Calnex Solutions plc

Good afternoon, everyone. My name is Juan Gaitán, Director of Investor Relations at Celnex, and thank you for joining us today for our KeyOne 2025 Results Conference call. Today, I'm joined by our CEO, Marco Patuano, and our CFO, Ramon Trujas, who will go through the key highlights of the period, and then we will open the line for your questions. If you wish to ask a question, please press star five on your screen to raise your hand. So without further ado, over to you, Marco.

Thank you, good morning, good afternoon everyone and thank you so much for your time. I start with a key highlight of the first quarter 2025 which has been marked by consistent execution reflecting our commitment with our objective. Let me remind that our reported numbers are impacted by a change of perimeter And there is no contribution for Austria this year and Ireland has only contributed two months in 2025. On a like-for-like basis, the quarter has been characterized by a solid performance across key metrics. We have achieved the remarkable growth with revenues reaching 964 million and representing an organic growth of 6.3% in our EBITDA after lease, reaching 566 million, implying an organic growth of 8.7%. Once again, we delivered on efficiencies on which Raymond will give you more details. In Spain, we are implementing a voluntary redundancy plan encompassing around 200 people, which is another example of our efforts to continuously optimize our operations focusing exclusively on our core activities and improving our performance. A notable achievement has been the successful completion of the sale of our operation in Ireland. this strategic move allow us to further streamline our portfolio focusing on core markets where we can drive the most of the value and generate financial flexibility from a capital structure standpoint we have secured a new syndicated loan for 625 million for refinancing purposes at a very competitive terms even in the current environment another highlight comes from the execution of our equity swap and the progress on our share buyback programme, which started upon the completion of the Irish deal. As of the 2nd of May, we have almost completed the programme. We have acquired shares for approximately €755 million. This transaction reinforced our commitment to returning value to our shareholders and, as we shared in previous occasions, €800 million constitutes our new floor for a shareholder remoderation perspective from 2026 onwards. Additional disposal may generate additional financial flexibility. In summary, we believe our journey today has been marked by the definition of a clear roadmap, a solid commercial operational financial performance and a consistent and disciplined execution. Looking ahead, we are reiterating our guidance and we will continue showing an undeterred commitment with our promises. So let's move to slide five. Here we just want to illustrate our share price performance compared to the recent evolution of our key financial metrics. In the 2022-2025 period, using for this purpose the market consensus, We increased our EBITDA after lease by 36%, our recurring level free cash flow per share by 46%, we reduced our leverage by 1.3 times of the EBITDA, and we started a meaningful cash shareholder return of 800 million. In the same period until today, our share price appreciated only 10%, showing a very high correlation in macro factors, regardless of our solid business fundamentals. We are leading Tauaco with strong and secured growth backed by the largest backlog in the industry and with the longest contracts with the clients. Slide six. The current macroeconomic and geopolitical situation is clearly impacting the performance of the financial markets, but I believe that the European digital infrastructure sector has a unique opportunity to demonstrate against its resilience in complex scenarios. Compared to other industries, digital infra is a defensive asset with the proven ability to withstand economic challenges. We have analyzed different potential consequences that, in our view, could impact the sector in the event of a tariff increase, and we believe that we are impact-free. Let's move to customer behavior. Celnex's strength sits on its long-term B2B contracts with its clients with a complete European focus, ensuring a stable and predictable revenue stream. Inflationary concerns. Celnex's revenue model is robust and visible, with the vast majority of our revenues adjusted to inflation or fixed escalators. Supply chain impacts. Sunnex strategic sourcing ensure that our operations and our investment will remain unaffected. Recessionary fears. The telecom sector is seen as a defensive industry due to its reduced exposure to variable revenue streams. Sunnex in particular has outperformed the broader market during crisis period such as the COVID-19 pandemic. Additionally, After assessing the long-term expected evolution of the FX, the interest rate dynamics, and the point of our balance sheet, we expect no impact. Moving to slide seven, we want to provide a quick update of our share buyback program announced earlier this year, and which total today is almost completed. As of the 2nd of May, We have already executed 93% of the program at an average acquisition price of around 33 euro per shares, and we're expecting to complete the program in the coming days. As I already shared, we believe our stock is undervalued, so this moved us to consider a share buyback as the most dedicated way to remunerate shareholders. And finally, I would like to reiterate our financial outlook for 2025 and 2027 with projected growth across all key metrics thanks to the attractiveness of our business model and the visibility it provides. We demonstrated our ability to adapt to changing reality. We've shown the capacity to consistently execute our strategy and we're creating a solid track record delivering operational and financial results, quarter after quarter. I hand over now to our CFO, Raimon, who will provide additional details on the period.

