Calnex Solutions plc

Hello, good morning, everyone. Welcome to our first half 2025 results conference call. I'm Maria Carabato, Head of Investor Relations, and I'd like to thank you for joining us today. I have our CEO, Marco Patoano, and our CFO, Raimond Trier, on the call. We'll go through a brief summary of our results, and then we'll be open to take your questions after the presentation. As usual, if you'd like to ask a question afterwards, please press your button on your screen and raise your hand. Okay, so without further ado, over to Marco.

Thank you. Thank you, Maria. Good morning, everyone, and thank you so much for your time. I'm delighted to start with the key highlights of the first half of the year, which continues to be marked by consistent execution with solid performance across all the key metrics, reflecting our commitment with our objectives. As a reminder, the numbers we are reporting today are impacted by our change of perimeter due to the sale of our business in Ireland in Austria. There is no contribution from Austria for 2025 and Ireland only contributed for the first two months. On a comparable performer basis, we achieved a strong growth in the semester with revenues reaching 1.958 million and representing an organic growth of 6%. And our EBITDA after lease reaching 1.163 million implying organic growth of 8.1%. Our recurring leverage per share improved by 10.2%. We are successfully delivering on our push for more profitable growth with significant improvement in efficiencies, which Raymond will give you more on shortly. In terms of operational developments, we're excited to announce the renewal of our agreement with Odido in the Netherlands. The milestone reinforces CELNEC's long-term industrial alliance with its clients, securing the associated revenues for an additional 15 years. It reinforces our commitment to delivering reliable, sustainable infrastructural solutions that support innovation and growth across the sector. Continuing our effort, we have extended our infrastructure agreement with Telefonica to support the rollout of up to 3,000 run-sharing Digipops. This strengthens our partnership and reinforce our role in enabling fast, efficient network expansion. From a capital structure standpoint, we have issued a seven-year, 750 million bond with a 3.5% coupon. Additionally, we refinanced our 2.8 billion syndicated credit facility, ensuring our ability to meet future maturities and liquidity needs. I'm pleased to share with you another important development announced yesterday by S&P. S&P threshold for Selenex investment grade rating have become more tolerant, allowing us to have a higher debt ratio whilst maintaining the same rating. As a consequence, Selenex has been upgraded to positive outlook. These give us materially more financial flexibility. As of today, we have not taken any decision as to how this additional flexibility could impact our capital allocation strategy. This also be conditional upon agreeing a comparable level of flexibility with Fitch. During the second quarter, we successfully completed our share buyback program, a key initiative aligned with our capital allocation strategy. We acquired 24,064,404 old shares, representing 3.41% of the share capital, at an average price of 33.24 euro per share. This decisive move reflects our confidence in the long-term value of the company and demonstrates our commitment to enhancing shareholder remuneration. Moreover, this action reinforces our disciplined financial strategy and capital structure optimization while maintaining flexibility to invest in growth and value-creative opportunities. In summary, We believe our journey today has been marked by the definition of the clear roadmap towards profitable growth, solid commercial, operational, and financial performance, strong governance, and consistent and disciplined execution. Looking ahead, we are confident in reiterating our guidance and our ability to deliver on our key strategic targets. Moving to slide five, let me start by reinforcing the foundation of our industrial value proposition. one that is clearly focused on maximizing long-term value for our shareholders while positioning Celnex as a trusted partner for our clients. Our business model remains underpinned by strong fundamentals and robust free cash flow visibility. First, let me start from the strength of our MSAs. We have very long-term contracts in place. with watertight all-or-nothing closed renewal mechanism, CPI-linked escalators and very limited churn concessions. More importantly, they provide predictability of future cash flows with anchor tenants securing the vast majority, being in approximately 70% of our revenues. The strength of this contractual framework has been proven over and over again and more recently through renewals with major operators like Wind Italy, following its merger with Hutchinson, with the renewal of Telefonica in Spain, with the Vodafone and Hutchinson merger in the UK, and with the Mass Orange case in Spain. But I would also like to stress that we have other very important renewals for several of our secondary tenant contracts. Vodafone VMO2 in the UK, the so-called Farris Agreement, Sorry, I had a moment of blackout in the communication. Is it fine? Yes. Okay. Vodafone BMO2 in the UK, the so-called agreement virus. Iliad in France, we extended extra 10 years. Orange in France, we extended the secondary contract for another 12 years. So not only we are demonstrating that our anchor contracts are rock solid, but also the second tenant agreements in our largest markets are also long-term and robust. With these renewals and framed by the importance of our industrial partnership and spirit of constructive collaboration with our customer in each market, we have successfully increased the maturity and scope of service, preserving the underlying value of our contracts. I would also like to stress that we have only one renewal coming up for 2030, the terms of which have been already agreed, and no other major renewals until 2035. We have an important role as a key technological enabler. Our infrastructure enables the efficient use of spectrum as cars and highly valuable resource. We operate in a sector with very high investment requirements, and our specialized operation of passive telecom infrastructure allows our customers to focus on their operations. In particular, Europe continues to lag in 5G deployment and general network investments. Against a regulatory backdrop that appears more favorable to the existence of financially stronger operators capable of supporting the level of investment required to be globally competitive, And we are a strategically well-positioned partner in the creation of that healthier telecom ecosystem, providing operators a neutral platform to develop the coverage, the capacity, and the reliability of their network, with the most rational use of resources. A key example is the UK, where the regulator did not oppose the Vodafone 3 merger. However, it did impose significant additional investment in network improvement. We also played a key role as enabler of new market designs. As an example, we made possible for DIGI to enter the Portuguese market, providing around 4,000 co-locations in a record of 18 months. After DIGI was awarded Spectrum in Spain, we also enabled their expansion via network sharing agreement on telephonic equipments and the launch of ELED in Italy via combination of network sharing with WIND and the building of dedicated infrastructure. To complete the picture on long-term value orientation, as of today, we have contracted backlog of over 100 billion, supporting very high free cash flow visibility. Concerns have been raised recently about our capacity to protect our revenues when we renew our contract. I stress that as of today all, and I underline all, of our anchor agreements have been renewed maintaining the original MSA prices. The Odido renewal announcement confirmed this thesis once again, even more importantly since it involves both the anchor and the secondary component of our business relation. We are