Good afternoon, this is the Chorus Call conference operator. Welcome, and thank you for joining the Rai Way Industrial Plan 2024-2027, and 2023 full year results analyst conference call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Andrea Moretti, Head of Investor Relations. Please go ahead, sir.
Thank you, operator. Good afternoon, and welcome to all of you today to our 2023 results, and even more importantly, new 2024-2027 Industrial Plan presentation. Considering that I may be new to you, being my first call, let me start by quickly introducing myself. My name is Andrea Moretti, the new head of IR at Rai Way. I joined a couple of months ago, and I will be your new point of contact with the company. You can find my details at the end of the presentation, and I'm obviously looking forward to speaking with you soon. Today's speakers will be Mr. Roberto Ceccato, our CEO, Adalberto Pellegrino, CFO, and Giancarlo Benucci , Chief Corporate Development Officer, who will take you through the latest results and the outlook, pillars, initiatives, and targets for the next four years.
At the end, we will open the line to your questions in the usual Q&A session. Let me therefore hand the call over to Mr. Ceccato. Please go ahead.
Good morning, everyone, and let's begin this call, which will be slightly longer than usual. Excuse me, but I am very excited to share with you plans, our commitments, and priorities for the coming years. This will be a more interactive call. I will start with some quick highlights of 2023 performance, and then I leave the financial details to Adalberto. Then we will move on the plan with my introduction on the foundation of the plan. Together with Giancarlo Benucci , we will outline market trends, pillars, and initiatives. Adalberto will take you through the financial targets, and I will conclude with some final thoughts. Starting with the comment on the year just ended, the fourth quarter 2023 confirmed the extremely positive trends on the first nine months. A growth that actually has been continuing steadily since our IPO in 2014.
In 9 years, the company has been able for now, essentially by organic means, alone to increase EBITDA by 60%, profitability by about 12 percentage points, net income and half dividends by 2.5 times, cash generation by almost 2 times, distributed dividends overall of more than EUR 580 million. All this while keeping net of IFRS 16 accounting contribution, debt essentially unchanged. In particular, 2023 saw extraordinary growth, which saw the benefits of several strengths of our business model materialize. Revenues were boosted by the usual CPI link included in our contracts, by the contribution of new regional multiplexes for the full year in 2022. The entry into operation had been gradual, and by the excellent performance in the tower hosting business of certain customer categories, such as fixed, wireless, and radio, both about 20%.
Revenue growth came in steady and drop in energy tariffs, reduced consumption, and especially careful control of other costs. These trends translate into an Adjusted EBITDA growth in the range of 20%, 19.4 to be precise, in line with the updated guidance shared in November. While slightly above 20% is the growth recorded in recurring free cash flow generation, which rose from 93 to over EUR 110 million. Development investment, totaling EUR 46 million, registered a marked acceleration in the fourth quarter, with over EUR 23 million spent, equal to 4 times the average of the previous three quarters. Acceleration that, as you know, also comes from the board, renewed support toward the execution of diversification initiatives happened in the final days of September.
But we will talk about this in detail shortly, also with some update on the authorization process for the hyperscale, apparently moving in the right direction. Before turning the floor over to Adalberto for more details on the numbers, let me confirm the proposed distribution of almost 100% of the 2023 net profit, or precisely EUR 0.3222 per share, currently equivalent to a dividend yield of 6.7%. While in terms of expectations for 2024 that are consistent with the projection of the new plan, we will strive to keep our Adjusted EBITDA in the growth trajectory and to continue capital deployment in the development projects. Please, Adalberto, the floor is yours.
Thank you, Roberto, and, good afternoon to everyone, also from, from my side. So slide, seven, if you look starting from the top line, core revenues were EUR 271.9 million, vis-à-vis 245 in 2022. More specifically, as concerned RAI, you may see a 9.3% growth compared to the full year 2022 figure, driven by CPI indexation. Let me remember, the comparison with 2022 is negatively affected from the nine months, as we comment in the nine months conference call, by the termination of the medium wave radio service that has been effective since the end of the third quarter, 2022, with a EUR 2 million one-off penalty.
On the other hand, acceleration in third parties revenues is confirmed also in the last quarter of the year, pushed by the full contribution of the new regional MUX capacity sold to local broadcaster, as well, to a lesser extent, the good performance on fixed wireless access player and radio broadcaster. The overall growth is 20%. Moving now to cost and to slide number 8. Total cost in 2023 amounted EUR 92.6 million, against the EUR 94.9 million recorded last year. In particular, excluding non-core items, personnel cost is relatively stable, and other operating costs marks a 10% reduction, benefiting from lower utilities, 48% decrease of energy price in 2023, and also consumption efficiency, -11% in 2023, vis-a-vis the previous one.
While other OpEx items recorded a growth on a normalized basis of approximately 6.5%, this is the overall trend for our OpEx. Let's now move to the next slide, slide 9. Bottom line at EUR 86.7 million, recorded an overall 18% growth in 2023, despite EUR 5.3 million of non-recurring costs. The trend mainly reflect the just commented, of course, EBITDA dynamic, resulting in a significant increase in the profitability over 2022, 475 basis points, just to give a number. Then we have the non-recurring costs of EUR 5.3 million, related mainly to an early retirement program.
Higher EBITDA, following investment activity and provisions, financial charges more than double, reflecting the higher interest that we already commented in the last call. Tax rate, finally, is back at normal level, at around 28.6%. Moving now to the cash generation, slide 10. You can see how net debt, after the increase recorded in the nine months, has decreased during the fourth quarter, coming out at EUR 105 million, in line with the 2022 figure, as a result of, among others, the strong EBITDA contribution, the CapEx spending, and the taxes paid during the year. Last but not least, of course, our dividend. It is worth remembering that part of the debt has been spent so far on diversification initiative.
Overall, a record recurring free cash flow to equity of EUR 114 million was generated, better explained in the following slide. The recurring free cash flow to equity is made available for development CapEx and for the distribution of 99.7% of our net income as a dividend, subject, of course, to the approval of our next shareholder meeting. The dividend proposal of EUR 0.3222 per share implies a dividend yield of about 7%, 6.7%, to be precise, at current market prices, and brings the cumulative distribution since the IPO at approximately EUR 582 million, which confirms once again, our strong focus on shareholder remuneration. Next slide on the sustainability plan. Let me highlight. Let me mention the main target achieved.
Apart from the increase from the increased coverage of the entire DTT network as part of the refarming process that you know very well, let me highlight the reduction of the energy consumption vis-à-vis 2020 figures, -26.4%. Then we confirm 100% of purchase renewable, renewable energy. And then recently, we also obtained an important certification, the Gender Equality certification. The very good results of our activity has been confirmed by the major rating agencies. Let me just recall the last upgrade we received on February, when Rai Way was promoted in the CDP rating assessment with an improved score from B to A-, thus certifying the company at the leadership level. Next slide, last one for this first part, on guidance.