Thank you, Marco. Good afternoon, everyone. Please allow me to provide during this section a bit more granularity on our financial and operational metrics for the period. Let me start reminding you again on slide 10 that our numbers this quarter are impacted by the change of perimeter. as there is no contribution from Austria this year and Ireland has only contributed for two months. This table gives you a cleaner comparison as we are removing this effect from our numbers. On the left, you can see our actual reported numbers. Then, if we exclude the revenues and the results from Austria and Ireland, we got the pro forma results. Finally, on the right-hand side, you can see that the organic 2025 pro forma with very strong growth at revenues and at EBITDA level, with more than 6% and close to 9% respectively. Moving to our financial performance on slide 11, our revenues have increased 6.3% and our adjusted EBITDA has grown 7.7% compared to the same period last year. Both growth rates are on an organic performance basis. Our EBITDA has increased 8.7% on the same basis, further highlighting our operating leverage and our ability to optimize our operations, enhancing profitability. In terms of cash flow generation, our recurrent level of free cash flow amounted to 351 million and its growth will accelerate throughout the year thanks to the normalization of cash items below EBITDA as I will explain later in a bit more detail. Moving to our key operational metrics, we have added 1,216 new sites in the context of our B2S programs. Our gross collocation reached 1,109 And in the context of efficiencies, we have undertaken 887 land site actions backed by the creation of our land code, demonstrating our commitment to optimizing our assets and driving operational efficiency. As you will see later, we are improving our least cash output tower. If we move to slide 12, on the first quarter of 2025, there has been another quarter of consistent commercial performance with POPs growing 4.3% compared to the same period last year. This is explained by the progress made on our Build2Soup programs, which represents 2.5% of the growth coming primarily from France and Poland. In France, as you can see, this quarter we have had an acceleration of the Build2Soup program, allowing us to accelerate growth within the year. Net allocations are contributing 1.8% in the period. It would be 2.2 if we exclude the impact of the MAS Orange impact in Spain. In the first quarter 2025, net collocations have been lower as a result of the already announced contract with MAS Orange in Spain. As a reminder, this contract gives our client network flexibility in the short term in exchange for a single longer contract until 2048 and additional services to be provided by CELNEX. As per this agreement, no impact in revenues is expected until 2026, despite the turn that we see in terms of OPS during this year. If we move to the next slide, we provide you a clearer picture of our performance in the period we have excluded the impact from change of perimeter. We are providing here our organic revenues bridge on a pro forma basis, excluding Austria and Ireland from the first quarter 24, and from that base building our organic revenues for the first quarter of 2025, which have grown at a robust 6.3% with a well-balanced mixed growth linked to CPI, co-location and business. On slide 14, we have followed the same approach of adjusting the perimeter to look at the specific performance of our different business lines. The tower segment grows organically 5.8% on a performance basis. Fibre and connectivity grew 24%, mainly due to the project with Bouygues in France. DAS and ACTIV grew 5% and broadcasting services grew 3%. As you can see, we keep having a strong and well-diversified growth on all our business lines. If we continue to slide 15, as part of the strategy set out at our Capital Markets Day, in our continued focus on industrial excellence, we have the objective to become operationally more efficient, rationalizing assets, optimizing our cost base, and improving the group's overall productivity. Here, we're stripping out the contribution from Ireland and Austria to provide a cleaner analysis of the performance on our different components. On staff, it is worth highlighting our ongoing efforts to streamline operations and improve efficiency. This reduction in headcount is part of our broader strategy to optimize resource allocation, enhance productivity, and focus on core activities. The numbers today do not include the impact of the recently announced redundancy program in Spain, which will be implemented over the 2025-2027 period. This plan will also result in discontinuing certain operation and maintenance contracts with an associated negative EBITDA contribution. As you will see later in the P&L, we have booked this quarter a provision to execute the redundancy program, although the associated cash impact will be seen during the next three years. On repair and maintenance, following the positive performance last year, we continue to see good progress in the period, with costs flat on a per-tower basis, meaning that we are saving to compensate inflation, and the evolution of our general expenses translates into a 2.3% decrease on a per-tower basis. Finally, on leases, we have been able to reduce the cost 2.3% per tower. Our land acquisition plan is picking up speed, deploying capital at very attractive returns while securing strategic locations for the future. Additionally, our efforts in rent renegotiation and cash advances are well on track, further contributing to the optimization of our operations. the first quarter 25 we have invested 13 percent more in land acquisition and efficiency capex compared to the same period last year the results of the strong growth of our revenues and the continuous work on the cost reduction can be seen on the slide 16. our efficiency measures are helping to first absorb inflation second offset incremental costs associated with growing perimeter Third, improve our margins. Our EBITDA margin is 83% versus 82% last year. And finally, generate operating leverage. A 6.3% growth in revenues translates into almost 9% growth in EBITDA, as Marco mentioned before. If we take a look at our debt maturities on slide 17, You can see that there are limited maturities left in 2025, as we have repaid debt with the proceeds from disposals and refinanced other maturities via new bank financing, particularly a 625 million term loan at very competitive terms, as you can see. We keep working on extending the duration of our debt and flattening the maturities over time to have an even more robust and well-designed capital structure. our liquidity remains high at approximately 4.7 billion with our debt being approximately 80% fixed with short-term maturities that have been managed. So our average cost of debt will only marginally increase in the upcoming years. Last but not least, we have been able to execute an 800 million share buyback whilst maintaining our commitment with the rating agencies. Finally, on slide 18, you can see that we are reiterating again our 2025 outlook, whilst providing visibility on the expected phasing of our key financial metrics during the year. If we focus on the bottom of the slide, it is important to understand the phasing constitutionality of our cash items below VTAL. The first half of 2025 will be more intense in terms of lease and interest payments, due to the structure of our contracts and the coupon schedule, as it already happened in the first quarter of 25. Additionally, as you know, last year, we did a significant work to optimize our working capital. We ended 2024 ahead of our expectation in terms of improvements. So this impacts the working capital slightly on the first quarter, but we expect this cash item to turn positive during the second half of 2025. We have already identified measures to keep on improving our working capital. So despite timing defects in the period, we are in a position to reiterate our guidance. And with this, we now remain at your disposal to answer your questions.