also expanding the scope of our partnership as telecom infrastructure play an increasingly central role in European digital defense and energy strategy. Beyond connectivity, we are actively investing in adhesion opportunity, such as smart IoT solution, critical communication networks, tower used for drones, battery storage systems, and many more. And we are also complementing the active network of our clients every time that a neutral host solution is more convenient and more feasible than an MNO proprietary network. I refer to DAS and small cells, a growing market of specialized coverage, for instance, stadiums, malls, hospital offices, city centers with over-restriction and others, in which we do not compete with our clients. We offer turnkey solutions to MNO and business users. All of this is guided by a disciplined governance framework and a leadership team committed to long-term value creation. In short, Selnest continues to deliver resilient performance focused on profitable growth backed by very high quality and robust contracts, an industrial relationship with our clients, a strategically well-positioned asset base, a transparent and disciplined governance structure, and a clear strategy to deliver sustainable value for our shareholders. We are conscious that rumors on consolidation in the French market and potential impact on us have been the cause of much speculation, much more than needed. And as such, I would like to give you some objective data points that will help you to understand the context. Sunlex is strongly positioned to navigate any potential market consolidation in France. We operate over 26,000 POPs as heights and 31,000 POPs, generating 725 million in tower revenues. Our business is underpinned by long-term MSAs with SFR, Buick and Iliad as anchor tenants with the first renewal programmed for only 2037 and Orange as a secondary tenant running until 2037-2045 with fixed escalator 1-2%, ensuring stable and predictable revenues. Importantly, all of our secondary tenant contracts have already been renewed for between 10 and 12 years. At the end of 2024, we also renewed a non-anchor contract with Iliad Freemobile for circa 1.7 thousand colocation of ivory towers. The length of the MSA is 10 years and we have an individual contract for another 12 years. France is leader in run-sharing with two major frameworks. The Crozon Agreement between SFR and Bouygues, a 20-year long deal, covering around 65% of the population. In the case of Ivory, approximately 11,000 pubs, more than 50% are in run-sharing. And the so-called New Deal Mobile, a government-led initiative involving all the MNOs to expand 4G, 5G in rural areas. So in these run-sharing areas, roughly two-thirds of the country, networks are already being deployed efficiently with minimal impact from any potential consolidation scenario. The remaining area, the so-called dense area, are those where the impact of consolidation should be analyzed. They represent, roughly speaking, a third of the country, and we have between 40% and 50% of our POPs. When looking at the various consolidation combination between MNOs, it is important to take into account that, on one hand, the physical overlap between the sites, and on the other hand, the automatic increase in subscriber and data traffic after a potential combination, basically. The operational ability to cancel site post-combination is lower than the pure contractual terms. On MSAs, which account for 90% of the tower revenues, include all or nothing closers, a churn rate is allowed below 1%. And secondary tenants, approximately 4,700, contribute less than 10% of the revenues and have been already renewed for 10 to 20 years. Finally, as seen in other markets like the UK post-Borderfront III combination, often led to increased network investment, a trend that would further reinforce Celnex's role as a neutral long-term infrastructure partner. A factor that also results as a positive from the potential consolidation in trials in the resulting improved credit rating of large clients. Depending on the final outcome and how the assets are distributed among the other operators, Alty's fragile financial situation today will no longer pollute market dynamics and credit risk profile will improve. All these elements make us an unavoidable and strategically critical party in any potential market consolidation policy. Our contract with SFR cannot be transferred in parts without our consent. And, as we did in the past, we are going to give our consent, swapping some collocation flexibility for the guarantee by the new tenant that the entire portfolio assigned will be duly priced and maintained for a longer period. We have thus far demonstrated in Spain and in the UK recent market consolidation that we are available to support the development of a healthier M&O ecosystem, introducing some short-term operational benefits while safeguarding and even potentially growing the value of our long-term agreements, also standing to reap benefits from potential optimizations that result from M&O consolidation. Therefore, In terms of the current environment, we support the favorable regulatory tables around MNO consolidation in Europe, if they favor behavioral remedies, namely investment to improve network quality and densification, in opposition to structural remedies of the previous years. Adding all up, we believe that the impact of potential consolidation scenario in France is limited, with potential upside. Move to slide 7. Further reinforcing the health of our strategic long-term partnership in different markets across Europe, and our continued efforts to enhance network infrastructure, I am pleased to share with you two key renewal agreements. From July 1st, DG InSpace started to use the spectrum it acquired as a remedy taker of the mass foreign merger. Within this context, DG and Telefonica formalized a long-term network agreement. Over the next 16 years, Telefonica will provide the DG with both run-sharing services and roaming on its network. To support this transition and to enhance the overall network, Sanex and Telefonica have extended their infrastructure agreement. We will deploy 110 additional physical point of presence by Telefonica, significantly boosting their network densification, and we will activate up to 3,000 run-sharing DG POPs over the next years. These efforts will not only increase the network's capabilities, but also reinforce our leadership position in infrastructure sharing and efficient network development. In the Netherlands, We renewed key infrastructure agreements with Odido, strengthening Celnex's position as a key partner to enable high-quality connectivity and digital transformation across the country. Our contract is renewed for 15 years. It is CPI-linked and maintains the revenues of our original agreement, ensuring long-term cash flow stability and predictability. Together, these agreements are a testament to our strategic approach to the collaborative relationship we have with our customers, focusing on long-term value creation, operational excellence and enabling our partners to thrive in an increasingly connected world. My last chart is on ESG. Turning to our ESG progress, This is an area where we continue to lead with purpose and measurable impact. Sustainability is not just a pillar of our strategy, it is embedded in how we operate, how we grow, how we create value for the long term. I would like to highlight a relevant milestone in our decarbonization strategy this quarter, having achieved the ISO 50001 certification for 80% of our energy use. Our efforts in responsible leadership continue to earn us global independent recognition, renewing best-in-class positions in the major ESG rankings and standing out at the forefront of the most sustainable companies in the world. Raymond, I drink a glass of water and I leave the floor to you. It has been a bit longer than in the past, but I think that the MNO consolidation deserved a bit more space. I hope I made clarity, but, of course, I assume that more questions will come afterwards. Raymond, the floor is yours.

