Calnex Solutions plc

Good morning, everyone. My name is Juan Gaitán, Sundance Director of Investor Relations, and I would like to thank you all for joining us today for our H1 2020 for Resource Conference call. Today, I'm joined by our CEO, Marco Patuano, and our CFO, Raymond Trias, who will discuss the main highlights of the period, and then we will open the line for your questions. As a reminder, if you wish to ask a question, please press star five in your keyboard. So without further ado, over to you, Marco.

Thank you. Thank you. Good morning, everyone. Thank you so much for your time today. I assume ready for vacation. So let's make the last effort. So let me start, please, updating you on our portfolio optimization and capital allocation priority. As you have seen this morning, we are in the middle of advanced negotiation after having received the binding offers for our Austrian asset. The disposal process is aligned with our objectives of achieving a simpler structure, strengthening our balance sheet and maximizing shareholder value. This agreement will add to the remarkable progress we are making in terms of the leveraging, thanks to our agreement in the Nordics, the disposal of sites in France and the exit from Ireland. This last closing process remains on track with no changes to our envisaged timeline and leverage will be reduced by €971 million when completed. In this sense, probably you read that the process moved from Phase 1 to Phase 2. It was absolutely foreseen, so it's not a surprise. So the conclusion expected base case Q125, best case Q424 is confirmed. Okay, let's continue. Now, I would like to remind you that we have recently launched our first bond as full investment grade issuer, which has been used to repay variable debt at a higher cost. Following the Austrian deal, it is our intention to assess a potential earlier shareholder distribution in the most accurate form, which today would be represented by a share buyback, subject to our leverage target and to our rating commitments. Before that, it's required to complete antitrust reviews and receive the associated proceeds, which should be happened by Q1 2025, the latest, as I said. In the meantime, we will work closely with our rating agencies in order to determine potential timing and quantum. Okay, moving now to the business performance. We are once again providing very solid results this quarter, proving the attractiveness of our business fundamentals and the alignment of our organization towards the achievement of all our public commitments. The period continues to be marked by a consistent commercial performance and by a robust operational execution. The point of presence increasing more than 9% compared to the last year in terms of equivalent POPs, which is the old metrics. In any case, it would have been more than 6%. Our main sources of co-location growth are Digi in Portugal and Plus in Poland. And in terms of BTS, we see strong progress from Iliad in France and Play in Poland. Our organic revenues, which excluded the impact from the disposal of sites in France during the period and other effects, just to mention effects, increased to 7.4%. Our organic MDA after leases increased 10.7%. Our recurring level free cash flow increased to 781 million euros from 741 million euros last year. And our free cash flow reached a 49 million euro positive, benefiting both from our cash flow generation and from 154 million euro received in the context of the remedy process. So, we are on track to meet all of our short and medium-term targets we recently established at our Capital Market Day. I can assure you, that this management team is fully committed with our promises and we are also convinced that with a consistent delivery, quarter after quarter, we will gain your trust. Finally, in a market that is seeing M&O consolidation, I would like to give you a quick update on the progress we are making with our clients in order to crystallize potential accretive agreements. In the light of the potential integration between Hutchinson and Vodafone in the UK, we have enhanced our existing contract with CTIL. The former Archiva had with the joint venture a contract which will be replaced by two separate contracts which each of the operators and its duration will be extended for initial term of 10 years followed by two 10-year renewal periods. After the announced in-market consolidation in Italy, we are in discussion with the acquiring entity, where we see no material short-term risks, but on the contrary, potential network improvement opportunities in the market. At the same time, we have ongoing dialogue with Emergeco in Spain in order to facilitate a network improvement and the expected efficiencies on the client side, and at the same time, an NPV neutral agreement and a long-term relation enhancement. We have reached an agreement with Bouygues Telecom for the deployment of around 150 co-locations to suit instead of built to suit. We see limited counterparty risk from relevant clients in France and Portugal due to the very high level of contractual protection. The fact that Celnex provides a mission-critical service, and to this point, we see clients operating as usual with no changing behavior. Finally, we have created the entity structure for our land co, which will accelerate the acquisition of land initially in our five major markets. Having said this, I now hand over to the CFO. Ramon, please, the floor is yours.