Thank you so much, Marco, Raimon. Now the first question comes from Maurice Patrick from Barclays. Please go ahead.

Good afternoon, guys. Thank you for taking the question and the call today. If I could ask a question about Zegona and Vantage. Sorry to go on the subject, but investors do ask a lot about it. On the last call, when asked about it, Mark, I believe you said it was difficult to replicate the network due to the number of sites and possible gaps in the network. Now, Zegona is saying they think it's not only possible just to move the equipment, as in they can move it, but also many of the existing tower companies are happy to facilitate it. There's obviously lots of tower covers in Spain. Spain is a special case in point, and it is a rapidly evolving landscape. We're keen to understand your thoughts on that. And just a small clarification. In the slides, you talk about the churn. I think it was 733 from Orange, 373 from others. Can you just let us know where those 373s are from? That would be helpful. Thank you. Yeah, sure.

On the Zegona case, honestly, I have nothing really different from the past to what, so it's a bit more of the same. So Zegona is trying to force the possibility to move out from the contract. They still have time. The contract, as we understand, expires in 2028, so they still have time. and they're trying to find alternatives. I'm still a bit skeptical that the possibility of moving entirely the antennae that are under the all-or-nothing umbrella can find a new house. But let's see. I didn't honestly change my view. On the second part of your question, it's bits and pieces here and there, it's not a single country that makes the big number. If you take the previous quarters, The number between 350 and 450 is quite usual, quite normal.

I would say that this specific quarter, it's mostly Italy that we have seen some change. Also remind, remember Maurice, that we are branch sharing is now being classified as a physical POP. So also in the context of the different combinations that we have seen in Italy, we have seen this quarter in Q1. branch selling POPs. So I would say, yeah, that the main explanation comes from Italy, but also given that we are removing branch selling POPs, also the associated revenue is also quite modest.

Yes, but again, I made the same exercise as Judith made, I went backwards quarter after quarter in order to see what was a normal churn rate during the different quarters, and it stands normally between 350 and 450, so it's pretty normal.

That makes sense. Okay, so it's quite normal to see churn, we just don't normally see it. It's only because it's large this quarter you're calling it out. That's helpful. Thank you.

You're welcome. Next question comes from Andrew Lee from Goldman Sachs. Please go ahead.

Good afternoon, everyone. I had a couple of questions. The first one is just there's press speculation today on suggesting that you're into the end game in your Swiss asset sale process. Don't expect you to be able to speak to specifically about that, but just wondered what that process has informed you of on the attractiveness of selling infrared assets at the moment to private investors? Haven't heard mention of your French data centers or the Dutch business recently, but kind of any kind of broader thoughts you could give us on the merits of selling assets at the moment, be it for valuation premium or simplifying your role. And then second question, just irrespective of the Swiss sale, should we expect that the next shareholder returns update you give us will be at the end of the year in terms of buybacks and dividends and not before that, just thinking about kind of how we should think about your share returns profile. Thank you.

Sure. Let's take the disposal or the asset rotation more broadly. In our case, we have the French data center in which we entered into a bilateral conversation. which normally tends to be fairly straightforward. So on the French data center, I would be surprised if it derails, but you know, you never know because ultimately what we made clear or very clear is that we are not forced seller. and not being forced seller put us in a better position than before. I won't say that before we were forced seller but the target of delivering the leveraging and the target of accelerating the shoulder return was quite stringent. And today, if we get the price we want, we do it. If we don't get the price we want, we don't do it. On the Swiss, so the speculations are saying that we should receive in those days some information about what is our market testing. Which is correct. Between now and the next week we should receive what are the non-binding offers for an asset like Switzerland and more or less the same as I said before. If the price is interesting, we will go to phase two. Otherwise, we will drop it. I can't tell you at the moment give you more color on this for the simple reason that I don't have more color on this. So as soon as I have, we can comment on this.

I think on your second question regarding the TSR, as you know, we committed to 800 million this year that we have already done through Share by Pack. We said that next year is going to be also 800 million. That's going to be the floor. And that if there is any other asset rotation this year, we might consider extending the shareholder remuneration. But it's difficult to give you any kind of timeline on any change on that from what we have already committed, because first we need to see if there is any further asset rotation.

Thank you. That's really helpful. Can I just have one quick follow-up just on your answer to Maurice's question? Are you able to give us the exact amount of Mass Orange disconnections that you had in the first quarter and what you'd expect in the second quarter? I'm not sure we're able to calculate that.

I think, Andrew, on the slide 12, you have the turn of Mass Orange in the first quarter has been 733.

That's all. That's all pure disconnections from that contract as a result of the contract.

Correct. Those are disconnections expected, but also with no associated loss in revenues in 2025.