The outlook for 2024, let me remember, is based on, of course, on the most recent level of power futures for 2024. Adjusted EBITDA, we expect a further growth of the Adjusted EBITDA, although limited by new infrastructural costs and lack of energy tax credits, thanks to the CPI link, the rising contribution from DAB services, and regional refarming. As concerns capital expenditure, maintenance CapEx on sale will be slightly above the recurring normalized level, and development CapEx will be in line with 2023 level, with the large majority of the development CapEx devoted to diversification and other third-party internal projects. That's all on my side for this first part. I now leave the floor back to Roberto.
Thanks, Adalberto. And now we could start the chapter related to the industrial plan. Having reviewed the 23 results, let's dive into our new plan and the outlook for the next four years. Let me say it is a plan that we will define as one of strategic continuity in term of our industrial pathway, of combining our traditional broadcasting business with an extension in the media distribution services and integrated digital infrastructure, but of strong implementation discontinuity in term of the focus that we intend to place on execution. When they are not put into practice, ideas, good ideas remain just ideas, no matter how good they are, and we want them to turn into reality. This is why we are making sure that we have all of the enablers we need, including in term of our organization and expertise.
Our plan is based on three fundamental factors. First, our assets. Second, where our targets markets going from a technological and competitive standpoint. And last, what are the main levels that we will enable to us unlock the real value of the company? On this basis, we identify the strategic goals of strengthening what we do today, including extracting more value from assets that are not used to their full potential. Expanding our scope of action, obviously, with an industrial approach and maintaining consistency and synergies with our assets and expertise in order to reinforce our positioning. And as a consequence of the first two points, we should also benefit from the acceleration and synergies coming from external growth, improving shareholder returns by utilizing our financing capacity, having more adequate capital structure. The goals were then declined into initiatives and priorities for a successful planning of the execution.
I would like to make one point. Today, the subject of the presentation is the industrial plan, a plan for the evolution of the positioning, precisely industrial, of the company. And as such, a plan that will work both in a standalone and a transformational consolidation scenario, either with the current capitalization or double capitalization, with the current EBITDA or a double EBITDA, with the current leverage or a higher leverage. I'm not saying anything, anything new. Another way we confirm it as a possible external development area by saying that there is a consolidation scenario in the infrastructure sector, which is being investigated. It is well known that because of institutional, regulatory, and governance context, we are not totally autonomous. Now, nothing is all in our full hands, but we are working constructively and proactively to give to the stakeholders all the elements to take a decision.
This plan has been designed to remain valid in any scenario, and let me say, in some aspects, it could even benefit from synergies in the implementation. Slide 16. At the end of the plan, we are striving for a Rai Way that is bigger, more diversified, more digital, and more efficient, with better growth outlooks. In this ambition, not only we will preserve our features, highly appreciated by the market, but through this pillar, the plan is expected to address the key value levers to unlock company value. But we will come back on this at the end. Slide 17. As mentioned, and one of our starts has been our asset. Honestly, when I arrived, I found a portfolio of asset that goes far beyond the usual external perception of Rai Way, the only tower company of the group.
Of course, there are over 2,300 towers that, beyond any doubt, represent one of Italy's best broadcast infrastructure in terms of coverage of suburban and rural areas. Already here, first of all, we do not just host customer equipment, but this is very important. We design, build, and operate networks, an element which already in the recent past with the refarming, has demonstrated the highest stability and protection of the business model, and which, in the future, could offer further opportunities for growth. In addition to this, we also have a transmission network, that after recent investment, includes over 6,000 kilometers of brand new, high performance, owned national fiber optic networks, backed up and extended by more than 500 radio links, and also with the support of some satellite system section.
This can be extended rapidly and at limited cost, even in the most remote areas. We have three control centers, guaranteeing internal and direct oversight of operations and security. An extensive portfolio of land, in some cases, large plots of land, distributed nationwide, and with availability of electricity and connectivity infrastructure. These characteristics, in addition to our data center, also make them appealing for other users, either internal or for hosting third-party operators active in some verticals. The widespread local presence of very good technicians and engineers, allowing for direct asset management. And then an existing portfolio of customers with long-term relationships, which we can also leverage for most of the new services that we are introducing. And according to our plan, so we will also have a network of data centers and a CDN, a content delivery network, to improve video and data delivery performance.
To sum up, a diversified, modern, integrated platform of infrastructures and people with a national Italian footprint, which in principle, allow to us to go far beyond the pure management of broadcast networks, to be leveraged to support the country's digital transition, offering customers an infrastructure, a one-stop shop for hosting networks, data and services, with the highest performance standards and reaching even the most remote areas. Last but not least, the prerogative of a public asset control to guarantee service neutrality, security, and continuity. Rai Way, that position itself an operator of media services, management of broadcast networks and content distribution services, increasingly also on IP platforms, as well as a digital infrastructure, including towers, connectivity networks, and data center.
These are the two areas to which the company must devote its focus, efforts, and capital, starting with the definition of target markets and the reporting as we wish to see. Slide 18. In both of these markets, media services and digital infrastructure, trends confirm, you see on the slide, on one end, the still positive balance of opportunities and risk in the more traditional business. We targeted development opportunities, and on the other end, the solid rationale underlying our areas of diversification. Now, I leave the floor to Giancarlo to give you more color and details on the market trends.
Thank you, Roberto, and good morning to all of you. So starting with the trend, the market trends. In the media service market, meaning the management of broadcasting networks and content delivery services that we separated into video and radio segments, the details are shown basically on slides 18-23. To sum up, the video consumption, so meaning both the traditional linear television and the digital consumption in terms of OTT, online, and mobile TV, the video consumption continues to increase, supported in particular by the rapid growth in recent years of the OTT platforms, which, however, are now moving towards a phase of greater maturity.
The good news is that despite this OTT boom, and not counting the peaks linked to the COVID impact and effect, the linear television has actually proven highly resilient, with a reduction of only on average 1% per year in the recent period. And within the linear television, the digital terrestrial has been much more resilient than the satellite pay TV. Moreover, considering that the COVID was still a factor in the early months of 2022, if we focus on the second half of 2023 and the first couple of months of 2024, the good news is that the audience has totally stabilized compared to the previous year level. This is true not only from a, let me say, audience perspective, but also from the advertising revenues perspective.
Indeed, the weight and the absolute revenues of the digital terrestrial television are stable and expected to grow slightly over the plan years. Again, OTT growth impacted the pay TV segment in Italy, let me remember, on the satellite platform, and also understandably, considering the fact that the DTT is totally a free platform. For the future, the long-term vision that we have, the one, or let me say, assuming platform coexistence already shared in the previous plan, remains totally confirmed, considering the greater maturity achieved by OTT platforms, the evolution of the linear broadcast offer to better meet the demand of younger generations, the fact that some types of content are inevitably linear, and DTT is the most efficient linear delivery mean.