Thank you, Markov. Good morning, everyone. I will now provide a few additional remarks on the period and our financial strategy. This has been another period of consistent commercial performance, with POPs growing at 9.3% compared to the same period last year. Please remember that we are now reporting physical POPs, which in our view provides a better reflection of the addressable market and our commercial activity. Physical POPs complement our historical reporting based on equivalent POPs. Following that methodology, the growth would have been 6.3%. This 9.3% growth that I was referring to is explained by the progress made both in our build-to-shoot programs and the collocation. Build-to-shoot growth represents around 3% and was mainly deployed in France and Poland. Collocation POPs were generated mainly in Portugal and Poland, with the rest of our markets showing steady performance. POPs growth associated with the new collocations has reached 6.2%. It would be 3% if we were to measure it in terms of equivalent POPs. Revenues increased 7% compared to the same period last year. Our adjusted EBITDA 6%. and our EBITDA, after leases, 8%. Please bear in mind that year-on-year, trends are impacted by positive one-offs, mainly associated with electricity pass-through in the second quarter of 2023, as well as the change of perimeter in 2024, as a result of the disposal of the sites in France. Additionally, sequential recurrent level free cash flow performance for the second quarter 2024 versus the first quarter 24 is explained by the change in working capital, tax payments in the quarter, and the dividends paid to minorities in the Nordics. All of them timing effects which do not affect our view for the year 24. When focusing on pure organic performance, our revenues increased 7.4%. Our EBITDA, 8.9%. And our EBITDA releases 10.7%, showing the operating leverage of our business and our focus on OPEX and lease management. If we now move to slides 10 and 11, we are providing here our organic revenue bridge for the period, as well as the individual performance of our different business lines. As you can see, if we take our contribution to revenues from inflation, collocation, and bill to suit, our organic revenues grew 7.4% compared to the same period last year. And going into the specific performance of our different business lines, first, the tower segment grew 6%. 7% organically, including the positive impact from our ability to translate inflation into incremental revenues. Fiber and connectivity services grew 24%. Thus, small sales and run-as-a-service grew 17%, and finally, broadcasting services grew 3%. The strong performance of our fiber business unit reflects the return on investment done to date. Our free cash flow reached 49 million euros, around 180 million euros more than the same period last year, mainly due to our organic cash flow generation and the 154 million euros received in the context of the remedies process. Our free cash flow is expected to reach between 250 and 350 million euros in 2024, compared to the 150 million generated in 2023. Our CAPEX needs this year are distributed as follows. Maintenance CAPEX is expected to remain below 4% on the total revenues excluding pass-throughs. Expansion CAPEX should be around 500 million euros in the year 2024, a split between 60% tower expansion capex, 20% other business expansion capex, and the balance allocated to efficiency capex. Build-to-shoot capex before cashing from remedies is expected to be around 1.3 billion euros in 2024, down from the 1.6 billion euros in 2023. and we are expecting the second half 2024 to be less intense compared to the first half 2024 in terms of B2S. Going forward, our pre-cash flow generation potential will significantly increase as we get closer to the end of our B2S programs. This will underpin our rapid deleveraging and will also give us the financial flexibility required to remunerate our shareholders whilst pursuing value-accretive business opportunities. If we move to slide 12, we are illustrating here our commitment with our former efficiencies program and our willingness to continue optimizing our lease costs. Our program remains on track, and we continue to actively pursue land management measures, including the creation of our LandCo that Marco mentioned before, in order to continue absorbing contractual rent increases and the additional costs associated with a growing perimeter. We have 20 million euros of additional costs linked to additional sites which have been absorbed through land management initiatives. Finally, let's take a look at our debt maturities profile on slide 14. As you can see, there are no maturities left in 2024, and we have used proceeds from our recent bond issuance maturing in 2029 with a coupon of 3.625% in order to repay variable debt that was maturing at the end of 2025 at a circa 5% cost. Proceeds from additional disposals may be partially used to continue repaying variable debt with a high associated cost. as these instruments are linked to your iBOR. We have a robust and well-designed capital structure which prevents us from incurring higher interest expenses. Remember that 80% of our debt is fixed. Short-term debt maturities have already been managed, so our average cost of debt which today stands at 2.3%, similar as last year, will only marginally increase in the coming years. And with this, we thank you all for listening. We wish you all nice holidays, and we remain now at your disposal to answer your questions.

Thank you so much, Marco, Raimon. We will now start the Q&A session. First question comes from Akil Datani from JP Morgan. Yes, I can go ahead.

Hi, morning. Thanks so much for taking the questions. If I could ask a couple of questions on asset sales first, if I can. And there's a few parts to this. The first is, I've seen the release today that there is a write-down as you're concluding the Austrian asset sale process. And I guess I wanted to understand how I should think about that number. When I look at the release, it looks like it's about a 400 million gross write-down. And in Hutchison's original release, when they sold the European assets to you, Austria was at 1.1 billion. So that implies a net sort of NPV of 700 million. So I just wondered if that's the right way to look at the rough ballpark of valuation for this asset and And if it is, that implies about 18 times EBITDA on my numbers. So just to understand, it looks maybe a little bit lower than we might have thought. So maybe if you can just share some general color around that. And then beyond that, obviously, you've mentioned shareholder remuneration in terms of use of proceeds. Could you maybe just help us understand timing and how we should think about it? Is it contingent on getting the proceeds from Austrian Island? Is it only contingent on some sort of confirmation of the transaction, so just some sort of color there? And the last piece of the same piece is really around guidance. I guess as Ireland and Austria get sold, you'll update guidance. And I thought it would just be helpful if we could have some high-level thoughts around that. And I guess what I'm trying to understand is you're reporting very impressive growth rates. You've got 7.5% revenue growth organically reported. low double-digit EBITDA growth. But if I'm right, it's the rest of Europe that's growing a lot lower than that, probably low single-digit, and obviously Austria and Ireland are in there, so they're obviously growing lower too. So is it fair to say, as and when you sell these assets, is growth enhancing, the growth rates of the residual portfolio is higher than what we're seeing today? Thanks a lot.