To make clear, the way we discussed with Mass Orange is to decouple the industrial or, if you want, technical flexibility we're giving to them to the financial impact of this technical flexibility. So if they want to start tomorrow morning to redesign the network, to move assets, to move antenna, please do it. And we designed a cash profile of their commitment. that gives some flexibility this year and the next year, but it's not a sort of a peeper coup. It's not a one-to-one, you move an antenna, you get a discount for the antenna you move. Thank you very much. This was very much appreciated by the technical team of Maso Orange because they can start immediately doing things. That's great. Thank you.

You're welcome. Thank you, Andrew. Next question comes from Roshan Ranjit from Deutsche Bank. Please go ahead.

Great afternoon, everyone. Thanks for the questions. I've got two, please. Thank you for providing the slide 18 on the phasing. It's possible to get a sense of the absolute kind of working cap number for the full year. I think previously you said it's more positive, neutral, and also you're thinking around the interest component bearing in mind the buyback, the 800 million buyback will be completed. And certainly maybe just going back to some of the previous questions, No, 93% down off the buyback where it should be completed by the end of this month, as you said. What was rationale for executing it so kind of quickly, obviously maximizing the lower share price? Is it with a view to have that flexibility towards the end of the year if you wanted to do something different or something extra, sorry? Thank you.

Okay, Raymond will take the first and take the second. This is Raymond.

So on the working capital, as we explained last year, we put a lot of focus on the working capital, at the receivables, at the suppliers as well, trying to first reduce overdues, try to improve payment terms from customers, but at the same time try to improve payment terms with suppliers. We did a great exercise I would say from June till December and specifically in the last quarter when we improved a lot and at the end that even had an impact compared to this first quarter. Why? Because we even managed to achieve some collections in the last quarter that we were expecting probably to have in the first quarter. so this quarter we have had this negative 20 million but we have identified already a lot of measures to be implemented still within receivables and within the supplier side we still have our views to improve and we are putting we're still putting a lot of focus there to keep on reducing and what we are planning is that we're going to finish in line with the guidance that is positive in terms of working capital for this year

Good. So your question about the accelerated path of the buyback, you know, that the share price, the sense of the chart I made showing our medium term improvements in the dynamic of of our share price give you the sense why I consider that it was a good idea to try to accelerate as much as we could our share buyback in the first part of the year. It's still quite unpredictable what is going to happen with the U.S. rate, so possible a decrease in the rate, more difficult to predict the calendarization of this reduction. And I honestly, the only explanation I can give for the delta between our improvement in the industrial metrics and the improvement in the share prices because of the macro factors that are representing a headwind on our share price. So this is why we decided to accelerate and to try to make it as soon as we can. And by the way, this is the reason why we also performed an equity swap that gave us another 550 million of shares that we can buy at the price that we already fixed and predetermined in Q1 this year, between Q1 and, no, it was Q1, in Q1 this year, which would be, again, very critical. Now, going forward, if in case we have further flexibility for making something more, we will immediately look to the share price. If the share price is still convenient, we will go for that.

There was a pending question on interest for 2025. So the figure that we are contemplating is around 400 million. That includes the incremental impact from the incremental debt associated with the survival program. So despite the heavy concentration of interest payment in Q1, we are not changing our view for 2025.

That's great.

Thank you very much, guys. Thank you. Thank you so much. Next question comes from Emmet Kelly from Morgan Stanley. Please go ahead.

Yes, good afternoon, Marco, Ramon, and Juanjo. Thanks very much for taking my question. My question comes back again to slide 18. So that's a super-duper helpful slide for looking at the phasing of leases, tax. My question is actually really though on the phasing of EBITDA growth, please. I think I'd probably need a little bit better eyesight to figure out what's going on EBITDA Q1 to Q4 in your slide. But if I just look at the numbers, EBITDA fell about 65 million euros quarter on quarter between Q4 and Q1. And just looking like the last couple of years, EBITDA has increased sequentially between Q4 and Q1. Now, I know there's been a few kind of exceptional items in there for Q4. I know there was the loss of the Austrian and Irish EBITDA, which you mentioned, Marco. Can you just say a little bit about what's going on underneath the hood? I think there's something going on in terms of the engineering works that you guys are providing for TOCOs and maybe some other elements as well. So how should we look at that EBITDA number evolving, let's say Q2 to Q4 this year? Thank you.

Yes, I start giving you the first part and then Raymond will complement with further details. Yes, you touched two big offenses. One, of course, is the discontinuation of the operations in our land in Austria, which it is fairly material. And so the majority of the number comes from there.

You have three months not having Austria and one month of Ireland that we don't have. That's part of the difference.

Yeah. So it's quite material. And so this is why Raymond made also the apple on apple. I don't remember exactly the number of the chart in which you restated all the numbers, which is chart number 10. which I think it's fairly helpful because at least it gives you the sense of what is this component. Then you were mentioning the engineering services, which is another part of this activity. Engineering services move together with, how can I tell you, the activism of our clients, which tended to have seasonalities. It's 30 years that I'm in this industry and it's 30 years that I'm trying to understand why engineers tend to move their feet more in Q4 than in Q1. But it is exactly what happens every year that Goal gives us. The point is that in Q4 24 our client had a sort of a hyper activism in this And in Q1, possibly they took a nap. And so there is a bit of difference coming from there. Nothing that puts at risk the total number for the year. But the calendarization, yes, it's true that the calendarization this year, or if you want the seasonality this year, has been a little bit higher than what has been the previous year. Raimond, if you want to complement.