Lastly, also the requirements of the public service, our largest customer, right, and its contact with the state, in terms of, universality, of coverage. Let me say that this substantial continuity at platform level is also reflected in the stability of the broadcast network operator system, with the structure at the national and regional level that was created after the completion of refarming, and that you see, summarized on slide 21, except for the possible allocation of the last available multiplex, as we will see later. At the same time, the increased use of streaming video content through OTT platform, whether of broadcasters, OTT-only operators, the so-called FAST channels or gaming operators, another segment that is experiencing very strong growth, is sharply boosting the need and demand in terms of traffic volumes for content delivery network solutions.
In the radio segment, sound customer health is expected to continue, thanks to the growing advertising revenues, with the greater availability of frequencies freed up by the TV refarming, supported the extension of the DAB network coverage, both nationally, with possible benefit on networks managed for RAI, and locally, with benefits for our tower hosting activity. Turning now to the digital infrastructure market, that we divided into tower and data center segments. The details are shown in slide 24-28. Precisely as regards towers, at supply level, the number of broadcast towers is expected to remain basically stable, while telco towers should grow to accommodate 5G network densification.
In terms of hosting demand, the number of MNO POPs is indeed set to increase, although mainly in urban areas and on captive telco towers, while broadcast towers are expected to benefit from both the upgrade of existing POPs to 5G and the extension of DAB networks, as mentioned earlier, fixed wireless and albeit at lower rates, at lower tariffs, also IoT. As regards tower companies at international level, there are two major trends in the international landscape: consolidation and streamlining of local markets to pursue operating efficiencies, and progressive diversification away from the pure passive components towards additional services and adjacent infrastructure, both upstream, with small cell, DAS, run as a service, CDN and content management, and downstream of the network architectures with backhauling, connectivity and data centers.
In the data center segment, we have already described the trends in the most recent calls, talking about the diversification project, with a supply-demand balance in Italy that continues to remain positive, especially in certain areas and for certain applications. Demand for large data centers, so the data centers used to host the core system of large customers, such as cloud providers, OTTs, techos, and so on, as well the demand for regional data centers to serve local clients and application require low latency, is supported by very clear drivers that are technological, think of the upgrade of 5G, edge computing and artificial intelligence.
Structural drivers, like the opening of new regions by global cloud providers and the trend towards outsourcing data rooms by corporations and public administration, and regulatory drivers such as the GDPR.... On the supply side, although it's improving, the availability of good quality assets remain inadequate compared to the other to other countries with a similar degree of digitalization, and highly geographically concentrated, essentially in the Milan area. This is reflected in an expected average annual growth of the, data center segment, in particular of the colocation, of around 10%, and even higher for the regional edge assets. So let me now, give the floor back to Roberto for the pillars of the plan. Thank you.
Thanks, Giancarlo. Now explain our vision of the pillar of the plan. By cross-referencing our assets with market trends, with the priority of acting on the main levels of value creation, the plan includes six action areas, six group of initiatives, which in order to provide an appropriate representation, also in terms of the associated results, we have separated between traditional business and assets and diversification areas. It is right that a little bit dense of information, but, I think it is useful to represent, all the meaning. For the traditional business, the strengthening of the activities by exploiting target growth opportunities, particularly to improve DAB coverage and tower business responsiveness. Another is the greater utilization of assets that are currently only partially used for internal purposes, such as the transmission network and land portfolio.
Detail about this will be provided shortly. Improving operational efficiency, mainly by updating the operating model and streamlining the real estate footprint. In the diversification areas, we accelerating the execution and marketing of the two expansion project already underway. The CDN, in order to expand our media distribution services positioning, and the data center network to complement, our digital infrastructure. Another pillar which in view its potential value creation, we are specifically focused on, is improving the capital structure by pursuing external growth, both as a means of achieving industrial synergies, increasing the efficiency and the cash generation of the traditional business, and as an accelerator of new initiatives time to market. Go to the slide 32. Capital allocation.
Before moving on to briefly review the initiatives and their status, the capital allocation calls for investment of around EUR 100 million in traditional businesses and assets debt, together with the initial trends, such as CPI, full expected growth in Adjusted EBITDA in 2027 of around 13% compared to 2023. This means EUR 24 million more, and the CAGR of 3.2% more, with an improvement in margins of 150 basis points. Furthermore, considering maintenance investment, debt net of certain non-recurring work will remain stable at around 6-7% of revenues. Recurring cash generation will reach EUR 130 million for the core business, an increase of 15% compared to 2023. Then investment relating to the diversification initiatives.
Assuming the development by 2027 of the CDN of 10 edge data centers for more or less 3 MW, and the first data hall of the hyperscale data center near Rome for 4.4 MW, this amounting to about EUR 140 million over the plan period. We are expected to provide an initial contribution to revenue growth of more than EUR 10 million in 2027. In terms of EBITDA, while the contribution of this investment is still expected to be marginal in 2027, they have the potential of generating more than EUR 50 million with no additional CapEx, with strong future scalability linked to the further progressive development of the hyperscale data center.
Just for example, assuming the completion of the first two modules with additional CapEx of EUR 160 million, thus increasing capacity from 4 to 17 MW, the EBITDA potential will double to over EUR 30 million. The cumulative distribution to shareholders over the plan period of approximately EUR 350 million, equal to over 25% of the current market cap. Numbers that are based on the assumed continuation of the policy of distributing 100% of the net profit, with an average dividend yield of approximately close to 7%. And let me say, which, as you know, is currently the maximum possible level consistent with our distributable reserves. Reminder of capital allocation dedicated to external growth, according to the guidelines mentioned previously.
Indeed, development, investment, and shareholder distribution bring the net debt at the end of the plan close to 1.5 times the EBITDA. A level that not only enable the external growth, but make it even more important also as a tool to improve the capital structure. Andiamo verso slide 33. From the capital allocation, it is clear how, compared to the previous plan, we aim to more than offset the opportunity represented in the recent past by TV refarming. Area of development are sought primarily outside the relationship with the tenant anchor RAI, but also we have to consider the large investment carried out just in the recent past. The traditional business and assets continue to offer good opportunities for growth. Diversification projects, we will improve growth profile and sustainability in the medium to long term, enter a phase of deep execution. Slide 34.
The value creation associated with the investment in major project is evident. Initiatives in the traditional business involve CapEx of around 5 times the EBITDA generated. For the diversification initiatives, we still see an unlevered project, an IRR level of more than 10%, equivalent to a CapEx on run rate, EBITDA generation of slightly less than 10%, compared to industry multiples that are basically double, primarily reflecting the significant growth outlook in these business areas. Now we could go to the initiative. Without going into too much detail, we now provide you with the flavor of the main initiatives, also to pass on you the sense of, solidity behind them. Starting with the traditional business.