Okay, on the first question, Akhil, So thank you for your questions first. The first question, you understand that we are in the middle of the process, so I'm going to be a bit generic. Point number one, for the one who know me, you all know that I'm a fairly prudent former CFO, let's put it this way. So we had more than one offer. And we decided to go with a quite prudent approach in order to make this allocation on our balance sheet. What I can tell you is that we are looking to an enterprise value valuation, which is accretive, vis-à-vis our trading multiples. As I've always said, we are not to make disposals just for getting rid of assets. We make disposals if and only if it is accretive for our shareholders vis-à-vis the share price. Shareholder remuneration. What is the process? Well, you can easily imagine that in our desire, the sooner the better. So what we are going to do once the dealer is closed in Austria, I mean, depending on the characteristics of the final bidder, the Austria sale can turn into a relatively quick process from signing to closing. So what we will do is after the summer break, we will sit with the rating agencies. We will make arrests with them, submitting to them what is our plan, both in terms of what we already have on the table and what we have in the pipe. And we will discuss with them. So I take profit of your question, Akhil, to make a more general comment. The entire company, meaning from the CEO to the management to the board of directors, agrees that we are performing industrially good. But we possibly need to accelerate the shareholder remuneration because comparing with our peers, the lack of an adequate shareholder remuneration or better having a commitment and a strong commitment from 2026 onwards is not enough. So we are working on this. And there is a strong focus on both from the management team and from the board of directors in this direction. On the guidance, yes, you're right. The two countries that we are disposing are, let's say, not the strongest performance of our portfolio. So once the two, let me say that, yes, we will provide, we will help you to have a reviewed guidance exposed. So what is the impact on our guidance of those two asset disposals? It's something relatively easy, but it's easier to make it once the Austria case is closed. I don't know, one question, you want to add something?

Maybe just to provide, I mean, specifically on Ireland, it is a country that generates around 40 million of EBITDA. Austria, they say magnitude. So, actually, slightly less. So, 23 figures for Austria. They are 39 million. So, that gives you an indication if you want to start making some adjustments when these transactions are closed. And then, of course, you are right. So, we are... assessing the disposal of countries that, in terms of organic growth, are performing less than stronger countries. So, post-transactions, post-closings, it is a performance of the resulting entity.

Good. Akhil, I hope I answered you. So, the next, Franco?

Next question comes from Andrew Lee from Goldman Sachs. Please, Andrew, go ahead.

Hello. Good morning, everyone. Just want to say thanks for the greater disclosure levels on free cash flow on slide 13 and for your detail on the expansion CapEx outlook, Ramon. That's really helpful. So apologies for coming back to the inorganic side. Just wanted to follow up on Akhil's question just in terms of the shareholder returns. Just to be clear, So you're saying that you need to have completed at least one of the deals to be able to do a buyback. And then could you just give us a bit of clarity on the likely scale of buyback, speaking in kind of generic terms? But if it's just one of the assets sold, is the buyback kind of size we're looking at around 1% of the market cap? And then if both of the assets are sold, then the buyback will be 2% plus of market cap. Is that the kind of level you're thinking about? That would be really helpful. And then just a second question. Obviously, there's lots of private investor demand out there. But your comment around the accretive to your current trading multiple for Austria, I think your current trading multiple, there's a big gap between public multiples and private multiples, and I think your current one year forward is about 17 times. So do you still see a meaningful gap on average asset quality between public and private multiples and an ability to close that gap with asset sales? Thank you.