Just to complement on the engineering services, you will see that the main difference comes from France. That is the place where we had most growth in the last quarter and then less growth this quarter. and then you were mentioning also the one off and it's like that also in the fourth quarter if you remember we had this fine in Spain that we released the provision for 18 million because we won the case and that impacted one of the lines of cost as well and that was explained during the the end of the year super that's very helpful thank you both thank you thank you thank you

Next question comes from Rohit Modi from Citi. Please go ahead.

Hi, I hope I'm audible. Thanks for the opportunity. Just a couple from my side. Firstly, I'm not sure if I'm reading too much into it, but Marco, your recent comment around growth in UK, Netherlands, Spain, you know, once this overall completes and also a statement from the chairman around, you know, you're looking at five billion capex growth. investment opportunity over the next three years. But if I look at CAPEX guidance in terms of implied CAPEX guidance, that's around $4 billion. Just trying to understand if there's more investment that you're looking into any of the markets in the next few years, any color on that. Second, on the land aggregator regulation that you have been mentioning a couple of times in the past, how do you see, what kind of risk do you see around the land aggregator issue that you're facing? Lastly, equity swaps. Just want you to understand if you want to continue the equity swap, pull this bar back or you will probably terminate any viewer on that. Thank you.

Very good. So on the future growth capex, I think that the vast majority of the growth capex will stay linked to the towers. We have to end the fiber project. The fiber project in France is, I try to remember by heart, should be sort of the remaining capex. I'm asking to my colleagues the sort of 200 million I have in mind by heart. So if I'm wrong, we will pass you the number, but I don't think I'm materially wrong. Raymond is telling me that I'm right, so I'm good as a former CFO. When I look to markets where I see possibility for having a network creation, I continue to think about France will continue to have network creation. UK will continue to have network creation. Poland is going to be for us an important market for making both a network creation and a network rationalization program. This is going to be quite important. And then the land, you have to imagine something between 250 and 300 million a year. So this is another number that is easy to come to my mind. um lander brings me to answer to your question on the land aggregator so thank you for making the question because i want to make it very clear um point number one i have nothing against land aggregator if they do the land aggregator uh so the land aggregator who have uh cheap funding go and buy land and then turns to us and they become the new landlord instead of being the farmer is a land aggregator, I have nothing against. And I tell you that eventually it's a more professional counterparty. It's someone that you optimize the administrative component. So many things, sorry, there is some noise around us. I hope it does not disturb the communication. What I'm strongly against is the land aggregator who try to have unfair return on their investment, which means they get the right on the land, then they turn to us and they try to have an indecent profit with us. This is something that I consider simply not in the interest of my clients, not in the interest of the community, because we end up reducing the coverage and it's going to be something bad for the entire system. We're going to fight this attitude as much as we can and we will fight it hard. We're not going to let them put us in a corner. We will fight and we will fight hard. I hope that has been clear and polite. Equity swap. As of today, we don't see the possibility of having more equity swap. Today, we have 550 million. uh in uh that we bought into different tranches the price uh we we made for the uh for the 550 million is around 32 euros so which is very nice and uh and uh and the financial component of the equity swap is very well priced uh so it it remains a very attractive price even if we wait a little bit to exercise it so uh this is uh we don't expect in the in the near future to have more equity swap the maturity of the existing equity swap is june 26 and we could accelerate if we wanted but if not we'll have until june 26. thank you

Thank you, Roy. Next question comes from David Wright from Bank of America. Please go ahead.

Thank you, guys. Just a slightly different question. Some of the TowerCo is talking more about owning the RAN as part of the Tower contract and providing synergies upstream to the operators, potentially sharing the RAN. a lot more I know there is already some run sharing in place but I just wondered how you thought about extending the sort of traditional tower model upstream a little let's say into the more active equipment I think we're all broadly agreed that sharing telco networks is only ever a good thing really and provide synergies to potentially everyone I just wondered how you thought about that evolution of the business model within your business plan appreciate its a little more hypothetical right now. Thank you.

Well, as you know, we already have this model in place in Poland, so possibly I'm the only one in Europe who can talk about the topic, having a direct knowledge of the stuff. You get synergies if you have a network that serves more than one MNO. If you have one network which is serving one MNO, you can make it more efficient. You can rationalize. We are pretty good. And by the way, we have less constraint in being more efficient than some of our clients. But the real efficiency, you get the real efficiency if you have two networks, you combine the two networks and you make a single network. This is the way you make real efficiency because you make efficiencies every time there is a change of generation because instead of making two carpets, you make one carpet and you have synergies on OPEX maintenance, transmissions, everything, energy, you make synergies. So I personally see more headwind and tailwind going forward in having these run codes for the mobile. For the mobile, it's a little bit more complicated than for the fixed because you have to involve the use of the spectrum, the allocation of the spectrum, the ownership of the spectrum. So it's a bit more complicated than in other cases. To say the truth, we are learning in Poland. It's hard for me to believe that in the short term we can replicate this in other countries. The investment profile is honestly different from the investment profile of the TowerCo. The investment profile of the TowerCo is something that you put the money upfront and then you marginally upgrade or you marginally change it during the life of the investment. But the big investment is day one and then you go for 20 years. When you are in Iran, you have an investment cycle every five, six, seven years because a new generation. So now we have the 5G and 6G is already beyond the corner. Then we can argue if 6G would arrive soon or late. But in the Far East, they are really already starting, really talking about 6G. So, in our case, it's something that it's not easy to imagine Sunnex having invested in RAN, or as we say, RAN as a service. Having said that, where we are, we are not unhappy and we are learning a lot. I mean, it's a good business for us. Possibly, I see brand codes being created and being not necessarily integrated with tower codes.

