thank you for taking my question. Just one, if I may. I was wondering if you can provide us some more color on the pipeline you were mentioning for Q2 in terms of acceleration or positive presence. Thank you very much.

Thank you, Fabio.

Okay, as we said in the presentation, okay, in the Q2, we see the pipeline very consistent with numbers. Our clients are confirming the need to be hosted in our towers. And so our, let me say, forecast is to gain 400 new pods for, let me say, And to build more than, let me say, 100 new sites in addition to the 50 that we do. Okay? This is our very, very, I'm very, very confident in the pipeline. Regarding the new sites, our target for the full year is around 500 new sites at the moment.

Okay, thank you.

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

Yeah, good evening, guys. I just had a question around contract renegotiation risk. Obviously, very clear and positive setup you have in an inflationary environment. So just wanted to ask around, is there any risk to that outlook from... any of your contracts coming to an end and the operators renegotiating the no-cap clauses. And then I maybe just didn't hear correctly, but to Roshan's question on the ground lease negotiations you're having with landowners, obviously you've been able to talk down the actual inflation you pay on those costs this year and in the past. Are you seeing any pushback or any change in behavior from landowners that you're speaking to at the moment? Thank you.

Yes, thanks, Andrew. With regards to the MSCI revenue index to inflation, it's a contractual clause. It's crystal clear, and so there is no room for renegotiation. So it's straightforward, and as I say, no room for renegotiation. So as of January, we applied the 1.9% rate we have seen in 2021. So starting from Q1 2022, we have started the standard regular approach, which we see every new year to apply the average inflation rate of the previous years. With regard to ground leases, actually, there are two different dynamics. One is the dynamic driven by inflation, which is actually, by the way, a little bit, again, fragmented compared to the top-line revenues. So the adjustment to inflation are, yeah, contracts are 75% indexed to inflation, but the adjustment to inflation is less standard, less regular, less timely than the and the, how can I say, there is no direct link with the current cycle, a continuous cycle of renegotiation, a continuous cycle of lend-buy-out. The two things are not actually connected, and so we are going on on the standard program, the continuous program of both lend-buy-out and renegotiation. So actually, so far, we have not seen any change at all. the environment.

Okay, thank you. Can I just, on the first question, your answers around your own price inflation, the question was more are any of your contracts or in terms of material proportion of contracts actually coming to an end and therefore subject to renegotiation or any risks on that side of things?

Yeah, actually, my answer was mostly related to the MSA, which is clearly the majority of our revenues and where we have the close of zero floor and no cap. The other contracts with the other players, honestly, the conditions are different generally. With all those, the inflation index is 75% of inflation. And honestly, this is a standard practice in the market since ever. There is a logical reason for that, because also ground risk costs, as we said, are indexed to inflation. So it's been always like that. It's a standard practice in the contracts. And actually, we don't see any pressure from this perspective. In terms of renewals, yeah, there is a standard cycle of renewals. We don't see any peak or any different trend in terms of renewal cycles. So the cycles of renewals will continue as in the past, including the closes related to inflation.

Okay. Thank you very much.

You're welcome.

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

Hi, good afternoon. Thanks for taking the questions. I just have a couple of questions. Firstly, just on your cash flow, you reported a 33 million positive working capital movement, which is sort of quite a large contributor. This is below recurring leverage-free cash flow. Can you maybe just share with us what does that relate to and will that reverse? And then also you mentioned a couple of times on the call that you saw a reduction in the quarterly volatility of KPIs. Could you maybe just detail what are some of the steps you're taking to reduce that? Yeah, I'll leave it there. Thanks.

Yeah, with regard to the first question, hi, Jacob. This is referring to the movement of working capital below the current free cash flow, so to free cash flow to equity. Yes, it's something that is actually will be reversed in the next quarter, so its timing is temporary, will be reversed in the next quarter. Sorry, on the second question.

Yeah, you mentioned a couple of times, I think it might have been Diego that mentioned a couple of times that you expect to reduce the quarterly volatility of new POPs going forward. And I was just wondering if you could explain how.

Yeah, just two perspectives on this. I think it's nice to see how I mean, there is no volatility anymore of revenues, and the revenue trend is quite stable, consistent, and the activation of the multiple growth drivers, which have been done actually last year, shows the strength and the resilience of the business and gives stability to the growth profile, despite the volatility of the POPs and despite some I can say up and down on the different lines. So that's for us, it's absolutely relevant to see the consistency, resilience of the revenue trajectory.