Okay, on the first part, let me put it this way. Let's go in order. We made an irrevocable commitment to staying in investment grade. Point number one is we sit with the rating agencies and we define what is needed for maintaining the investment grade. Here, this is not negotiable, so we do this. Obviously, it's not a passive conversation. It's a conversation in which we want to express our point of view on what should be The debt reduction commitment that we have to take in order to stay investment grade because the life does not end the 31st of December 2024. So we have to give them full visibility. Every penny that is not devoted to maintaining the investment grade will be allocated in this moment on shareholder remuneration because in our pipe, there are no industrial needs in excess of what you already know. So you have the BTS tracker, you know what are our commitments. We have no extraordinary commitment coming. And therefore, this is what what we are doing now. Allow me not to enter. in the math of what if I sell one, what if I sell two, because I should drive you through a matrix of combination which imply what is the BDR, what is the debt, how you reclassify some elements of the debt, etc. So as a general concept of what I'm telling you, Andrew, is that We are committed to maintain the investment grade and everything that is not needed for the investment grade today. Our intention is to allocate on the remuneration. On your second question, public and private. It's very much it's a it's a case by case situation. I think that there was a little bit of a generic enthusiasm that whatever you put in the market would have been traded at 23, 24 or very, very high multiple. The truth is that there are many factors that influence the final number. why we got a very good number in Ireland. Because the buyer had synergies. And the buyer accepted to share a quote of their synergies with us. It was complex from the antitrust perspective. And so we've been able to negotiate with the buyer to be compensated for the complexity of the antitrust process and the timing of the antitrust process. So when you put it all together, you end up with, let me say, a very good transaction with good satisfaction from the buy side and from the sell side. Now, there are markets in which, and once again, we had an industrial player on the other side. So when you have a financial player on the other side, the discussion is different. You start discussing on expected returns. You start discussing on possibly a more aggressive financial structure that add a higher walk to the buyer, et cetera, et cetera. So it's very much a case by case. What is clear? What is clear is that the quality of the assets is, that are in our portfolio is on average quite good. I would say very good. Normally, the country risk is a good country risk. We are not in geography that are the difficult country risk. The business risk profile normally is between good and very good or up to excellent. So the fundamentals of our countries are good. So, yes, there is still, to answer your question shortly, yes, there is still a delta between public and private. You should not expect the delta to be the same everywhere. The delta depends on manufacturers. Sorry, Andrew, I gave you a very long answer, but I think it's the most honest that I can give.

The question comes from Andrej Kavejsek from UBS. Please, Andrej, go ahead.

Hi, good morning, everyone, and thank you for the presentation. I had two questions as well, please. First, just generally or more generally on just capital allocation with respect to your debt. So, first of all, you still have about $1 billion of 2025 maturities related to the deals that you are currently working on or waiting to be closed. Are you kind of targeting to pay down all up to 2025 maturity so that you avoid refinancing in this kind of high interest environment and related to that, how do you think about allocating capital between shareholder and the outstanding roughly 3.6 billion of debt that is currently costing about 5% on the variable side? How do you decide which kind of use of proceeds is better? Is it paying down? Is it increasing the buyback first? Just your thinking around that, please. And then second question, just on the CTIL situation, so you now have two separate contracts, just if you could talk about how... Does this make basically the UK situation safer from the perspective of you have two direct links to the tenants? You've got, I guess, additional business opportunities from dealing with two separate entities rather than just dealing with one where you have to decide on a joint network pullout. So does this already seem like an MPV accretive situation to you? And just remind us, please, in terms of the original CIDO, is it the new kind of separate MSAs, are they valid only after the current one expires, I think it's 2030, around 2030, or are the two separate MSAs already today replacing the one that was the joint one from today, basically? Thank you very much.

I'll leave the CFO to answer your first question, and I'll answer your second. Thank you, Marco.

Thanks, Audrey, for the questions. In terms of the debt, as you said, we have maturities for next year, 1 billion euros, and that's a split more or less 50-50 between variable debt and bonds at fixed rates. We mentioned during the presentation the two investments that we first would have closed Ireland or signed Ireland and the second one that we are ongoing. The proceeds that will come from those, we will use them to repay the variable debt, that's for sure, because as we said, the cost of the variable debt remains around the 5% and that's the most expensive debt that we have at the moment. And for the rest of the debt, the fixed maturities, we will also pay them once we receive the proceeds from the sales. And that's the idea. You were linking that with the shareholder remuneration. I think it's important what Marco mentioned at the beginning. We have the two processes that Ireland should be closing first quarter 25, best case fourth quarter 24. Austria should be faster from a timing perspective but it still will get to the end of the year in terms of timing beginning of 25 as well. To the end of the deal. To the end of the deal first. And Once we have clarity on the two deals, we have closed, we have received the proceeds, and we have done the assessment with the agencies, we will be able to then make clear the commitment of anything that we can advance in terms of shareholder remuneration. Not before that.

Okay. In any case, don't forget that being investment-grade, we can issue bonds immediately. fairly conveniently. There is big demand. We saw when we issued the first bond, the demand was very strong. And this allowed us to tighten the cost of the debt. So we are not worried about refinancing the debt. Correct.

And maybe link to that and just also so that you understand, not today we are investment-grade, but it's because The agencies believe in our commitment to reduce the leverage to the target that they have fixed in the year 24 and 25. It's not that we have already achieved the target that they placed to us, so that investments will help us reach that target in advance of what they were expecting, and this is what will allow us to then make the shareholder remuneration.