Thank you, Marco. Good morning, everyone. I will now run through some of the main financial and operating metrics we are reporting for the period. Let me start by reminding you as Marta did that our numbers this first half of 2025 are impacted by the change of perimeter as we have no contribution from Austria in the year 2025 and Ireland only contributed within two months. This table gives you a clear comparison as where we are removing this effect from our numbers and highlighting the organic growth derived from our performance. As you can see, we continue delivering strong operating leverage. Revenues grew 6%, our EBITDA 7.3%, PMI down 8%, and our recurrent level free cash flow per share 10%. Let me remind you as well that our recurrent level free cash flow per share has improved not only as a result of the improvement of the recurrent level free cash flow, but also as a result of the share buyback we undertook during the first half of the year when we bought 24 million shares. Moving to our financial performance on slide 11, as I mentioned, our revenues increased 6% on organic basis and we adjusted EBITDA by 7.3% compared to the same period last year. This growth has been driven by the four business lines we operate, and in particular by the towers and the fiber connectivity and housing services. Our EBITDA increased 8.1% on the same basis, highlighting further growth in operating leverage and enhanced profitability. As we will mention later, we have accelerated significantly versus last year, the land efficiency program helping us improve via BitTal. In terms of cash flow generation, our recurrent level of free cash flow amounted to €132 million, with growth set to accelerate throughout the year, thanks to the normalization of cash items below BitTal. as I will explain later in more detail. As I said, the recurrent level free cash flow pressure has improved 10% on the year as well. Moving to our key operational metrics, we have added 2,233 insights in the context of our B2S programs, mainly in France and Poland. Our net allocations in the first six months reached 578, impacted by the 974 withdrawals from Mazoran in Spain, as you know, negotiated in the context of the merger. Collocations have been well balanced by country, improving our tenancy ratio to almost 1.6, 1.59. As regards to our investments in efficiency, to optimize our asset base and drive operational efficiency, we have undertaken a combination of land-side actions, acquisition, upfront payments, contract renegotiations, totaling 115 million euros in the first half of 2025. This compares to the 93 million we did last year, so there has been an increase of 23.7% that reflects the increased focus on land efficiency after the creation of Finland. Moving to slide 12, the first half of 2025 has seen another period of consistent commercial performance with POPs growing 4% compared to the same period last year. This is explained by the net collocations contributing 1.5%. It would be 1.8% if we were to exclude the impact of the MAD Orange in Spain. As a reminder, the new contract signed with MAD Orange in Spain 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 TELF. As for this agreement, no impact in revenues is expected until 2026, despite the churn seen in terms of OPS this year. Nevertheless, the impact expected for 2026 onwards will be compensated by new business. As discussed by Marco before, regarding consolidation, it is another example of how we have been managing the various consolidation cases to date without a long-term impact to CELNEX and the value of our contracts. Moving to the next slide, we maintain strong organic growth at 6% year-on-year. As you will know, this is due to various factors like the price escalator and CPI from our contracts, the co-location we're undertaking on the existing sites, and the new build-to-suit that we're building mainly in Transom Poland. To provide a clearer picture of our performance in the period, excluding the impact on the change of perimeter, on this slide, we are providing our organic revenue bridge on a pro forma basis. Let's look at the data by business line. As you can see from slide 14, our tower business that represents 80% of our total revenues is growing organically at 5.2%, driven by escalators and CPI, co-locations and built-to-suit. As of June 30th, all price increases from the contracts have already been applied to all our customers in the year, and we have excluded, for comparison purposes, Austria and Ireland from the 2024 base. Moving to the next slide, we can see comparable performance of our other business lines, which continue to show healthy organic growth. In fiber, connectivity and housing services, revenues grew by over 20% year on year. A key contributor to this performance is the NextLook project in France, which exemplifies our ability to deliver advanced fiber infrastructure tailored to high density and high demand settings. Thus, small cells and RAN saw growth of around 2.8% by densifying networks and enhancing indoor coverage. What's driving this performance is the growing demand for smart infrastructure connectivity, particularly in high traffic environments like stadiums, such as Etihad Stadium and Riyadh Air Metropolitano, transport, such as the Metro Société du Grand Paris, airports such as Milan-Malpensa and Milan-Linate, and hospitals such as Bergamo. These deployments demonstrate our ability and technical expertise to adapt and deliver value in mission-critical scenarios. We could also add to this list Metropol, our joint venture within the Metro de Madrid, which operates the task service for the MNOs in Madrid Underground, now developing the 5G update. In broadcasting, revenues increased by 2%. This cost-efficient business line, operating mainly in Spain and the Netherlands, continues to generate strong cash flow and offers long-term visibility, thanks to its mature and stable structure. If we move to slide 16, we keep improving all our cost drivers to drive efficiency. As part of the strategy set out on our capital market today and our continued focus on industrial excellence, our main efficiency ambitions relate to asset rationalization, cost-based optimization, and group-wide productivity. Again, considering performance numbers, the reduction in headcount is part of our broader strategy to optimize resource allocation, enhance productivity, and focus on core activities. In June, it took place the first phase of the recently announced redundancy program in Spain, which is implemented over the 2025-2027 period. This plan will also result in discontinuing certain operational maintenance contracts, which have a nil or negative EBITDA contribution. In preparing return maintenance costs following the positive performance last year, we continue to see good progress in the period, representing a 1.6% decrease per tower. and the evolution of our general expenses translated into a 4.4% decrease per tower. These trends reflect our continued focus on lean workflows and disciplined cost control. Finally, on leases, we have been able to reduce costs by 1.1% per tower, reflecting good momentum on our land acquisition plan, along with rent negotiation and cash advance initiatives, which are progressing well as discussed before. Now, let's take a look at our debt maturity profile on slide 15. Be aware that this page is updated as of today, not 30th of June. All 2025 maturities have been either repaid or refinanced. As a result, there are no remaining maturities left in 2025, while we still remain with a strong cash position, circa 1.6 billion euros. Regarding our debt management, during the first half of 2025, we have executed the following transactions. We secured a new €625 million syndicate term loans, with a margin below 1% as communicated in our first quarter results. In May, we successfully completed a €750 million bond refunds, thanks to active interest rate management through the use of hedging instruments, The effective annual cost of these equines was reduced by more than 10 basis points. The coupon of the bond is 3.5%. Finally, in July, we refinanced our main syndicate credit facility, increasing its total amount from 2.5 billion euros to 2.8 billion euros. This refinancing not only extends the maturity to 2030, to 2030, but also includes two one-year extension options which could push the final maturity to July 32. It has been supported by 26 financial institutions. This is essential for maintaining and strengthening Telnex's long-term liquidity position. We have a robust and well-structured capital frame. Liquidity remains strong, with more than 4.7 billion euros of liquidity available 1.6 billion held in cash in order to cover upcoming maturities. 78% of our debt is fixed rate and shorter maturities have been proactively managed with average maturity now standing at 4.5 years and our average cost of debt of 2% is expected to increase only marginally in the next years. As Marco mentioned at the beginning, Standard & Poor's just revised their outlook to positive, reflecting the improvement we have been doing over the past two years on our capital structure, but also the stable and predictable cash flows and higher barriers of entry of the sector. Finally, on the last slide, we are confident in reiterating our 2025 outlook and all our public financial targets, reflecting the resilience of our business model and solid execution across all our markets. We now remain at your disposal to answer any questions you may have.