Okay, thanks for your answer, Marco. Nice to speak to you.

Thank you. Thank you, David. Next question comes from Andrej Kabisek from UBS. Please, go ahead.

Everyone, thank you for the presentation and for allowing me to ask questions. I've got two questions. One is a bit higher level, just on your built-to-suit contracts and how well protected they are legally in terms of future growth. Because obviously when you have a potential merger in one of your markets, if there's a party merging that's got an outstanding built-to-suit contract with you, then the future growth from the sites that you have not yet built how well is that legally protected in the sense that this was reflected in the multiples that underwrote the deal in the first place. So, you know, we always talk about the current perimeter of revenues being, you know, very well legally protected, but how is this the case for revenues that are not yet kind of in the ground in terms of powers not yet built, if you could elaborate on that, please. And then the second question is more of a follow-up just on the uh mass or injured muscle bill situation in spain where obviously you you've seen sites decommissioned as you as you report uh you say you know no impact thus far on revenues but uh i guess we're correct in assuming that over the next five years there will be a dip somehow before you recoup revenues for the new services that you highlighted in the first release maybe three four or five years down the road is that still kind of the expectation thank you very much

okay so uh sorry i i hope i understood perfectly correctly because it was a little bit disturbed at the line um so uh the bts in case uh if the bts agreement uh stays in place in case of a merger of two of two clients uh it's not necessarily true but this is an easy an easy discussion to have uh uh with uh with the merging entity uh because if they if they really continue to need it we are happy to go to maintain our capex allocation if they don't want it they have just to tell us and we don't put the capex and possibly we renounce to a little bit of of uh of capex uh with uh with this client but we can reallocate to the capex on growth without a client uh today the problem is not that clients are not asking us to make more towers. The problem is that we are disciplined. We have a maximum framework of CapEx that we want to put on the field every year. And so sometimes we say no. So if I cancel someone on the right hand, possibly I can put the money on the left hand. uh it the limit it would be an easy conversation with uh with the merging entity because uh it's it's useless to force someone to have something that they are not interested in anyway so that's uh that's uh it's not okay the mass orange case yes you're right so it goes down but it's a mid single digit in in absolute terms so let's say four or five millions And when we recover, we recover a little bit more because we intend to recover including the financial effect of the time displacement of the two events. So you reduce first and you recover later. So you cannot recover exactly the same amount, you have to recover a little bit more. But it's something that has been designed together with the client. So the client is perfectly aware. And it's a hard commitment. And this is important. It's a take or pay commitment. So, of course, nobody likes to pay for nothing. So I assume that they will use the commitment for which they're going to pay.

Thank you, Marco. If I can pull up on the first point around built-to-suit, please, because I guess my point was, yes, you can allocate capital elsewhere, but if you do exit or if your client exits from a built-to-suit program, you are losing future growth that is currently expected, and that expectation was built into the transaction multiple, if I'm thinking about this correctly. So is that the correct kind of way to think about it, or...?

uh yeah let me let me let me try only uh very much that our bill to shoot the economics of our bill to suits are are more similar to the original transaction rather than organic if you like okay so if you compare the average cost per tower it's very similar to the initial money transaction and also the associated every type of tower is also very close So, again, the economics of the built-to-suit are very similar to the M&A. So, yes, clearly, if we don't continue with some of the ongoing built-to-suit programs, we don't see the associated EBITDA, but at the same time, we save on the CAPEX. So, I don't think that any discontinuation would change the original return of the project.

Yes, I agree. You have to imagine some of those contracts which were including built-to-suit as a deal with a component which has a forward execution. That's it. That's the way you are to read it.

Okay, the equilibrium is, I guess, the thing that I was missing. Thank you very much.

You're very welcome. Next question comes from Otavio Alorizio from Berstein. Please go ahead.

Good afternoon, gentlemen. I have a couple of questions on my side. The first is a follow-up from what Marco said about the land aggregators. It's clearly you like them if they are fair, you don't like them if they are unfair. But I just want to see if they are unfair, which are the tools for you to avoid the contract being terminated? Because from memory, your average leasing contract on the land is significantly shorter than the average contract on the towers you have with the clients. So if basically that contract reached the end, the expire, and it's not been renewed, how are you going to cope with this, especially if the land aggregator will have significant amount of land where you can actually build anything around? So how you can provide a service? The second one, it's a follow-up on the orange, but more on the UK. So in the UK, you also have a similar situation. whereby you give them some flexibility to the client's Vodafone. It's a different sort of agreements, but you never really disclose how the agreements work. So should we expect also the Vodafone some dip on the revenues in the short terms with a compensation medium long term, or the revenue cycle is slightly different? And the third one, it's just a follow-up. When this tool you want, when you say basically on the M&A that the BTS is a similar business model, from memory, you don't build any towers. So the towers are built by the operator, so you just buy the towers. So that's reasons why either you do on BTS or you do on M&A, it's exactly the same transaction. Is that correct?