On media network management, apart from a few minor opportunities to improve RAI's digital terrestrial network quality and the initial installation of some 5G broadcast equipment in few cities, mainly to ensure technological coverage for RAI and to support RAI on that, the most significant opportunity is for sure in DAB radio. As a result of the TV refarming process, the availability of frequencies allocated to digital radio has now improved. Three new national frequencies have been identified, which are currently being put out to tender, incentivizing coverage, and several tenders, around 10, have been announced for regional network development. Here, there is an opportunity in terms of both extending network coverage for RAI, which is currently lower than the two other national consortia, and increased hosting on towers for third-party operators.
Another project included in the plan involves the broad coverage of the main tunnels on the major motorway section, with a system that is substantially similar to radio DAS, distributed antenna system. On a side note, the potential awarding of the Mux 1/2, the last multiplex not yet allocated in the Refarming process, since the two operators who inherited the rights of use on L4 MUX were unable to come to an agreement. This is a multiplex also based on VHF frequencies, which RAI would have a competitive advantage, since it is the only operator with VHF antennas used in the past for the older RAI macro regional multiplex. But given the difficulties connected to the tender process to date, due to some pending appeals, in the plan, we have assigned a very low and conservative probability. So this means that we are leaving a potential upside.
On the tower hosting front, consistent with the market trends of last and above, the development opportunities lie mainly in upgrade of the existing point of presence of our MNO customers to 5G, rollout of fixed wireless networks, also taking advantage of the National Recovery and Resilience Plan incentives for gray areas, and next station for DAB radio networks. In this segment, internal action is probably even more important to optimize processes by reducing activation times in a highly competitive market. Now, widening the role in the media value chain, the slide 37. As for, for our positioning in the media services value chain, as you know, our focus is made on content distribution over IP networks rather than on other more competitive or personnel-intensive sub-segment, such as production, post-production, or playout. The development of our Edge CDN is well underway.
In the summer, we will begin trials with the customers to test the features and performance. By the end of the year, we will be marketing a solution that is already quite widespread, with the possibility, of course, to further increase in the number of cache and injection points. It is a regionalized distributed solution, which features also low latency and carrier neutrality, that we believe make it appealing within the multi-CDN strategy adopted by broadcaster, OTT platform, fast channel, aggregation platforms, or gaming operators, particularly for live linear content that develops more traffic, causing server and telco backbone congestion.
Keep in mind that this is also a project with a dual strategic value, providing a public, national, always-on media distribution assets to complement other private solution, representing a guarantee of the sustainability of Rai Way's role, even in the currently, let me say, unexpected scenario, of a more pronounced rebalancing of media distribution platform. Now, we speak about the digital infra expansion, the slide 40. To complete our integrated digital infrastructure, in addition to towers, a key role is played by the data center network. A network that will include several edge data center, varying from hundreds to of kilowatt to 1 megawatt of power, which meet the demand for both high quality local infrastructure, as well as a low latency network for application requiring very short processing and response time. We are speaking about the application of the edge computing.
One large modular hyperscale data center, scalable up to almost 40 MW, towards the core system of major cloud, telco, and corporate customers. All of these, as we will see shortly, will be interconnected via the national proprietary backbone, fiber optic backbone, which can be extended quickly and cost-effectively to even the most remote areas using wireless technology that is in our DNA. Also, in this case, there is a clear value proposition, in particular based on passive hosting and carrier neutrality and synergies with existing assets. To let me share now an update of the rollout plan, also after redefining some design implementation principles to keep the best optimization.
The first five edge data centers in Milan, Turin, Venice, Genoa, and Florence, for about 1.6 MW of power, will be operational, let me say, not delivered, but operational, so interconnected, and therefore able to generate revenues by third quarter 2024. On line 42, the picture that you see are not... There is the slide. Perfect. On line 42, the picture you see are not renderings, but the actual data also. I think, I think that you can get an idea of the quality and reality. Coverage of central southern Italy, Bologna, Bari, Campania, Sicily, reaching about 10 data centers over the next two years. A possibility of scaling up in other areas based on customer requests, with benefits not included in the plan for now. And on the hyperscale front, the hyperscale data center, apart from confirming... Could you change the slide?
Considering the hyperscale data center front, apart from confirming the rationale behind the choice of Rome as the next Italian region for larger cloud operators, the updates mainly regard authorization. The preliminary service conference, meaning the procedure during which comments are collected from various authorities, has been initiated by the municipality of Pomezia, the municipality of Pomezia, with the strong support from their side, which has therefore agreed on the project. The timing of this step also depends, of course, on the comment raised, so far in line with our expectation. Indeed, we are already working to address them, but a reasonable target could be to get the construction permits by the end of 2024. Keep in mind that the permit itself will generate a good value to our properties.
Then, moving on to the final design, tendering, and construction, assuming 12-18 months for these activities, the estimate set forth in the plan is that the first room for 4.4 MW, half of the first module, will be available and therefore starting generating first revenues in 2027.
Okay, Roberto, take the commercial approach and priorities on the data center. Let me say that together with the acquisition of specific expertise and the internal reorganization aimed at providing a separate focus and appropriate levels, the marketing of new services and infrastructure will involve direct relationship with major customers, which can be managed even without a particularly widespread sales force, while reaching the smaller customers, so the SMEs, through partnership with players such as system integrators, telco, and brokers. Let me pass to you a few messages on the current feedbacks that we are getting from prospects. First of all, I will say openness to marketing partnership, also due to the absence of any conflict of interest as we are focused on the more infrastructural component.
Secondly, pending more significant uptake of low latency services, we are collecting very good interest from cloud operators, ICT, and local SMEs interested in hosting at local data centers with high quality standards like ours. And finally, although it's difficult to get real pre-commitment, especially when the assets are not going to begin operations quite soon, for example, for our hyperscale data centers, we are, in any case, approaching customers, let's say, potential initial anchor customers, that will improve the investment risk/reward profile. Now moving to the other pillar in terms of valorization of internal asset, Roberto, I think you can take it.
Yes. When I say valorization internal assets, I am mainly referring to the transmission network and land portfolio. In the recent past, Rai Way invested in a proprietary fiber optic backbone of around 6,000 kilometers, covering Italy regional capitals. This fiber is then complemented and extended with IP radio links for signal distribution to the site. Of course, the net was originally created to give the best quality for contribution and distribution activities for Rai. But following the upgrade, we have spare capacity available for transport services that we could offer to data center customers to sell intra data center connection, but also domestic international carriers, that's mainly on a wholesale basis, that want to complete their network or have additional capacity in the event of saturation on the most popular network section or as a backup.