About the industrial KPIs, okay, as you know, we are very focused on this item. As you know, we change our organization in the first month of the year, and we are, let me say, improving the processor to deliver it to be more stable in the numbers of the industrial KPIs. So, let me say, I am confident that from the second quarter, third quarter, fourth quarter, we have to gain, we will gain stability in this, let me say, KPI. About the site, as you know, there is a lot of, let me say, problems with the permits, with the timing, but now, let me say, the plant is going towards Stable, let me say, feed of permits to the local authority to permit to us to be more constant in delivering the sites, new sites, the hospitalities, the common grid. So, let me say, this is our target for the second, third, and fourth quarter.

Thank you.

The next question is from Giorgios Ieradiakounou with Citi. Please go ahead.

Thank you for taking my questions. The first one is more of a follow-up around the new sites and the third-party POPs. I just wanted to clarify for the target of 500 whether you expect it to be relatively linear already from the second quarter or whether we could more like see what we saw last year, a lot of the sites being added towards the end. And similarly, the comment you've made of more than 400 new pubs on third parties, I was just wondering whether that is a kind of target for each of the quarters, or is it more for the second quarter? And if you could comment at all on the mix between, you know, MNOs, Ciliad, or versus Fritz Wilder's players. Thank you.

Thank you, George. So, new sites. Okay, our target is 500 within the end of the year. Let me say, giving the second quarter, we start with more than 100 sites, and so to be constant in the other quarters to gain the 500. let me say, hospitality parties, okay, in the second quarter, our target is 400 that we have to maintain the space for the Q3 and Q4 of the year. So, let me say, it's only a question of our, let me say, organization and processes that just in these days are giving us good results.

Okay, if I could ask a follow-up based on what you said about third parties on your side. Your guidance obviously is for around 9% growth for the rest of the year. I just wanted to ask if within that guidance you exclude any small acquisitions you may do, whether it's DAS or any other kind of arrangement similar to what you did with Vodafone last year, whether if you were to do any of those kind of transactions, whether that 9% will accelerate much higher given the contributions from those deals?

I mean, it's difficult to say at this stage. So what the approach that we have actually in terms of small acquisition is that basically they are basically considered organic as part of the guidance when it is done at the same, when instead of, you know, building a new DAF, actually we buy. So that's somehow equivalent. So there could be some cases where we buy instead of building. So it's actually not additional, but it's replacing what we have in our cafes. There could be also something more that is not included in the guidance, but let me say this moment is difficult to say.

Very clear. Thank you. The next question is from Stefano Gamberini with Equita. Please go ahead.

Good afternoon, everybody. A few questions also from my side. First of all, regarding the new sites, you expect 500 new sites this year. Last year, they were around 360. So this means more or less 1,000 between 20 to 22. So if I'm not wrong, you need something in the region of 800 sites next year to reach the target you have. So could you confirm this acceleration also next year, or do you see some risk on this side, on this topic? The second question regarding the acceleration of new POPs that you're expecting for the coming quarters, if I'm not wrong, to reach the target 2023 of total 11,000 new POPs from the anchor tenants and 810 from Holos. you need to arrive in the region of 1,500 new POPs per quarter when you expect to arrive to this level of new POPs per quarter. And the very last one regarding what are the contract penalties for the two anchor tenants if they do not meet the commitment of 11,000 new POPs they agreed with you by 2023. Many thanks.

Okay, thank you, Stefano. Okay, new sites. Okay, the target of this year is 500. Okay, and so we are confident to gain these important results. But just today, we are working in terms of designing and presenting permits for 2023, where our targets are 800 new sites. So let me say we confirm the number that is said.

Yes, actually, as you pointed out, so far we have been constantly higher than 1,000, basically between 1,100, broadly 1,200, which has allowed us actually to grow total POPs by 9% at this stage. So it's a significant step up, but not yet at the cruising speed needed to achieve the target. And actually, we need a further acceleration, which is basically depending on two things. We see the demand from customers, though in some cases, as in this quarter, it takes more time to contractualize, to finalize the contractualization of that demand. And also, as Giovanni said, internally we are working to shorten the end-to-end cycle to deliver the contracts and down, by the way, also to the invoicing. So, the third element which will help us is the famous simplification that actually is becoming a little bit more concrete in accelerating the end-to-end cycle. So, we think that there is room and that there are the the chance, the possibility to achieve this target. Difficult to say exactly when. Though, before actually, you know, we are playing with numbers and we are playing sensitivities. Let me just point me out that actually this gap of basically 150 to 100 hospitality would mean that we achieve the target one quarter or two quarters after, which is actually would have a limited impact, and actually so far somehow we have been able to compensate through other growth engines. So I think that for me this quarter is interesting really to see how somehow these trends of the waves of the growth engines that have been put in place are able, as we said, to mitigate short-term variance volatility of KPIs And somehow, also the fact that we have been slightly behind the target has not been impacting significantly the revenues. I finish just saying that so far, now we talked a lot about Iliad, which actually has been the main cause for the gap of last year. And as we shared in last quarter, we have plans to compensate and to replace it through other sources of which are visible in the pipeline. So long story short, yes, we need to further accelerate. Cannot say at this stage when we will achieve that cruising speed. Even in worst case that will take a little bit longer or we will get there a little bit later is just a question of short term, one or two quarters, with a neutral impact on the revenue growth.