Thank you, Raimon. Thank you, Maria.

Okay, so in terms of the line-up of questions, our first question comes from Andrew Lee from Goldman Sachs. Could I ask you to pronounce your questions clearly so that we can all understand them in the room?

Thank you, Andrew. Good morning.

Yeah, good morning, everyone. I had two questions. Firstly, just on the balance sheet and cash allocation, and then just secondly, if you could give us an update on the Swiss and data center potential asset disposals, where are we with those processes? On the first question on the balance sheet, you obviously mentioned the positive update from S&P. I just wondered if you could talk through with a bit more colour how that has affected your thinking about your optimal gearing for now and how that thinking has evolved. I think you've talked about a five to six times range of leverage that you're comfortable with. Is that rising now? And any kind of colour you could think of on how you're thinking about that would be really helpful. Also, just secondly, in terms of acquisitions or potential capital allocation, is it still right to assume that it's more likely you'll be spending money on shareholder returns than M&A? Thank you.

Yes, Andrew, thank you very much for both the questions, because I think it's the first two hot topics of the day. Well, the update of the S&P has been a long, long, long discussion we have been having with the rating agencies, meaning that the strength of our balance sheet and the predictability of our cash flow is really remarkable. If you add the industrial position, the differentiation of the portfolio, if you put all in the basket, what you see is that We have more credit capacity than what was originally allowed. Now, the conversation with S&P, I make the long story short, is de facto a rating improvement. but it has not been shared as of today by Fitch. So we are having similar conversations with Fitch in order to understand where is the comfort zone of Fitch and therefore the entire work is not done. What is the takeaway? The takeaway is that Our strategy and our discipline has been rewarded by the rating agencies, point number one. We have more flexibility, point number two. This flexibility has to be confirmed by Fitch. So as of today, we have the flexibility only from one of the two rating agencies. And our view doesn't change. So it's good to have more flexibility in the balance sheet, but as of today, we stay committed to our strategy, to our financial discipline, and going forward with the board of directors, we will understand if and how to use this financial discipline, if and when agreed by both the rating agencies. With reference to the asset rotation. Well, to say the truth, we have very little to share with you. The potential transactions both in France and Switzerland are still on the desk of our M&A guys. So we have, as of now, nothing to share. And we will provide you, as usual, an update as soon as we have reliable information. Let me add a couple of points. uh we stated chance of time but i will never be be tired of saying again we are very disciplined in our approach to the capital location and every decision we make are based to the maximization of of the shoulder value so what i mean is uh is uh we are not forced to do nothing we have a solid capital structure as i said first further reinforced yesterday by the upgrade of S&P. We have committed to a shorter remuneration, which is not based on further disposals. So this is what we already said. We said that the original 500 million have to be read as a new level of 800 million. So this is nothing new, but again, this is not based on any further asset disposal. And as soon as we have more information, we will share with you.

Okay, so moving on to the next question. It comes from Akhil Gattani from JP Morgan.

Hi, morning. I've got two questions as well, please. Firstly, Marco, as you said, a helpful slide on the French market structure and what's going on. I had a couple of clarifications just to make sure that we've understood that slide properly. You've mentioned in the slides that, and in your comments, that the variables that could be relevant would be the overlap between the anchor sites. So I wondered if maybe you could just comment on what that is and the way you think about the relevance of that. And then you also mentioned offsetting that, the opportunity in the rural areas. from once you have stronger players potentially seeing more investments in that. Again, could you help us understand and quantify how you think about the scale of that, just so we understand the puts and takes in terms of how we think about that? And then the second question was just around the asset sale process. And it's a bit of a bigger picture question rather than specific to these assets. When we stand back and look at the industry as a whole today, it feels that the last few years, public markets had derated infrastructure assets, but private markets were still paying much richer multiples. This year, that seems to be eroding a bit. If I look in the fiber space, there's not been that many transactions in towers. But look in the fiber space, these multiples have come down. And we saw earlier this week, there was the French transaction on the InfraCos between Greek and SFR, and the implied model of that looks quite low as well. So can you just help us understand, when you look at the buyers out there in the private equity world, do you think there is a bit of, let's say, tension there in terms of just where they've been paying and what's going on, or do you think that that's something we shouldn't read too much into? And I guess with that, did you look at InfraCos at all, or was that not an asset you cared for? Thanks a lot.