In addition, the availability of towers and our experience in network planning and deployment allow us to offer, again, on a wholesale infrastructural basis, so to carriers, which in turn sell connectivity to end customer, wireless point-to-point text station to quickly and cost effectively reach venues in extremely remote areas that are covered by our towers. Let me emphasize that we do not intend to compete with carriers on connectivity, rather to support them. With regard to land, consider that our sites are not rooftops, but often proper campuses with larger areas available beyond the tower. In some cases, for example, the former wide media facilities no longer used. We therefore analyzed about 40 plots of land covering over 200 hectares, 2 million square meters, and identified some areas for development, in particular.
The installation of solar power plants, so electoral take, on a certain number of sites, prioritized by sites and internal use data center, for a potential target about of around 40 MW. The investment will be borne by Rai Way with the management entrusted to a third party. In the plan, we also assumed criteria for selling the energy that reduce the exposure to price swings, with the returns that are nevertheless attractive compared to the reduced risk profile. This investment is also, let me underline this point, consistent with the government support targets for production for renewable sources and is in line with the company's commitment to environmental protection. Then operating efficiencies. Go to the slide. Very briefly, the fifth pillar is the operational efficiency. We cannot forget them.
I'll be the first to admit that at our starting point, with maybe the margin of 66% makes it challenging to pursue further efficiency, but basically, we evaluated two drivers that have been identified. The first is related to the digitalization of maintenance system based on predictive maintenance, maybe with some flavor of, in, artificial intelligence solution. This consists of the installation of IoT sensor and monitoring system on more than 200 sites, representing the largest maintenance workload. It is optimizing field force by relying on full prediction and increase the quality service level that we could grant. And then the rationalization of offices and real estate portfolio, that today representing a rental expense of more than EUR 5 million, based on space and rent reduction and the smart office approach. Now, we go to the improving capital structure, slide...
Oh, this is a, a very important slide. As we have previously commented on the goal of improving the capital structure through external growth. Obviously, this growth must be functional to the planned industrial objectives, and therefore primary aim at that. Industrial synergy, increasing the efficiency and cash generation of the traditional business, and accelerating the time to market of new initiatives by acquiring assets and/or expertise and operating companies. In the first area, apart from a few opportunities to consolidate appealing, independent, medium, small portfolio that we are looking for anyway, possibly, increasing exposure to specific customer segments, especially radio. The relevant option, let me say, is well known, and we are not hiding from it. On our side, its inclusion in the plan reaffirms its strategic and industrial rationale.
The rationale that, of course, needs to be more precisely quantified and evaluated, also depending on the possible terms and conditions. As commented at the beginning, due to the institutional, regulatory, and governance context, it is not only in our hands. I recently expressed interest in evaluating industrial development opportunities for Rai Way, and we are working together with our advisor to constructively and practically to give to all the stakeholders the elements to make a decision. In the second area, the trend that we have anticipated of a separation already observed in the tower segment between service providers, e.g., cloud and telco, and data center infrastructure is beginning to materialize in the market. Our interest is mainly in independent assets with existing customers and development potential. Assets spin-off from anchor customers with the simultaneous signing of a master service agreement.
This could be from telco, ISPs, cloud providers, corporates, and new assets replacing our construction. And in any case, geographical areas and technical qualitative features consistent with those of the network that we are planning and developing. Moving to the slide 52, regarding ESG, Adalberto has already commented on excellent results achieved so far on all pillars of sustainability. We place us among the best companies, also in terms of ratings. With the new sustainability plan to 2027, we have broadened the topics to work on, confirmed key targets, such as carbon neutrality by 2025, and maintaining 100% of renewable energy use, and aimed to strengthen cybersecurity and internal ESG data control center. Let me now give the floor to a lot of numbers to Adalberto Pellegrino.
Let's go on with some numbers. So thanks, Roberto. So slide 55. Slide 55, you may see our standard representation of the main financials of the company with the target figures for the last year of our plan, 2027. All the key metrics show a positive trend of growth, with revenues that are expected to touch EUR 316 million in 2027. The long-term marginality is confirmed above 65%, a threshold we exceeded in 2023. Sorry, and this, of course, is resulting in EUR 207 million of Adjusted EBITDA. Net income is expected to reach EUR 92 million, impacted by growing D&A linked to our development CapEx.
I remember over EUR 240 million on a cumulative basis, that will continue to guarantee a solid path of growth even after the last year of the plan. Free cash flow to equity will reach EUR 140 million in 2027, more than 2 times the IPO values. And last chart, net debt is forecasted at EUR 286 million at the end of 2027, 1.4 times the EBITDA, with an improved capital structure as a consequence of the development CapEx spending and the dividend policy, on which I will give you some more details on the next slide. I was quick on the, on this first numerical slide, because we now have a detail for each of those key metrics. So let's go on with the following slide, 56.
Before entering into details, just a quick forward relating to the new breakdown of our core revenues. In particular, under media distribution, we have included, and we will include, the following revenues: RAI service contract, broadcasting, transmission, network services, and CDN. In 2023, total revenues from media distribution amounted approximately to EUR 241 million. On the other side, under digital infrastructure revenues, we have included revenue arising from tower hosting, connectivity, edge data center, and hyperscale data center. In 2023, total revenues from digital infrastructure amounted to EUR 31 million. Finally, other revenues are related to land valorization, mainly concerning the solar energy production initiative, that in 2023, didn't register any revenues. Another important breakdown we will provide is the one between traditional business and diversification initiatives, as already highlighted by Roberto.
The latter includes one item of the media distribution revenue, CDN, and two items of the digital infrastructure revenues, edge data center and hyperscale data center. All the other revenues are part of the traditional business. Following slide. Let's move to slide 57. Slide 57, as you may see, you expect to reach EUR 316 million at the end of the plan with an average year-on-year growth of 3.8% over the next four years. So the expected contribution from the diversification initiatives is, in 2027, will be greater than EUR 10 million.
Please, let me clarify that this is not the full run rate impact, because the EUR 140 million CapEx to be spent till 2027 on the diversification project could generate up to EUR 40 million of revenues, as you may see in the slide, and even more than EUR 70 million, assuming further CapEx on the hyperscale data center to increase the capacity from 4.4 MW, assuming the plan, to approximately 18 MW.
Media distribution revenues will reach EUR 266 million in 2027, with a CAGR of 9%, thanks to new services to RAI, mainly related to the plus coverage extension, and to the launch of CDN services with an overall CAGR of 2.5%, with digital infrastructure will touch EUR 44 million euro, leveraging on the progressive growth of the revenues from the edge data center, connectivity, and on the launch of the services in our hyperscale data center, forecasted in the last year of our plan. So, very interesting growth rate. Let's now move to the following slide on the EBITDA.
Next, we expect a growth of 3.5% on a yearly basis, on the Adjusted EBITDA, that is expected to exceed EUR 200 million in the last year of the plan, reaching the amount of EUR 207 million in 2027. In the first years of the plan, the Adjusted EBITDA growth is held back by startup cost of diversification services. Furthermore, from 2026, the effect of efficiency measures and traditional business will gradually begin to materialize more significantly, as well as the results of new initiatives, such as the solar energy production project, with has a very high marginality, and will begin to support the overall financial starting from 2026.