Yes. CTAL, so I tried to answer your question earlier, Possibly, I'm reading a little bit more what is the market situation. Let's imagine for a second that tomorrow the Hutchinson-Voda merger is approved. But what happens is that Hutchinson and Voda will consider one area of synergies or partnerships not only efficiency, but also in terms of quality, their combined mobile network. What is our situation? Our situation as of yesterday was I had a very strong anchor agreement with 3UK, which has all the characteristics of an anchor contract. And then I had an agreement on a portfolio of sites which were coming from the acquisition from Archiva, which were rented to CTIL, so indirectly to the joint venture of Vodafone and the MOTU. So if on the one hand, the Hutchison 3 contract was the typical anchor contract, the CTIL contract was more similar. It was a hybrid, but with some element of similarity with the second tenant contract. So what we agreed with them is we give you significant flexibility on using to Vodafone on using the combination of the two portfolio in order to design a very powerful, very distributed, very popular and very data with a lot of data capacity. And we transform in exchange. we transform this CTIL contract in something that increases the similarity to an anchor tenant. So the combination of the two portfolios is good for Vodafone because they have extreme flexibility, call it sharing, call it the way you prefer, and extreme capillarity. Why it's good for us? Because we took the two portfolio, the revenues coming from the two portfolio, and we have a securitization of those revenues on an anchor-like contract. We are forgetting the M02. So what we did is we turned the head in the direction of the M02 and we said, we want to serve you at our best. And so we gave to them M02. Third, the flexibility. Since the interest of VMO2 can be aligned or slightly different from the interest of Vodafone, the interest of Vodafone is massively related to the integration of two networks. The interest of VMO2 was we want to have a very good network, very capillary. And we don't want to have a competitive disadvantage vis-à-vis the result of VODA and 3UK. So in the second contract that we agreed with the MO2, the characteristics are, again, anchor-like, but with some element of flexibility that fits better with the industrial characteristics of BMO2 that are not necessarily absolutely the same as the characteristics of. So net-net, what happens if the merger occurs? That we have a very good relation with the merger and with BMO2. Of course, BT is unchanged in the relation with us. What happens if the merge doesn't happen? Nothing. We continue and we have transformed the CTIL contract in an anchor-like contract and possibly Vodafone, the element of flexibility that were designed for Vodafone will remain unused. I don't know, Andre, if I answered, but it was a bit complex, so I assume I did.

So the next question comes from Luigi Minerva from HSBC. Please, Luigi, go ahead.

Yes, good morning, everybody. Thanks for the presentation and thanks for taking my questions. The first one, Marco, I just wanted to pick on one of your comments earlier on to replying to one of Akhil's questions. So you basically mentioned that you are working on Cheryl the Regeneration. and rethinking a bit the framework on the basis that, you know, increasing the dividend from 2026 onwards is not satisfying compared to your global peers. And I was wondering what are your tools there to adapt the framework? I presume, I mean, from everything you've said, that... thinking about a more flexible approach to leverage ratio is not feasible, given the commitments to the rating agencies. So I just wanted, yeah, if you can elaborate a bit on how you are thinking about the framework there and how it may change. Then second is related and in your remarks you stated that at these levels the share by back is preferable and I agree. I mean the equity IRR is very supportive at these levels. At the same time I suppose The share buyback maybe seems more as a one-off, whereas boosting the regular dividend provides more of a recurrent signal to your shareholders. So I'm intrigued to hear how you and the board think about this. And thirdly, just thanks for the update on the Landco and the progress there. At the Capital Markets Day, one of the messages was that you would be open to minority shareholders in the Landco. And I haven't heard anything more on that since. So I just wanted to see if that is still the plan and the rationale behind it. Thank you.