Good, so thank you for both your questions. On the French case, you got perfectly the two points that I wanted to underline in the chart. uh if you allow me i swap the order of the answer so i start from the rural as of today the rural coverage in france is a mix of run sharing and co-location so the number of duplicated towers i mean duplicated towers for me is you have two sides two infra where technically speaking with a higher collocation rate you can serve the population with only one tower okay the number of duplicated assets is relatively limited why it's relatively limited because sfr and and weak telecom are run sharing by design and orange After, let me say, the first phase of network deployment, they started using co-location more and more. They have their totem tower, and they started to use co-location more and more. We have several thousands of co-location requests from Orange in rural areas. So it's a big market. As you know, France is more than 500,000 square kilometers. France is big. And the more you go in the deep rural, the more you feel that, let me say, the voice coverage is okay, but the data coverage is not okay. So in the rural, the possibility of a, let me say, network rationalization, I would say that the network is fairly rational as of today. So impact, modest, upside, material. The problem of the upside is that the original bill-to-suit criteria, so the one that was, let me say, an extension of an M&A transaction, is not active any longer. So if someone asks us to replicate the old bill-to-suit agreements, well, the answer is that those agreements are not replicable anymore. In the urban areas, I want to share with you, so before talking how we see France, is what we see happening in Spain and in England. So it's more moving the pieces on the chessboard than cancelling. Why? Because in the dense urban areas, putting together two customer base increased dramatically the capacity needs of a network. So the risk is that you have the coverage, but you cannot access to the network. Or you have such a crappy service, and sometime in London you have some examples, that you see that the operator needs to do something. What we see in London, for example, is a super strong acceleration of intensification by Vodafone 3. So, what we assume is On the one hand, there are the contracts. The contracts allow my client to move a limited number of, sorry, to cancel a very limited number of POPs. But I know that my client needs more flexibility. So I don't want to impede the flexibility of the client, as we did in Spain. We are favoring the flexibility, but with no financial impact, not even limited, with no financial impact. I think that this is going to be the case also in France. The contract is designed in this way, the secondary. So what has been super important, possibly our fault, we have not been loud enough in the past, we've been working a lot on the secondary contracts. We renewed the secondary contracts for 10, 12, 15 years. with Telefonica renewed a very long secondary contract, very long. So this is, I hope I gave you the answer. If not, please tell me and I can deep dive for another couple of hours. On the asset sale, you're touching a very, very delicate point, which is, you know, the assets are basically the same assets. The point is, did something change in the infra fund environment? So I would say that it has been tough for them to raise new funds. If you take super successful firms, they struggled to raise new funds. And therefore, in order to be more competitive, they need returns that are not the traditional infra returns. What is the expected return on capital of an infra three years ago? It was a mid-high single digit, it was something 7-8%. Today this return on capital is not there. So I don't think that the problem is on the quality of the assets, on the quality of the cash flow, on the predictability of the cash flow. I think that the finger point on fragility on our business model possibly is a bit overestimating the downside risk. When I hear talking about 3%, 4% risk, I think that this is too much. So it's not about us. I think it's more about the fundraising of the private market.

That's super interesting. And Marco, just on InfraCross, was that an asset that you looked at as a company? Sorry, say again? The InfraCross transaction that Buig and SFR announced this week, selling their towers. I just wondered if that was an asset that you looked at as a potential acquisition.

Oh yeah, we've been looking to the assets. The problem is that in France I have a strict antitrust limitation. And then there are some specific elements that did not fit perfectly with us. So we decided to exit from the process fairly quickly. because it's useless to spend the time and to use my resources to an asset that we were not interested in. Great. Thanks so much for the answers. Thank you. Thank you, Kim.

Okay, so now moving on to the next question. It comes from Andre Kabatek at CBS.

Hi, everyone, and thank you very much for the presentation and especially the more detail that you gave us on France and other contracts. So I'm just going to stick to the theme, if I may. So just wondering, you highlight the co-location renewals for Iliad and Orange. I'm just wondering what the co-location situation is with SFR and Bouygues.

Andre, can I interrupt you? Could you maybe speak a little bit more slowly and clearly? It's a bit difficult to hear you in the room.

It's a bit disturbed. The line is a little bit disturbed. So if you speak a little bit slowly.

Yeah, better. Better. Thank you. Okay. Okay. Thank you. Apologies for that. So I was wondering on the slide on France, Bill, so you are highlighting the renewals that you've done for Iliad and Orange. I'm just wondering what the collocation situation is for the agreements with SFR and VUI, because those are potentially even more important. And on that theme, if you can maybe expand a bit, you know, how the average secondary tenancy, you know, looks like in other markets, because I think maybe not many of us were aware that, you know, some of these contracts are actually this long or that you are, you know, renewing them at this length, if you could talk a bit more broadly about the general secondary contract landscape. And then second question would be in relation to the deal that we're talking about with Phoenix Power. What kind of impact are you seeing, if any, on France and Italy, specifically where Phoenix has, you know, done some deals and it's becoming a bit more of a weight in terms of market shares. So is this having maybe an adverse impact on, you know, pricing in these markets? Any call on that would be very helpful. Thank you.