Headcount will increase over the years of the plan of about 30 units to support the diversification initiative expansion. On the traditional business, the introduction of predictive maintenance will help to enhance efficiencies in operating model, as Roberto already commented. Notwithstanding the impact of the diversification initiative, the overall EBITDA marginality in 2027, as I mentioned, is confirmed above the threshold of 65%. Marginality on core business, excluding the diversification initiative, is expected to continue to grow. In 4 years, it will gain almost 150 basis point. As you may see in the slide, the expected contribution from diversification initiative in 2027 is limited to EUR 1 million.
In the long term, it should exceed EUR 15 million, considering the development CapEx forecasted within the industrial plan time horizon, reflecting the typical return profile of infrastructure initiatives. Assuming a further investment to increase the capacity of the hyperscale data center to about 18 MW, the impact on EBITDA related to all these initiatives will be even higher than EUR 30 million on a run rate level, with strong scalability. Following slide 59, sorry. Maintenance CapEx, including an extraordinary project due to the reconstruction of some towers, a very limited number of towers, the overall ratio of maintenance CapEx to revenues should be equal to 6.5%, on average.
The industrial plan foresees total development investment on organic basis of EUR 240 million, of which about EUR 100 million relating to growth opportunity of the traditional business, and roughly 140 linked to the rollout of diversification initiatives. Assuming, let me recall again, for 2027, the completion of CDN, 10 edge data center, and the development of the first hyperscale data center data hall for 4.4 MW. Hyperscale data center is the project that is expected to have the most important impact on CapEx, with a total spending of EUR 77 million. Following slide, 60, number 60, cash generation to shareholder will remain very strong during the whole plan, as shown here.
2027 free cash flow to equity target of EUR 130 million is EUR 16 million higher than 2023 level, with a broadly neutral contribution from diversification initiatives and very light reduction in 2024 and 2025, due to interest rate, debt stock, extraordinary maintenance. If we think in terms of yield, the current 9% is expected to grow up to 10% based on current stock prices. Let's go on. Net income is impacted by the growing trend of the D&A, mainly due to the development CapEx we commented, and to a minor extent, due to the increase in financial interest.
Notwithstanding the mentioned trend, net income will reach approximately EUR 92 million in 2027, with a growth of EUR 5 million vis-a-vis 2023 figures. Also, in this industrial plan, in continuity with the past, the proposed payout ratio is around 100% of net income, resulting in an average dividend yield of approximately 7%. This means an expected distribution of approximately EUR 350 million on a cumulative basis in the 4 years of the plan, equal more or less to 20, actually more than 25% of our current market cap. Last slide, number 62, containing a final overview of the capital structure evolution in the next 4 years.
Considering the organic CapEx plan, as well as the continuation of the dividend policy based on the 100% net income distribution to 2027, net debt will be around 1.4x the Adjusted EBITDA, confirming our flexibility to push external growth with a sustainable level of financial leverage that we believe is between 3x and 4x the Adjusted EBITDA. That's really all on my side, and I will hand over to Roberto for the closing remarks. Thanks.
Thanks, Adalberto. As you see, we have outlined the assets, the positioning, initiatives, and target of our 2024, a plan with a very clear industrial path, consistent with the company infrastructure, background, and expertise. Focus and effort on two segments, media distribution services and digital infrastructure, so complementing our traditional broadcast management of networks and services. Let me say that we will maintain a strong care on this segment, also because we respect our clients, our customer, like RAI, regional broadcaster, and all our customers of today. Then, traditionally, business and assets continue to offer targeted growth opportunities coming from network extension. Thanks, let us remember, to a unique business model, efficiency or the better utilization of assets, but this cannot be all. We have to secure, we feel this kind of responsibility, long-term growth, and now is the time to do it.
We confirm the ratification path undertaken, even after the comprehensive new board assessment. A path consistent with the company profile, with synergies, with assisting assets and expertise, with an acceptable level of competition, with growth and returns. We are creating one of the most modern, interconnected, high-performance digital infrastructure for network and data hosting, and expanding our media distribution services to the new platform. We also committed to accelerating the strategy of efficiency and diversification, also through external growth, by exploit our high financial flexibility. Let me say, a rare feature in this sector. I know that many of you consider it to be a limitation, but today we could see as a competitive advantage for Rai Way. Slide 65. A path that, while preserving the company's strengths appreciated by the market, addresses all the main levers to unlock the full value of our company.
Enhancing the cash generation of current assets, getting returns and improved long-term outlook from expansion into synergistic business area, obtaining industrial benefits from external growth opportunities, and improving returns, reaching a more efficient capital structure and size scale. So let me say, the priority is very clear in our mind. In the short term, priorities lie in completing the assets, finalizing first commercial agreements, and trying to accelerate external growth. Now, the focus shifts to execution, and on this, we can assure you our full commitment to deliver greater and good shareholders value. That's really on our side. Thank you for the attention. Sorry for the length of this presentation, but was needed. We can now open the line for the Q&A session.
Thank you. This is the Chorus Call conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone who has a question may press star and one at this time. The first question is from Fabio Pavan, Mediobanca. Please go ahead.
Yes. Hi, good afternoon, and thank you for this detailed presentation. I have two questions, please. The first one is referring to new business opportunities. You mentioned in the presentation you already started discussing with customers, potential anchoring investors, anchor clients. So could you provide us some more details on how this system will work? We're talking about long-lasting contracts. You said that there is no pre-commitment, but how confident are you in meeting the targets on that part of new business? And the second question is a more ample one. Just to summarize, if I understood properly, when we look at this plan, a conclusion seems to be there are a lot of upside left.
First one, on traditional business, other one is on a potential speed up in investments to increase capacity of edge computing, our hyperscaler, and finally, sector consolidation. Thank you.
Hi, Fabio. Let me start with your first question. Let me say that during the presentation, we tried to give you a bit of flavor on the marketing activities on the new assets, both on CDN and edge data centers. Let me say that on your question is how confident we are. I would say that we are relatively. The confidence is good, is really good, based on the feedback that we are getting right now. Let me say that in terms of the CDN, we have seen customers very interested in trying in testing our solution.
You know that there are other solution on the market, but we are addressing a very interesting niche, the one for mainly for linear distribution, where we see our solution as being a competitive and technological and performance advantages, and the interest in trials is very supporting. As for the data centers, let me say that what is at certain extent also surprising us is the very good interest and level on demands that we are getting for from local clients. You know, there are a little bit of I would say delays in the uptake of real edge computing applications.
... the consensus is that sooner or later, this application will come. There is a strong interest for our assets as regional assets, so not as edge assets, but as regional proximity assets from customers, that today, if they want to move their servers in high quality assets, they need to put them hundreds and thousands kilometers away from their headquarters or venues. So very good interest on that front. On the hyperscale data centers, as we said during the presentation, I mean, the construction, the authorization process and the construction will take a little bit of time.