About the third question, let me say I'm absolutely confident on commitment by the ANCOR, because, let me say, it's something that is useful for them in terms of financial, special coverage, and so on. And about penalties, there is no public disclosure, so let me say this is the question that I can say to you, Stefano.

Just a quick follow-up. In the case that you take more time to reach the 800 new sites, do you see some risk on that point that it takes, we can say, a longer period for that? So there are some risks on this or on that topic you are seeing to be on track?

No, no. As I said previously, We are just working now for the 2023 presenting the design to the municipalities, gaining, asking the permits. So let me say the path is very clear. Our pipeline is clear. I'm really very, very confident to gain number for the next year.

Many thanks. Thanks a lot.

Gentlemen, this concludes the Q&A session. Back to you for any closing remarks. Apologize. We have another question from David Guarino with Green Street. Please go ahead.

Excellent. Thanks for taking the question, guys. Question, it seems like you're going to generate some excess free cash flow relative to your long-term guidance ranges just due to some conservatism in those CPI-linked escalators. Can you talk about the capital allocation strategy with any additional proceeds?

Let me see.

We have a very, very severe discipline in our, let me say, capital allocation, okay? Let me say, today our focus is based on real estate or land buyout, road, rail, arbor infrastructure, dust, and a small portfolio of, let me say, macro sites that are available in Italy, okay? What we did today, finally, around 70 million highway tunnel investment in July, as you remember, that gained more than 10 million revenues in line with our, let me say, with average profitability. And so with a clear, let me say, industrial fit with revenue that we are, let me say, gaining. Okay. Now, so our, let me say, attitude, let me say, is though, is we are looking for clear industrial synergies and more plus, let me say, accretion. We know very well the business. We are the only organic grow company in the market. So, let me say, we are totally concentrated in the core business or in the other technologies. For, let me say, our region, In Italy, if there is something interesting, or let me say Europe, not outside Europe, and let me say there is the returns discipline that must absolutely in line with our cost of capital. So let me say this is our, let me say, strategy. We are analyzing, we are studying, and at the right moment, for the right, let me say, action, we will act.

That's helpful. Good to know opportunities exist for growth. And maybe one final one. This will probably be for Diego. I know you've spoken of targeted leverage levels for the company, but do you have a desired mix of fixed versus floating rate debt? And then lastly, can you just comment on what current unsecured borrowing rates for InWit look like today? and if the company has any intention to look for more permanent financing to replace some of the variable rate loans. Thanks.

Yeah. In general, we are fine with an 80-20 mix floating in fixed we have today. And so, yeah, that's our, let me say, general approach. In terms of borrowing cost today, our average cost today is 1.7%. Now, probably, we are at about 100 basis points, 80 to 100 basis points higher at the current situation. The profile, our aging profile is quite positive, actually. We structured the debt last year, so we don't have any any termination, any duty in the short term. So we have all the time to eventually make decisions. We are monitoring the market. We are assessing options if there is any opportunity to refinance or the current debt. Yeah, so we are monitoring and looking at it. But I can say, again, without any pressure because we are in, I would say, a quite comfortable situation at this stage.

Great. Thanks for the questions. Thanks.

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

Yes, good evening. Thanks for taking my question. I wanted to ask you, with the changes in the shareholding structure with the team significantly reducing their stake, do you expect any change in the priorities with regards to capital allocation? So, for example, would the shareholder distribution become more prominent in your priority list? Thank you.

Okay, we have an indecent plan that we presented on last 24th of February. We continue in our trajectory. We don't perceive any change in the trajectory. Okay.

Okay, thank you. Thanks, Giovanni.

The next question is from Abhilash Mohapatra with Barenburg. Please go ahead.

Yeah, thanks for taking my questions. And apologies if these have been answered earlier. The first one was just on 2023. So obviously, as discussed, quite a big step up in inflation potentially next year in your MSA contracts. I was just wondering, in terms of the other growth elements, could we see your customers maybe dial down some of the growth plans just to sort of limit the total amount that they pay you next year? And then secondly, I'm sorry if this has been asked earlier, what gives you the confidence on the set of 400 new POPs per quarter target, OLO POPs target from Q2?