Yes. So on the Chevrolet remuneration, if you rewind for a second the memory to the presentation we made at the CMD, what we said is that from 2026 to 2030, we were generating north of 10 billion euro of available cash. And this was not considering, by the way, the proceeds coming from the disposals. So, Luigi, the topic is not... I'm sorry, the second part of what we said is we commit to a minimum dividend and then we will be opportunistic in allocating the remaining available cash to shareholders in the way that maximize the value. I have not the crystal ball. So where is going to be the share price in 2026? Well, hopefully significantly higher than today. And so are the share buyback, will the share buyback continue to remain as attractive as today? We basically don't know. So we took this. I think that this has been a little bit misinterpreted, saying that, okay, we want to pay the dividend period, which is not the case. So now I try to give you an answer to your first and second question together. If I look to my shoulder remuneration, I think that it's more interesting when the story starts, than how the story goes on. Because if you look 2026 onwards, you say you have not so much flexibility in the leverage ratio. Well, pay attention, because between 5.0 and 6.0, there is one turn of a PDA, which is basically 3 billion. So there is quite some flexibility. And I personally disagree that on the possible concept that having a backlog of more than 100 billion, we should go below five. Today, there is no reason for having a capital structure that becomes illogical because it becomes too expensive because there is too much capital. Then if the interest rates go in unexplored territory, okay, we will see it and we will discuss everything. But this is not the base case. So the base case is that we are thinking, so our attention is, okay, starting paying 2026 is something that does not make us happy. That's it. So we wanted to accelerate and in order to accelerate, we have to do, we will do what is needed to accelerate and what is needed to avoid that the harder target of getting investment grade is jeopardized by something that is a lack of attention. So I think that it has to be clear. The shareholder remuneration, a generous shareholder remuneration for 2026 onwards was never under discussion. So what we are discussing is how can I accelerate? Regular dividends, yes, it's more than an option because... When you become a regular ETH company, you attract investors to whom dividends are important. And so we consider that having a robust dividend is something important and will be something important in the future. Because what we assume is that in the future, our shareholder base will include a significant number of investors to whom the dividend is important. In the trajectory between here and there, there is a window of opportunity, which is a no-brainer. So today, the window of opportunity is more driven by value creation in making share buybacks. In two years from now, tell me the truth, I don't know. LENCO. We made some math on the back of the envelope, and what we see is that the return on invested capital in the LENCO is very nice. And I would say very, very nice. And so we asked ourselves, Is it the best place where we can find extra liquidity? For the time being, the answer is no. It's not the best place. We can finance a program today with all what we need. uh using our resources and without impacting on uh on other projects or impacting on the total amount we are budgeting and putting in our plans so uh for the time being uh uh welcoming uh minorities here is uh uh is on hold we're not working on this, simply because GOIC on this is very good.

Thank you. Next question comes from Otavio Adorizio from Bernstein. Please, Otavio, go ahead.

Hi, good morning. I have a couple of questions on my side. First, I would like to ask for a clarification on the CTIL You provide a lot of details, and I'm thankful for that. And it looks at the renewal. You will improve the quality of the revenues because they will be backed by an anchor contract and will be long-term. But I can't really grasp what's happened to revenues. So now that you basically swapped the previous contract to the new one, or now that's conditioned to if... The deal goes ahead. But let's say that the deal goes ahead. Do we have to expect revenue to go up?

Sorry to interrupt you. We didn't catch you correctly. So before you go on, you said what happens to? Remedies or revenues, you said? Revenues, revenues. Okay, sorry.

Okay. I know within your, let's say, your decision-making, but the new contract basically will give you more security because you've got a long-term contract and will be anchor-like. So that's positive. What we're trying to grasp is what happens to the revenues from the contract if the deal goes ahead. So we should expect revenues to increase remain stable or decrease from the current situation? So this is a clarification. Then another couple of questions. Again, it's basically follow up for previous one. On the land call or sell land, you basically said that the returns are really appealing, but the returns are actually decided by you, considering that you are the anchor tenant. So is the land core returns, are you planning to save on rent going forward and therefore to decrease return on the land core, or you want to basically retain good returns on the land core and potentially use these returns to attract investors? And there is a huge tendency in the industry, particularly among your clients, to effectively gear these sort of entities, put a balance sheet. there is any plans at some stage then not just selling minorities, but actually selling joint control on the land core to private equity infrastructure funds. And the third one, again, is another follow-up. You clearly said that price tag for disposal really depends on the nature of the buyer. In Ireland, you had industrial buyers, and therefore that comes with a higher price tag. Now, in Austria... it looks that there are more financial buyers. So the question is, the one left, are there all financial buyers or there are any industrial buyers left on the race at the moment? Thank you.