We are approaching, nevertheless, customers, potential anchor customers, and let me say that the interest that we are getting, again, is very good, both for our asset or potentially to develop—also to develop new asset, in particular, in the Rome area and in the south of Italy. So let me say, you summarize pretty well the situation. The answer is that the feedback that we are getting so far are good. While concerning your second question, Adalberto?
So hi, Fabio. In terms of upside left, I would say on the traditional services, we, for sure, are monitoring the market in order to understand if there will be any better opportunity to have a better extension of the DAB or some other project in relation to the potential management of the entire part of the Mux 1/2. But I would focus on the diversification that could represent an upside more after the business plan time horizon, because especially on... As you mentioned, and as we highlighted in slide 55.
Sorry, let me on the slide on the core revenues and on the beta, you see that clearly the potentiality of our development investment on diversification will have a full impact after the last year of our plan, and this is for sure something that may represent something interesting in term of future growth. And then, last point, the sector consolidation, the potential sector consolidation is a potential upside, I, as you mentioned.
Let me add, on the last point, something that, Ciao, Fabio. So I am Roberto. As I told you, in the past, I think that we have to see and to evaluate this company for what it is and for what it would like to be. And the consolidation is something that I was very clear on that. We have to see as a very interesting upside, according to the condition, but is it really something that we would like to put as an add-on on the evaluation of the efforts that we are doing to move the company. We are moving the company.
We have moved the company in a reasonable thinking way, taking some risk, but if there are no risk, there is no margin and value creation, and so this is our path.
The next question is from Stefano Gamberini, Equita SIM. Please go ahead.
Thank you, and good afternoon, everybody. Few questions also from my side, if I may. First of all, regarding your current capital structure that you said is under geared at 1.4 times EBITDA, but you don't have reserves to distribute in order to improve this leverage, and giving back money to the shareholders, this could be a way. So my question is, in case of M&A deal and the opportunity to improve the, we can say, your equity ratios, in a new combined entity, could you consider to re-leverage your company and moving in the comfort zone, 3.5-4 times the EBITDA, paying an extraordinary dividend or a buyback? What is the preferred tool that you may have in this case?
So my question is, okay, expansion in traditional is an add-on, but, I think that the market is interested to understand if, this could be a way, paying extraordinary dividend, in case of possibility, because of improvement in the, equity ratios.... The second, in case of a deal with, Eight Towers, do you consider that an alignment of the contract structure of the two companies, mainly related to the two anchor tenants, MSC on one side and RAI on the other, is necessary? The second topic, in my view, is the trend of net debt.
If I add, on one side, $140 million development CapEx, EUR 350 million of dividends, and on the other, around $490 million of recurring free cash flow, as an average of the $115 million and $130 million per year that you expect, I get a worsening of net debt in the region of EUR 100 million between 2023 and 2027, while your target is EUR 80 million higher. Could you help us to understand better why?
The third, if I may, as regards to $25 million, EBITDA improving of traditional EBITDA, you underline, could you help us to understand what is the breakdown between the, we can say, homogeneous growth and the different breakdown among the $100 million investment that you will invest, sorry, in the next years. Because if understood correctly, from other revenues, which means solar activities, you expect just $5 million revenues in 2027. So it is not clear to me to understand better what are the different investments and the returns you expect.
Finally, very finally, if you help to understand, which is, the part of revenues that you will have at the end of the plan from RAI, and what part is included in your long-term service contract, and updated, therefore, CPI annually, as a total, and how the rest of revenues works in your plan. Many thanks, and sorry for many questions.
Hi, so let me try to give an answer on your questions. Let's start. The last question was on the component on the weight of the RAI revenues on the total amount of revenues we recorded at the end of the plan, that is EUR 360 million. Roughly, we should be close to 80%. Then, it's not clear what you were saying about the CPI, but all the revenues related to the contract with RAI are, of course, linked to the CPI.
That was 0.3% in 2024, and then we assume 1.5% in the following years. Of course-
My question was related to the fact that you will receive additional revenues, for example, from the exploiting of DAB in the future from RAI. Are these also included in the contract service or not? Do you have also-
Yes.
Part of RAI revenues excluded? Thank you.
No, no, these revenues are going to be included in the contract. Technically, they are called Servizi Evolutivi. That is a specific clause of the contract that regard all the new needs of our client. And so we will include inside the contract, as we did also for the other initiatives in the past. Then, same we did for refarming. Just, just to be clear, even if the refarming at the end has been reclassified in the main fixed consideration. But at the beginning, we treated as new services, these that, according to the contract, is called Servizi Evolutivi.
Again, about the trend of the net debt, actually, I tried to write the figures you mentioned, probably on which it's better to have a catch up later. But just let me give you some highlights. Probably the free cash flow to equity is a little bit lower than the figure that you mentioned, just because, in the first years, we, as you may see in the slide, in the specific slide on the free cash flow to equity evolution, you may see in 2024, 2025, figures that will be below the amount we recorded at the end of 2023.
And then, there will be some impact coming to the linked to the working capital dynamics. In particular, in 2027, we should have a decrease of the net working capital due to the decrease of the CapEx vis-à-vis the previous period. Of course, then we may analyze better this in a specific call in order to show and to share your figures and give you the best help to have a better understanding of the overall dynamics of our net debt. As concern other questions, it was on the deal, the potential deal with EI Towers, about the potential alignment of the contract.
Of course, let's see the potential deal, and then if we will have it.
Let me add something on that, Roberto speaking. When I say that, we have to confirm the rationale that in principle, from the strategic industrial point of view, are interesting, of course. When I say that the condition also should be exploited, when I say condition, one is one of this condition we have to exploit. Of course, this kind of, any kind of, at least from the Rai Way side, everything should be performed to create value, good feedback for our shareholders, all shareholders.
Okay, then in terms of reserve, yes, as you correctly mentioned, we don't have available reserve as of today. But, according to the potential consolidation of the market, we could start to book available reserve, assuming the deal, and this, for sure, will give us flexibility to change in a faster way our capital structure, if required. Consider that, if the consolidation happen, the net debt level for sure will increase, because we will include the net debt of the other entity. But, we should still remain below the three times the EBITDA. This means, as you mentioned, that we have flexibility to improve our capital structure with some more debt, but let's see which will be...
It's quite early now to elaborate on this. Of course, we should analyze organic opportunities, as we discussed, we have a lot of investment in the plan and also after. Alternatively, of course, we will have, theoretically, this alternative that should be materialized only in case of a merger.