Thank you. With regard to the first point, actually, there are how can I say, different contractual chapters, different elements in the contract, and there are, there is no, in the MSA contract, and there is no way to, no mechanism to compensate one with the other. So there are different elements. Each of them is specifically regulated, and as I said, there is no way to, no fluidity, no way to compensate one with the other.

About the commercial pipeline, we got in touch with each of the CEOs of our OLO clients. They confirmed the interest to be hosted in our tower. So, let me say, the second quarter is, let me say, strong, and okay, the team, as Diego of our, let me say, ability to accelerate the hospitality of our clients. So we are very confident in the pipeline that we checked it and our customers confirmed the needs.

Thank you very much. Just a very quick follow-up, then, just going back to the earlier question on the sort of big step-up in new site deployment that's implied for 2023 if you want to hit your target previously issued target. Is that also a contractually sort of agreed element? So, you know, is that like a guaranteed thing that there'll be sort of 800, 900 new sites next year?

Thanks. Absolutely, yes. The new sites are included in the commitment with our anchor. So let me say we are sure to have two customers in the new sites. And looking for the third that could be all or let me say others that can be hosted in our towers.

Thank you very much.

The next question is from Jerry Delis with Jefferies. Please go ahead.

Yes, good evening. Thank you for taking my questions. I've got two questions, please. You've commented in the past that the standard sort of lease fee from Fixed Wireless Access and Otmo customers averages out at about one-third of the standard MNO fee. Given that there's quite a range of different customers in the Fixed Wireless Access and Otmo bucket, how confident are you that that sort of one-third ratio holds good through your medium-term guidance? And then secondly, just returning to the issue of governance post Tim's sell-down, I sort of appreciate that Ardian would not end up in a controlling position, but it will end up as a shareholder of significant influence and more than in the past. So I'd be interested in what conversations you might have had with them What are the circumstances under which they might be able to sort of change a force a change in strategy if they were so minded?

Thank you Yeah, thanks Jerry only on the prices of all those people a success and automatically yeah, the one third is the reference and so far is holding very well and And actually, we have done even slightly better in terms of mix that's supporting the overall revenues in terms of average prices. So, yeah, we are, as I said, it has all so far very well, and we are confident also for the future.

About Ardian, let me say just today in the board there is a representative of Ardian, one director. that approved the actual, let me say, industrial plan that is absolutely confirmed. No, any, let me say, contact regarding the change of strategy with them, with our, let me say, with me and with my director. So, absolutely no contact.

Very clear. Thank you.

The next question is a follow-up from Stefano Gamberini with Equita. Please go ahead.

Yes, many thanks. Two quick questions. With the proper termination of the shareholder agreements for the control of your company, can you ask the renewal of the MSA contact to Tim or not? Could you confirm that you can't? And second, can you provide some more granularities on the progress of recovery fund tenders, what we can expect shortly? You said that you are working hard, and if you see some also slippage on the tenders or not. Thanks.

About the shareholder agreement, nothing changed and nothing will change, I know. So, let me say, Tim is and will be one of the two most important customers for us. So, let me say, we confirm absolutely independently from the shareholder, let me say, composition. About the European funds, there is two important, let me say, considerations. PIM, Open Fiber, applied to Italy, one giga sender. They are two very important customers for us, and there are some potential, let me say, for us to, let me say, to provide the fixable access solution where the the fiber will arrive in year and year so this is a an opportunity about the italia 5g tender it's at the moment it's live so let me say we are studying we cannot comment much because let me say the the deadline of the tender will be on monday 9 at 13 and so let me say we are working in a very different number of scenarios with our anchor. So let me say it's totally live today, tomorrow, Saturday, probably Sunday. So let me say to present our, let me say, considerations.

Thanks again.

The next question is a follow-up from Giorgio Tavolini with Intermonte. Please go ahead.

Hi, good evening. Thanks for taking my question. I was wondering if you could elaborate more on what is going on at the team level. The team is going to break up their group into a service company, an escrow company. And I was wondering if you think it could affect the master service agreement with you at which level or, I mean, if there could be some implication that you expect from these changes, operational changes, strategic changes at the team. Thank you.

No, in my opinion, nothing will change because independently where the mobile industry will be placed, the team will ease and will remain our customer with the MSA, the commitment, and the MSA contribute to our industrial plan that we presented.

Okay, fair enough. Thank you.

Gentlemen, there are no more questions registered at this time.

Thank you, everyone, for connecting.

Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones. Thank you.