Okay. Sorry, the communication was still, let's say, mid-quality, so if I've not understood properly, please correct me and I will follow up. Collocation in France was your first question. So, collocation in France, we have to split two different concepts. One is collocation coming from run sharing. So, collocation coming from run sharing is entirely SFR weak. They have this network sharing called Crozon. It works in all the countries except the high-dense area. And the contract for us is fairly protective because the contract clearly says that the fee remains unchanged. in case the run sharing agreement is not active any longer. So they want to integrate the network, so having a single network instead of run sharing, be my guest, it doesn't change a penny of my revenues. On the secondary tenant contract, so point number one, The three operators that have MSA with us, at the time of the portfolio acquisition, signed very important bid-to-suit agreements. So, as of today, there is a significant number of sites, individual sites, tenancy one, with most of them. So, the second tenant is something that has been used particularly by Iliad and by Orange. Iliad and Orange have a quite long contract. They are priced, let me say, the price is a market price. Let's say approximately 50% of an anchor fee or less. We are talking about 3,000, 4,000 POPs and excluding the run sharing, so on top of the run sharing. And we agreed with them two things. One is the extension of the duration of our contract. As always, there is a modest respiration rate that is quite modest, one below 1%. And we agreed on a 10-year duration contract with CPI escalators, the usual one. We have agreed with them. we have a pipe of further collocation requirements, which depends mostly on permitting. So the bottleneck today is represented by the permitting. So, on the pricing of the secondaries, I think I gave you the answer. If I understood well, the second part of your question was again on the deal of the Corazon Tower, is it correct? Yeah, so I think that the company who went for the... Let me make it one step back. The tower market in France is pretty fragmented. So if you take the number of tower players, it's Celnex, Totem, Phoenix, TDF, American Tower, and there was Crozon, and there was... It's way too fragmented. So the fact that the market, the tower market, go in the direction of the consolidation, It's a net positive for the French tower market because you avoid to have marginal operators who tend to act irrationally in order to get more scale. Tower business is scale business. So if you don't get scale at the end, you do something to get the scale, which can be something not good for the market because you can start touching the prices in an irrational way. So, we have limitations in acquiring big portfolios. When we made the last acquisition, the antitrust gave us remedies that ended with the sale of several thousand towers, approximately 3,000 towers, which is the base of the Phoenix Tower portfolio. So if you ask me, is 3,000 towers an optimal sizing for getting the scale? The answer is no. With 3,000 towers, you don't get all the benefits of the scale. So it's absolutely natural that you have on one side a market too fragmented, and on the other side, someone with good funding capacity who wants to get more scale. So I think that what happened is natural. The market goes towards a more consolidated tower market, which means a more rational tower market, which is good. And it was a portfolio too big for us for entering without another nightmare. of you buy 10 sites and you have to sell five. So, you know, my team in France has so many things to do that I don't want them to be in this. I hope, André, I answered your questions.

Thank you very much, Marco. If I may, maybe more directly on the SFR and brief situation. So, obviously, there are two MSAs. that is the network sharing goes on, but then what is the exposure to, say, less protected traits, secondary tendencies, if any?

Yes, we have two MSAs, because we have two MSAs, one with SFR and one with WIG. But the two MSA on the run sharing component are cloning the close of one the other. So, believe me, it's even less than modest, the potential. If the consolidation on the network is a brig with a safari, open a bottle of champagne. Okay, thank you very much.

So, thanks for your question. So, moving on to the next question. It comes from Rohit Modi from Citi. Rohit, if I could ask if you could also place your question clearly so that we can understand in the room.

Sure. Thank you, Maria. Two questions from my side. One is a follow-up on the French consolidation. You mentioned about limited impact on the French consolidation. Does that mean that the limitation from, you know, the agreement you're ready to let go some of the revenue or that's a combination of some of the revenue that is already at risk when consolidation happens as well as, you know, some of the revenue might let go, you know, for a higher duration? Second question is around the capital structure. I understand you mentioned that it remains as it is, but I'm just trying to understand what happens if Swiss sale and French tower sale doesn't happen and you have a bandwidth from S&P, but you still need approval from French. If French doesn't give approval, is there any change in terms of your shareholder returns for next year? Thank you.

Cool. I leave to the CFO the capital structure because otherwise I don't understand why you pay the salary. And I take the one on the friends. Well, I always refer to limited impact. When I speak about funds, I would say that my base case is no impact. This is my base case. Why I'm so positive? Well, Point number one, the quality of the contracts we have. Same as we did in Spain. In Spain, we traded operational flexibility with two things, with revenue stability and contract duration. Now, in France, to say the truth, contract duration, contracts are fairly long, very long. We well beyond 2040, so I'm not particularly worried. But what is important to me is that since the contracts are all or nothing, what we don't want is the fragmentation of the contracts. So the contract, do you want to split the contract? Okay, it aggregates to an existing contract with a total all or nothing at the renewal date. Which means that before you had 11,000, 12,000, okay, you buy a portfolio of five, fantastic. At the renewal, we will discuss about all or nothing of 16,000. This is the point. That is, by the way, what we discussed with Mass Orange, and it's rational. It's a win-win. So my base case, Roshan, is that we have this case. I'm pretty confident. What is important is I think that everybody understands that you cannot discuss about in market consolidation without having at the table such an important player as Celnex, who is a partner of choice of three out of four of the players in the country. So, this is where we stand.

Raimond. So, on the capital structure of it, if you recall, when we had our capital markets day in March 24, We committed to financing. The first one was to be investment grade. It is something that we already said before that date, but we achieved on that date. We committed to be five to six times levered. Being investment grade meant being below seven times with Fitch, below seven times with S&P. And we also committed to start shareholder remuneration in the year 26 with a 500 million dividend. What has changed since then until today? What has changed is that SMB, yesterday, because of the improved download, they have given us more flexibility. But Fitch, as of today, remains exactly the same. They have not changed anything on their side. We remain with the limit of seven times. This means that to be within their seven times, we still need to be between our five and six times. This is not changing from today. Our commitment to be investment grade has not changed. We remain exactly the same. And from a shareholder remuneration, there has been a big change. So as you know, we have the 500 million starting in 26. And what we have done is accelerating this shareholder remuneration. We moved shareholder remuneration from 26 to 25 by doing a share buyback, a size of 800 million. And what we committed as well is that for the year 26, the shareholder remuneration between dividends and share buybacks will not be below the 800 million that we committed. The different divestments of Switzerland or France do not change that picture. each without further disposals or other inorganic things. This means that the 800 million committed for the year 26 remains. Whatever happens with the two transactions of France and Switzerland, if the transactions were to happen, we will reconsider them, they shall hold the remuneration for the year 26. But the rest is not changing.