That is correct. It's partially correct.

It's partially correct because we build approximately one-third of the towers that are in the CAPEX programs. So two-thirds are built by the operator who sells us with a similar model. one third we build and we have the full responsibility, but the fact that you build or someone else builds doesn't change very much the economics of the program. What changes is, let me say, the activity that our engineering department has to do. So on land aggregators, uh land aggregators so point number one is uh um our contracts are uh the duration of our contracts is longer the average duration is longer than what you could expect the average duration of our contract is more than 20 years average so like every average it means that there is something that is expiring tomorrow morning and it's something that expiring in 50 years The big effort we are making is a tremendous exercise we did in the last 12 months, is putting all the data of all the contracts into a single big data lake and adding some artificial intelligence. making analysis on what is more at risk and what is less at risk. And which kind of fatality has the risk. If I lose a rooftop in the heart of Paris, it's not the same that if I lose land in Provence. I can replicate in one case and hard to replicate in the other case. So what we do is the following, where we have site at risk, we call it SAR, site at risk. When we have a site at risk that our AI tells us that replicating it would be a nightmare, we run for buying the land immediately or extend the contract as much as we can. If a land is in an area where we can have an easy alternative solution, I can't tell you that I'm happy, but it's less urgent. And if someone comes there and wants to have a nice fight, okay, we say several bad words and then we start building a tower in the field next to the first one, which I tend to dislike because I spend money for dismantling a tower, I spend money for rebuilding a tower and I have to ask pardons to my client because I will give him a bad service for at least two, three months, but we will never say I hope I was more clear. The orange, sorry, not the orange, the UK Merch Co case, yes, it's slightly different, but it's not at the end so, so different. It's slightly different because, first of all, the timing of their network redesign has not been as quick as Mass Orange. The day after they got the authorization, they started building this mountain, moving, so they've been hyperactive, and I like active people. In the UK, they are taking a little bit more time, but the concept is not very different. There is one thing that is the capacity to move or the permit that MNO has for moving assets. And then there is the financial profile, which is more linear than what is the movement of the towers. So, yes, it's a bit different. The underlying concept is not very different. I hope.

Thank you very much.

Thank you. Thank you. Next question comes from Luigi Minerva from HSBC. Please go ahead.

Yes, good afternoon, everybody, and thanks for taking my question. It's a topic we often discuss with investors, and it's about the influence on the equity story from a macro and rates. And I guess the question is whether there is something you can do as a company to decouple your equity story from the rate cycle. Or, you know, and this may be operational actions, maybe balance sheet actions, or should we just accept that, you know, this is a long duration asset and nothing to do. You are exposed to the rate expectations volatility.

Thank you. If someone has the magic answer, please write me an email. Don't wait until tomorrow because I would love it. So I take only the part on the balance sheet, possibly. You mean, what if we deliver more? And of course, we are thinking, what if we deliver more? But I'm conceptually in a dilemma because if... Possibly it's true that in a higher for longer scenario, it should deliver more, which it's unproven how long is this higher for longer. On the other hand, I have to consider the profile of my contracts. I have a 20, 30 years contract, highly predictable, covered against the inflation. And every time I look to the intrinsic evaluation of our business, ultimately it's the DCF. Now, if I deliver too much, my work goes up. And if my WAC goes up, my DCF goes down. So, you know, it's a bit of a dilemma of the prison here in which on the one hand, a higher for longer scenario suggests a lower or if you want a more aggressive leveraging. And if you look at your cash flow profiles, what suggests to you is not to go too low. so let me put this way uh luigi if uh uh we will stay higher longer uh the the leveraging takes uh possibly could take more momentum today we are not really convinced that uh rates can eventually even go up uh we're still uh in in a macro in which every time we talk with macroeconomists they say sooner or later this is going to it's going to go down more than up so our our idea of moving in the direction of 5.5 stays there and then and then we'll see thank you marco appreciate your thoughts Happy to have separate conversations with each and every of you if you have a different view. No, I'm serious. If you have different views, there is another thing that drives me crazy, Luigi.

uh i have not even a penny in in u.s dollar and i'm linked to the u.s dollar rate and we have a correlation to the u.s uh rate that is higher than the correlation of the american peers which makes no sense no yes but probably it is true that they have a lower leverage so Not all of them, not all of them, but we have committed to reduce leverage and we're still on the way. So probably what we have seen is that our correlation that was very high has slightly reduced a little bit, but we are not yet as the others. And hopefully as we keep on the leveraging and reaching the five to six times, we will see a big improvement, but it's not going to be massive and there will be a correlation.

Nevertheless, we're correlated to US dollar 10 year and not to the US. I understand that our investors have most of them invest from portfolios that are US dollar denominated. So this is the obvious explanation. But if you look to the intrinsic value of the company, is like saying that I have the revenues that are linked to inflation, European inflation, and so European rates, but you make my discounted cash flow based on the US dollar rates, which is at least strange.