While Stefano, on your last question on the contributions of the various, let me say, projects, on the growth of our Adjusted EBITDA, in particular, in terms of traditional businesses, we have put here and there in the presentation, all the information, so let me help you. We are guiding for an improvement in the Adjusted EBITDA of around, of the traditional business, of around EUR 24 million. Then, if you look on slide 33, the EBITDA coming from the investment projects amount to around EUR 14 million. This means that EUR 10 million is more related to the, let's call it, inertial or recurring business, so basically CPI. The remaining EUR 14 million of Adjusted EBITDA increase is related to the contribution of new projects.
Just to give you an indication, I would say that out of these EUR 14 million, one third will come from new projects to high, one third from valorization of internal assets, and one third from other projects to third parties, and efficiencies.
Thank you. Very clear. Thanks a lot.
You're welcome.
The next question is from Giorgio Tavolini, Intermonte SIM. Please go ahead.
Hi, good evening. Thanks for taking my questions. I'm struggling to reconcile the reclassification of historical core revenues for 2023, particularly, the transition from third parties revenues. So that was EUR 42 million in 2023, and now you expect under the new representation, roughly EUR 31 million under the digital infrastructure revenues. So I was wondering what is the EUR 11 million portion of third parties services now being reclassified, if I understand correctly, in the media distribution category? The second question is on the CapEx allocated to the data center initiatives. In your previous guidance, you were indicating something like EUR 200 million CapEx.
Applying 10x CapEx EBITDA multiple, it was expected to result in a run rate of roughly EUR 20 million in the longer term. Now, your guidance suggests a CapEx cycle of EUR 138 million, so with a 9x multiple, leading to a run rate of roughly EUR 15 million without requiring further CapEx investments. So, I was wondering if that's an accurate understanding of mine, and in particular, could you please provide an insight on the level of development CapEx allocated to the data center initiatives in 2023? Since I think maybe the 2024-2027 CapEx envelope is just a portion of the investments.
You already made some investments, and I was wondering if there was a right sizing of the CapEx spending or if you are, let's say, not considering the entire envelope in your calculations. The very last question is on the long-term EBITDA margin. I see in 2027 the profitability stabilizing at more than 65%. And in the longer term, you expect benefits from the scalability of the business related to the data center. So I was wondering what is a rational, let's say, a fair level of profitability looking at the longer term when the data center upside will be materializing? Thank you.
Ciao, Giorgio. Take all your questions. On the first one, the reconciliation of revenues, basically, the big part that is moving from third party is under the media distribution is related to the regional refarming. So basically, the frequencies rental to regional broadcasters, that of course, today is under the third parties being not right, but it's a let me say, a media distribution service. Then there are other, let me say, minor services related to broadcasting and transmission services, while under the digital infrastructure, you will find mainly the tower hosting, the tower rental component. Then coming to your second question on the CapEx on diversification. No, basically, compared to the number that you just mentioned, that you have in mind, the scope is a little bit different.
We are guiding for EUR 140 million of investments in new diversification initiatives, and then you have to sum up the EUR 20 million that we have spent so far, so let me say, in 2022 and in 2023. So you will end up in adding 160. Then, compared to the 200 million that you have in mind, the gap is basically linked to the fact that the EUR 200 million was based on the deployment of the first module of the hyperscale data centers, while as of today, by 2027, we are including only half of the first module.
So let me say that it's a difference in the scope, in the perimeter, of the assets that we are developing, but there are no changes at all in terms of total spending and returns that we expect from these assets. Indeed, I mean, if you look at the run rate contribution, at run rate level, it's again consistent to the ratio in terms of a levered IRR and in terms of, let me say, CapEx on EBITDA generation, we have always guided for. Last question on the EBITDA margin. Let's put it this way, I'll try to put it very simple. On the traditional business, let me say that we will reach, by the end of the plan, 68%. It's a very good level.
Then going forward, let's see, but always keep in mind that the CPI link, in principle, should increase over time, the profitability flowing entirely into EBITDA. While, in terms of, diversification initiatives, of course, in 2027, they will have a dilutive effect, given that they will bring more than EUR 10 million in terms of revenues and basically no EBITDA. But the indication I can give you is that, on a steady-state run rate, the level of EBITDA margin for these businesses is around 40%-50%.
The next question is from Antonella Frongillo, Intesa Sanpaolo. Please go ahead.
Yes, good afternoon, and many thanks for the presentation. Just a couple of follow-up questions and then another two questions. So the first follow-up question is on the breakdown, EBITDA breakdown, in the target, in the 2027 target, the EUR 24 million you were previously mentioning. You said that EUR 10 million is inertial and EUR 14 million from new projects. Could you help us understand how much is the impact on the start of the startup costs of new initiatives that you also mentioned in your press releases? The second follow-up is on the new businesses, not from RAI. Is it fair to say that over the long term also this business will be CPI linked?
Then I have a question on the contract, service contract with RAI. The next expiry date is in 2028, so just one year after the end of this business plan. I know that it's still very early, but you know that we have to make valuations based on long-term horizon. So how should we reason on that, on that renewal? Very last question is on consolidation. We read on the newspapers this morning several things, among which that you would have appointed an advisor to evaluate a potential consolidation. So can you confirm if you appointed an advisor or not?
So, we can confirm it, of course. Actually, I read about this also, also in the past. This is not the first time I read it. Anyway, let's go on with the question on the number and on the other matters. If I remember, you mentioned the expiration, the next expiration of the contract with RAI, and 2028. This is not related to the last year of our business plan. Simply, we ... I believe same duration was in the previous business plan.
Actually, we end in 2027, adding one more year in order to reach the breakeven of the diversification initiatives, in order to give so some more color on the evolution of these important projects. As concerns the new businesses and the potential link to the CPI, we expect to have a link to the CPI also on this stream of revenues. And then, last question was on the EBITDA 2027, the breakdown. Probably if you may just repeat the question, I can try to give you an answer. Probably, you mentioned-
Yes.
If I wrote in a proper way what you said, you mentioned the startup cost, how this is going to impact on the trend of the EBITDA?
Yes, correct.
the impact-
How much are they?
In absolute number, you will see in the slide, we are not talking about a big number, -EUR 3 million--EUR 4 million on a yearly basis of all the initiative. And then, we're starting from minus one, and the target is to have the breakeven in 2027.
A follow-up question on the renewal of the contract with RAI?
Ah, sorry, yes. I forgot the second part of your question. Right. We didn't see any impact. We expect to have a renewal, and so, I don't see any significant issue on this. So, at the end of 2028, we expect to have a renewal like the one we had at the end of the first seven years of contract.
So at the same terms as now?
Yes.
Okay. Thank you.
You're welcome.
As a reminder, if you wish to register for a question, please press star and one on your telephone. For any further questions, please press star and one on your telephone. Gentlemen, Mr. Moretti, there are no more questions registered at this time. I turn the conference back to you for any closing remarks.
Thank you. The call is over. We thank you, all the participants, and look forward for further questions by phone or emails. Thank you, everybody.