On CTIEL, the base case in case of an integration is revenue to stay stable as a result of the integration per se. which is not a bad result as a kickoff. Then, of course, I think, but this is my personal view, that if the market ends with one network which has sort of 26,000 sites and a second network with a very powerful operator like everything everywhere with sort of 5,000, 6,000, 7,000 sites less. I think that this second operator will need to catch up and possibly we can be one of the players that can support them for catching up. So let me say that the objective of the CTI agreement, also codename was FIROS, was literally to, as you said, we improve the quality, we improve the duration, and we defend the status quo. and then of course uh we will we will uh free to hunt for further growth that i think personally that a uh an integration between uh uh between uh uh three uk and boda will push in the direction of a better network quality for the country your second question uh lanko uh well You know, there are several objectives in strengthening the position of a tower player in the land. And all of them go in the direction of not selling the control. So, industrial, number one. We have to protect the most strategic sites we have from aggressive third parties that can attack, creating problem to our clients. I think that in our conversation, we don't talk enough about the clients. So the interest of my client is that the most available site has to be protected. Point number one. Point number two. What we saw is that the CPI indexation on a big portfolio ends with a material impact on the P&L and on the free cash flow. Once again, having it among your assets protects also from bad surprises and allows you to have a decoupling between the CPI indexation of the revenues and the non-CPI indexation of part, let me say significant part, of the cost structure of managing a tower. So, yes, it's true that the risk, that basically we make a vast majority, a vast part of the value of the land call, we are not excluding the possibility of buying some land in a friendly relation for other tower operators in order to reduce the level of systemic aggressiveness of the land aggregators, especially in some markets where the attitude is honestly borderline, let me put it this way. So I'm still very positive, both on the industrial sense, on the financial returns, and Yes, somehow you are right when you say, why don't you explore better the value and then you make your decision later on. Once you have explored more value, you have created more value, why don't you optimize also this capital structure in the future? I can't exclude the future because what you're saying is absolutely correct. What I tend to exclude today is the possibility of losing the control, point number one. And what I'm telling you in this moment, we are not in having a partner in the short term. Austria. we have a bit of everything uh but uh but uh sorry i i i really don't want to elaborate more because we are uh in this moment there is part of the team uh in in another room which is uh which is discussing so uh allow me not to elaborate more thank you thank you thank you

Next question comes from Roshan Ranjit from Deutsche Bank. Please, Roshan, go ahead.

Great. Good morning, everyone. Thanks for the questions. I've got three, please. Firstly, on Italy, and if I look at the co-location trends, we saw a big boost last quarter that has kind of normalized now. But going back to your comments in the slides, Marco, you say that any potential consolidation process in Italy will not negatively affect Italy. your performance, you know, where do you see kind of continued upside and progression in Italy given the change in dynamics in the market there? Secondly, in France, you've got three big anchor contracts. I think it's been well-flagged. One of the operators in France is going through some structural pressures. Are you seeing any impact on your build suit, on your contracts there? Are things going a bit slower maybe with that customer? Yeah. And lastly, just a quick clarification on the remedies. Now this quarter you didn't have any remedies. Is the expectation for full year 24 still around? I think 300 million for the BTS remedies. Thank you.

Thank you. So Italy, the integration already announced The integration, to be clear, between FastWeb and Voda has a relatively limited impact upon us. So point number one, the biggest spike you saw in Q1 was the activation of run-sharing POPs on the Win3 network from FastWeb. So this contract has a natural duration and so I don't think that among the priorities of Swisscom there is an immediate repatriation of these, even though a medium term is logical to imagine that all the sites, all the POPs have to be on the board of a network. So that's the basic of the logic. Being run sharing, you can imagine that the unitary price of a run sharing is significantly lower than the unitary price of a co-location. If you take the most important change that happened in Italy recently, it has been the new electromagnetic emission law. So what it states? It states two things. One is you increase in urban areas the limit from 6 voltmeter to 15 voltmeter. Forget about what does it mean a voltmeter, it's from 6 to 15. But the law said something that is brilliant because they said we don't want to increase this on the benefit of just one. So they said the maximum that every operator can use of this 15 is related to the quantity of spectrum that the operator has. So Tim and Vodafone, for example, can use maximum 7 out of 15. Now, you have to imagine the electromagnetic user not linear, but imagine that they are bubbles. You're summing two bubbles. So 7 plus 7 does not make 14. 7 plus 7 makes significantly less than 14 because you're not Piling up. It's not an histogram. You are you are composing two bubbles, okay? Now what does it mean? It means that if yesterday my towers were fully the Electromagnetic capacity of my towers in Italy was fully used by wind and Iliad now I have extra electromagnetic space that I can make available and for other clients. So who is the most likely other client that can use this electromagnetic space? Well, if you go in Switzerland, you can easily experiment that one of the best networks in the planet is Swisscom. So they have a beautiful network. And I would be very surprised if they don't want to transfer this attitude of having a beautiful network also on what has naturally been a very good network. Believe me, when I was in Tima, the border network was a pain in the neck. And then, you know, time passes, and today I think there is some quality improvement. And this quality improvement can be easily done using parts of the electromagnetic space we have on our tower. We have more than 20,000 towers in Italy. So even if they wanted to cherry pick really the most mature cherries, our implantation is fairly big. Second, France, SFR. For the time being, SFR is not representing a big headache. We are having the usual discussion we're having with operators, which normally are that we make a planning, which is crucial for us to better use our field resources and our CapEx. And then, you know, plants are made for being not respected. But not major slowdown. So if I see today, possibly there is another operator faster than them, but not dramatic. And on the creative side, no problems in France and no problems in Portugal. Remedies, no changes. Remedies, we are on track. The next deadline is August and we are on track.

And perhaps we have time for one. Thank you, Roshan. And time for one last question from Fernanda Primatorell from Alantra. Please, Fernando, go ahead.