Okay, thank you. Thank you. Sorry, just in the interest of time, we've still got quite a long list of questions, and we're already getting close to lunchtime. So what I suggest is we limit the amount of questions to two without follow-ups, and then obviously the IR team and the management team are available afterwards if you need further detail. So we'll move on to the next question, which comes from Nick Lyle from Barenburg.

Yeah, morning, guys. Can I just ask one about the rental levels, please? I'm assuming that the SFR rents for the urban sites that we're talking about are high. So could you just talk about the risk that the rentals are higher than averages in France and how you offset some of that? And also, how much control do you have over the timing of the revenue impact and the short-term impact versus longer-term gains, for example? Could you talk to the risk of that as well, please? Thank you.

yeah yeah yeah yeah well the topic of the prices uh in france is a no issue so the the prices are fairly aligned in in france which uh it's uh it's the market it's the dynamic of the market so and in france it's super interesting because prices are fairly aligned and the number of operators are many the tower operators are many so it means that there is a market and a market price different objects more or less the same price, which is okay, because you have not an incentive to move, because you have to trade between different price expectations. But as I told you, it's a super good example, because the French Tower market is possibly the most fragmented in Europe, and prices are not that different. So I don't expect the pricing to be a particular issue in France if a structural change in the market happens. By the way, everybody consider that the structural change happens tomorrow, which I honestly have to say that it's It's not that obvious, okay? So we are just discussing about a case, a possible potential scenario. And you all know that the transaction is monster big and monster complex, and nobody asked to the French government what they think about. But, okay, let's go on. So how do I think short-term versus long-term? I think that the short-term... In case of a redesign, the short term is a lot of activity for gaining efficiency via rationalization. What I mean is if you are a CTO, for you efficiency can be I get the same quality and I spend less, or I spend the same, I get more quality. In an integration, especially given the behavioral remedies that the authority are adding to the authorization, are putting for the authorization, this is very valuable for a CTO. What we see in both in UK and in Spain is that after a while, and I would say less than one year, much shorter than what we believed, the same CTO come to us and say, hey guys, the pure rationalization is not enough. Why? Because you put together two customer bases that are normally very different. For example, when you take Spain, MassMobile and Orange were very different characteristics of the client in terms of age, in terms of mobility, in terms of data consumption, in terms of many things. and so when you have to serve a more complex customer base you need more so our experience is request number one is flexibility which drives efficiency uh in a relatively short period of time is uh uh is a much deeper analysis uh on the uh on the shorter needs And then we work on the long term, which is 5G penetration, more data, etc. So the long term doesn't change. What is surprising us positively is that we thought that the short-term cannibalization would have been higher than what is really. And the two cases, Spain and UK, are a test case. I would say it's not theory, it's a test case. By the way, the theory, I was convinced, it was worse than the reality. I hope I answered the nick.

No, that's great. Thanks very much.

Thank you.

Okay, so now moving on to Fernando Cordero from Banco Santander.

Hello. Good morning for taking my two questions. The first one is on the secondary tenant contracts. In that sense, I agree with you, Marco, that you have been also vocal on your strategy when renewing the secondary tenant contracts. You have explained the situation in France, but I would like to understand which is your current approach when renewing those secondary tenant contracts, and for example, we have one beginning in Italy with Iliad and so on, so to understand, again, which is your strategy when renewing these secondary tenant contracts. And the second question is, I would say, more in detail, but related with one of, let's say, the potential optionalities in the sector, which is run as a service. I would like to understand why in Poland, in the second quarter, we have seen a quarter-on-quarter decrease in run-as-a-service revenues, particularly considering that this is the, I would say, the test of concept of this business line. Okay. Thank you.

Yeah. The Zagora case is paramount for understanding why the secondary tenant contracts are important. The Spanish case is one clear example of testing the robustness of an MSA contract. How I look at the secondary tenant, for me, is an anchor contract, differently from the U.S., an anchor contract is made with an industrial component and with a financial component. So the industrial component is what you price in the secondary tenant. And the financial component is what is priced in the anchor contract. So, it's not true that I can, and this is, by the way, the reason why, market by market, if you look at how different our operator priced the secondary tenant, Yes, there are marginal differences because in operations you can be better or worse. But by the way, a larger operator is more efficient than a smaller operator. And so we have good pricing capacity. So our strategy is we don't compete on secondary tenant on price. What we do is we compete on service. My chief operating officer has prepared a deck of SLAs that we insure to the client, which are top of the industry. We are pricing rationally. The way, again, is to have good contracts with good quality. Depending on the case, there are tower adaptation that we can absorb or we can agree with the client that they will pay for. And this will also influence the price if I have to absorb the adaptation cost possibly higher. So that's it.

Poland. On the other topic, Fernando, on Poland, the deviation that you have is not coming from the Rwanda as a service per se. It's coming from the lower DAS activity. You know that we have DAS both as a service but also as trading. And last year, Poland had more activity on trading. This year is less activity on trading. If you want later on with the IR team, you can get further details so that you can try to understand the variances.

I hope it's clear what is the difference between a trading activity.

I mean, when we talk about trading or data as a service, data as a service is when we do execute the capex, so you have long-term revenues coming from the contract where you are charging not only for the assets, but also for the service that we give to them in terms of maintenance and the management of the tool, etc. And in the case of that as a trading, what we do is we buy and sell as a trading activity. So you have the cost going through the P&L, not as a capex. And then we just invoice a lower amount going forward that is linked to the maintenance. We make an engineering activity for a client. So that's the difference. But in terms of the numbers, you can check later on with the team if you want.

Okay, so now moving on to Roshan from Deutsch.