Perfect. And last question comes from Fernando Cordero from Santander. Please go ahead.

Hello, good afternoon. Thanks for taking my two questions. The first one is related with the efficiencies delivery that you have already shown in the presentation. I would like to understand how confident are you regarding sustaining this unitary cost per tower In that sense, at which extent do you require additional, let's say, efficiency CAPEX when talking on the OPEX-excluding leases to maintain this, let's say, efficiency level at a per-tower basis? And the second question is on the whole discussion about MNO consolidation in Europe and what would be the impact in CAPEX. I would like to understand, given your knowledge on the ground, on the site, of course, how do you define the pending investments in 5G, the plumbing in different markets where you are already present? Thank you.

With enthusiasm, Raimon takes the first and I will take the second.

Thank you, Argo. So, Fernando, as you know, for the past 12-18 months we have been working a lot on trying to improve the analytical information that we have in the company. We have developed tools inside the company to understand first what is the profitability and the cost on a business line by business line and a country by country. We have divided also the P&L by what we call commercial expenses, what we call operational expenses, land expenses, SG&A, so that we are able to identify which costs, for example, are more fixed, more variable, which ones are linked to volumes, which ones are linked to sales rather than costs linked to towers directly. And based on all that, Simone and the team have been doing a lot of internal benchmarkings to understand who are the best in class in the different categories. And we have done exercises on trying to understand how many towers every person is managing and things like that to keep on doing savings. As you've seen, we are managing to keep the cost below inflation and even reducing the cost per tower in some cases. And we believe that this is going to be kept during the year. That's what we are planning. We have put targets to all our teams to keep on improving and we have created this benchmarking activity that we meet every month among the different countries with the CTOs, the CFOs, etc. to make sure that we have the best in class and everyone has to tend and improve to that level. And then we create initiatives, actions to make sure that we get there. so from that perspective that is working on top of that the operations team has developed the abc sites we have now a p l not just by country and by business line we have it on a site basis and we are now looking on a site basis to understand which sites are having the highest direct cost to see how we can mitigate and reduce those direct costs to keep on saving and improving the cost per tower on a monthly and annual basis

yes sorry to complement this uh i think that going forward you will see more rationalization projects rationalization projects are projects in which i have two towers to close each other which impede possibly both of them with tendency one which impede that's a tendency ratio because they are too close so possibly uh not only what we were calling collocation to suit so avoid to build but what if you already built so is it possible to have a rationalization project and with uh with simone our ceo We are working on Poland, we're working on France, which are the two countries, then Italy possibly could be another case. So this is something that, let me say, a bit more mid-term than short-term can become very interesting and attractive for making the synergies. Now, your second question is 5G rollout by country or where is Europe? Well, Europe is a bit a mixed situation where not surprisingly, countries with three operators and with a higher ARPU have a better network quality than others. If you take, for instance, Switzerland and Netherlands, They have very nice natural quality, which means that the market is stable for us. It's a good cash generation, but it's not so much growth. So we are talking market that are very solid and they are going to work on special situations. subway the indoor that of course can represent for us further growth opportunity but it's what it is what it is if I say today what are the two cases that we are monitoring closely closer in terms of 5G needs Poland is for sure number one and UK is number two UK that the CMA is pushing the merge code to go to 26,000 ops. and all the other operators are between let's say 17 and 19. So hard for me to believe that if you have one operator with the quality coming from 26,000 installations, the other can stay at 17 or 18. So there will be a catch up. Mixed feeling for for france france has a a a nice 5g in in urban areas and when you get out from the urban areas the situation is very different uh you have decent five well you have 5g not even this you have 5g on the traffic routes, the major traffic routes, and the more you enter in the countryside, the more you start suffering. And France has a lot of countryside. By the way, this is something that even the government, the French government, is considering. They had a first project, which was... Vincent, do you remember the name? New Deal was the name of the project that was a rural project, and they are thinking New Deal 2, so how to continue to push operators to improve the coverage on those. Italy, Spain to stay on big markets. Well, the average quality is not bad, but then it depends if you're future-proof or not. I think that if the traffic continues to grow with the current path, they can be considered that the improvement can be marginal. But if AI kicks in a bit more strongly on the consumer side, also those networks are not okay. So network okay today, I would tell you, Netherlands, Switzerland, Austria, and not so many more. The Nordics, Sweden and Denmark, they are really in the phase of thinking which kind of network rationalization they have to do. Denmark, they have a relatively good 5G but fairly inefficient. And Sweden, it's a strange topography because you have the coastline in which you have you have to deliver a good service and then the more you go north and the more you find Santa Claus. And it's difficult to give cover to the deers. So it's a bit difficult. Portugal, they have a They have a relatively good network. All the operators have a good network. By the way, they performed honestly quite well during the blackout. They suffered. They had an interesting performance. So it means that their networks are, to say the least, well-designed. I hope I answered, Fernando.

Yes, many thanks for the capillarity on the answer, Marco and Raymond.

Perfect. So we have reached finally the end of the session. Thank you so much for your time and have a fantastic weekend. Take care.