Hi, good morning. Thank you for taking my question. So I have a couple of questions. First is on the pending CAPEX. So you have around 3.5 billion of pending bill-to-shoot CAPEX. I was wondering if you could give us an idea of what is the pending EBITDA to be captured from this CAPEX, just to get an idea of the Gilton cost from the investments. And then secondly, and following recent developments in the Netherlands, sorry to come back on M&A, I was wondering if those developments have changed your view on this asset or does it remain as core as it was before? Thank you.

So, it's quite some time that we are trying to think how to help you in being, let me say, properly appreciate the quality of our BTS program. And so you went straight to the heart of the issue. So I answer you this way. Take the BTS program as a whole. Don't split the portfolio in the tiny component of the portfolio. Let's take... In Italy, we say take the average of the chicken. Okay, so let's take the average. The BTS program is the same as buying sites, slightly below 16 times, one sixth. So it's a very decent, accretive program. Okay, I hope that this helps you in finding a metric. On Netherlands, sorry, allow me not to answer. We are continuously revising our portfolio and what we consider core and what we don't consider core. In life, the general principle is that we never say never. So we are not dogmatic. So we continuously revise the quality of our portfolio and we evaluate what is better, what is the best capital allocation in the interest of my shareholder. But we have been fairly quick. There is the last one.

Yes, correct. Last question comes from Rohit Modi from Citi. Rohit, if you are still connected, there is time for your question. Please go ahead.

Thank you for taking my question. Most of them have been answered. Just a couple questions. Firstly, on the organic growth in some of the markets, which has been not as much as you have seen in particular in the markets like Poland or Portugal. Is there an optionality around those markets as well that you could consider in medium term? I understand you're already going through two processes, but it's something that you can consider in medium term. Secondly, you had the small transaction with the exam where you converted your BTS to CTS. Is there a capex impact? I believe it could be very small, but is there some kind of transaction, you know, transactions, deals you can have in future where you can reduce their exposure to BTSK packs. And thirdly, you spoke about the base case scenario around UK, where there won't be any impact. What is the worst case scenario in terms of what kind of impact do you see if things go wrong in UK?

So I start from the last base case scenario. What is the worst case scenario? Well, the worst case is not very far from the base case, because, as I told you, the three UK anchor contract is an anchor contract with a respiration rate, which is clearly defined in the contract. So what was... quote-unquote, a bit more at risk in a possible optimization of two networks was a non-anchor contract. So if there is a risk, is the risk coming from a possible request of acceleration of the respiration rate, but it's not material. Let me say that... The worst case is not materially different from the base case. BTS to CTS. Yes, it's small, but this morning I was talking with our chief strategy officer saying, okay, what is the value of only 150 BTS transformed in CTS? Well, you don't build an unnecessary tower. which in any case is some tens of thousands of euros. You don't pay another rental fee, or you pay a portion of the rental fee, which is some thousand euros per year. And you have a very cheap maintenance, because the maintenance is the same as... we easily and prudently, believe me, that we took a very prudent approach and with only 150 CTS, we made a sort of 20 million value in terms of what is the value we generate. And trust me that we've been using... uh and not very scientific method so every time we had a doubt we were taking a low number so there is a lot of value in this and uh and the good is that uh finally our clients understand that this is not going to slow down their rollout because the the real enemy of of the cts is uh uh the the the cto being scared of having a delay in their 5G rollout, which we demonstrated that it's not the case. I didn't last to your first question for a simple reason, because I don't catch it good, so if you can tell it again.

Yes, can you please repeat your first question? It was about organic growth, but if you can please rephrase it, please.

Sorry about that. The first question is, some of the markets where you are not getting the similar kind of organic growth which you are getting for Portugal or for Poland, is there optionality you can see going forward on those assets as well, similar to what you did for Austria?

Well, I guess that there are specific reasons why we are showing this very strong performance in these markets. Now you know that we are helping the new entrant in Portugal to deploy their own network. I guess that is the same reason that explains the very strong performance organically that we saw initially. In Poland, essentially what we are finding is important specification efforts from all our clients. Other markets, I would say that you cannot find those characteristics.

To give you an idea, Poland, the network with the largest number of sites have a sort of 15,000 POPs. And Poland, in terms of square kilometers, is almost as big as Italy, where the smallest one has almost a double. So Poland is going to have more densification going forward. The problem is that the densification has to come hand in hand with an ARP improvement because the ARP in Poland is still too low. And so the return on the invested capital for the MNOs is not as good as they could have the ambition. And so possibly the solution there is more network sharing. or to build networks that are natively shared. Thank you. So, ladies and gentlemen, thank you for your time. Hope you have a great month of August. We have not finished yet, so be sympathetic with us because we stay in the office some more time.

Thank you. Thanks, everyone. Thank you so much.