Hi, morning, everyone. I've got two questions, please. Firstly, just on France, and very quick follow-up. Whilst we're clearly seeing how the situation evolves, I think some of the operators have said discussions are taking place. Have you already been involved in these discussions at this stage? And a lot of talk has been around the top-line implications. France remains the one market where you have the biggest build-to-suit. Is this where you can really, at this stage, look to combine those build-to-suits, something which you've talked about before? So rather than just having the top-line benefit, you've clearly got the material benefit at the OPEX level and those high tenancies. And second question, more operational on the Lanscoe. I think previously you were running at around 900 site actions a quarter. Now, whilst you've given the absolute spend, are we still looking at that 900 level or have any of the pricing dynamics changed there? Thank you.

Okay. In France, we have a separate conversation with all our clients, including SFRs. But as far as we know, there is not a common table, so we cannot be invited to a table that is not there. So what we told to everyone and the answer we got from everybody is that the day that this table will be up and running operationally, of course, we are an important element. You were mentioning the built-to-suit. Well, of course, the built-to-suit should be understood, but the built-to-suit If you do, you do. If you don't, you don't have the CapEx and you can allocate the CapEx to other things. So the B2S per se are a good business. As of today, making a big average, let's say that is like buying the towers at 15 times. So it's a good business. But I don't want to build useless dollars. So if my client doesn't want, I save the capex and I use the capex differently or I give the capex back to my CFO who is happy like a baby.

So on the land, if I may, it is true that until last quarter we were reporting the number of actions we put on this quarter. You have seen more focus on the value of the action because it makes more sense to look at the value. and we will come back if you needed to put the the number of actions number of actions have increased slightly we have done in the first half of the year one point one thousand nine hundred approximately less but one thousand nine hundred i think the first quarter we were below the nine hundred what means that you have increased a little bit but it is still not significant but you have seen that also the value of the actions have been a bit higher so we have increased the land activity by 23%, reaching €115 million in this first half of the year.

Yes, what we can add is that Average price has not changed, so the activity of the land aggregator is not hurting us in terms of return that we can get from the acquisition or long-term renegotiation of the contracts. And very importantly, we are finally landing to a more quiet scenario in France. And allow me to stop here.

Okay, so now moving on to Octavio Adorizio.

All right, good morning. For the benefit of time, let me ask a few straight question numbers. The first one is if you can give us a bit more granularity about the agreements you announced today with TAF and DG. You didn't make any change to our guidance, so I suppose that either the contract is negligible or it's back-end loaded. The other one on the numbers is on the CapEx. The bulk of the growth CapEx is still in site adaptation. Now, from memory, it's a lot to do from upgrading some of the towers you bought to multi-tenancy. So if you can provide an update on the ratio of your tower portfolio that's already been upgraded to multi-tenancy and what's the current upgrade pace you are going at the moment. Thank you.

Okay, I answer the first. So the digital case, the run sharing fee is a demultiplicator of a second tenant fee, because you don't have the physical assets, so you don't use the space and the electromagnetic, so you're using by capacity to host in terms of the potential revenues but you're not using physical space it's a plan that is why we did we didn't change we didn't change because the activation of the 3000 ram sharing would take i would say something between two and three years but this is the the the total contract value uh is not negligible uh is uh is uh three digits so it's uh it's not negligible the total contract value uh but uh the rollout uh you know infrastructure have uh have the the pain point otavio that uh between the moment you agree and the moment you execute there is quite some engineering to do and some a bottleneck also with the equipment providers that have to do activity, you have to change the software, you have to do things. So it will take a little bit of time. But the total contract value is not negligible.

On the second question, as you clearly expressed, we have in the CAPEX, this tower expansion CAPEX, that includes the fact of reinforcing the towers in order to have multi-tenant towers. As you know, when we bought some of the portfolios of towers, some of the towers were not prepared to hold multi-tenants. That's what we are having to do. Can I expand on this?

Because I think it's important. Please consider that in Europe, most of the towers have been built by the operator themselves for hosting their equipment in a 2G, 3G environment. So, when you take the tower, the oldest one, you don't have a big mast that you can put an elephant on it. It was a relatively thin animal that was able to resist 50, 60, 70 kilos. Now, if dual-tenant 5G were hanging at 30 meters, were hanging at tons, with approximately 15 square meters of wind effect, so you have to imagine that in a windy day you have to avoid that your tower goes three miles away because uh because it starts flying which is what happened in portugal uh two months or three months ago a windstorm uh took seven of our tower and moved nicely a sort of 200 meters away thanks god we did not kill anyone so This is very technical that comes from the origin of the industry in Europe. And we are doing not because we like it, but because in order to make the collocation, you have some technical activities that have to be performed.

Sorry to interrupt you. I think it's super clear. And then it depends very much on the country. There are countries that have already done most of the work that needs to be done, others are still needing to do. So it depends very much on the country. If you want, again, with your team, we can give you more color on a country-by-country basis where we believe it will be heading over the next years. Yes, correct.

Okay, so I think that's it. I don't think we have anybody else.

I thought there was James.

Okay, no, so yes, we do. So the last question comes from James Ratsas. So, James, you're the last question for us at lunch and the holidays. So please go ahead.

Good, thank you. Thank you very much for your brief. I was just doing a little back of the envelope calculation, Mark, on what you were saying about the DigiRAM sharing agreement to make it a three-digit value over eight years. That would seem to imply that you're getting about €6,000 per site from DigiRAM sharing. Is that around the right ballpark that you can get?

I'm sorry. I'm really sorry, James. We don't enter in the details of the contract because it's covered by NDA, but there is a little point. When we calculate the total contract value, The duration of the contract has several clauses of automatic renewal. So you should imagine that this contract, and they have an agreement with Telefonica of 15 years. So a good part of our contract, there is a part of the contract with a shorter duration and a part of the contract with a longer duration to be compliant. with the terms that uh that dj has with telefonica so uh it's uh it's uh you you should review slightly on on the envelope you should review slightly the duration of the contract i hope i gave you any hint yes thank you very much indeed yeah and have a have a great summer break thank you okay thank you james

Okay, so we've come to the end of the questions. As always, the team is here to follow up on any specifics that you'd like to cover. If not, have a wonderful holiday and look forward to speaking after the summer.

Thanks, everyone. Thank you. Thank you. Have a good holiday.