Cellnex Telecom Sa Ord

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 e-coins 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.