Good morning, everyone. My name is Juan Gaitán, Cellnex Director of Investor Relations, and I would like to thank you all for joining us today for our Q2 2022 results conference call. As always, I'm joined by our CEO, Tobías Martínez, and our CFO, José Manuel Aisa, and our Deputy CEO, Alex Mestre, who will lead today's session. Throughout our prepared remarks, we will refer to the presentation we have published earlier this morning, and then we will open the floor for your questions. Without further ado, over to you, Tobías.
Good morning, everyone, and thank you so much for your time. Let me please start with the main highlights of the period which has been marked as always by consistent operational commercial execution, a strong commitment with our strategy and our value creation framework, and a reiteration of our targets in a difficult macro backdrop. Our organic growth continues to be strong with the new PoPs on existing sites and our build-to-suit program generating a 5.2% growth. The main driver behind this strong performance has been, again, the significant contribution from our build-to-suit program with more than 1,100 new sites deployed in the quarter, and with Cellnex having been able to successfully manage our supply chain, which allows us to meet all of our clients' network requirements.
We continue to make progress on our efficiencies plan, reiterating our 2025 target, and from a business development standpoint, we are extending contracts with key anchor tenants, as well as making progress in our industrial partnership with Digi in Portugal. We are again presenting a solid set of results, with revenues increasing 59% compared to the same period last year. Our Adjusted EBITDA 59% on our recurrent levered free cash flow 62%. We believe Cellnex is one of the few companies in the sector keeping pace with nominal GDP growth. We have integrated ESG as a key pillar in the way we conduct business, and our efforts are being recognized by ESG rating agencies with constant score improvements.
Thanks to recent board composition change, we now have more than 50% female representation, and we have also launched the second edition of our Cellnex Foundation program in order to continue implementing initiatives to reduce the digital divide and contribute to environmental sustainability. Our equity story remains intact, and this management is committed to a consistent execution of our successful strategy. We will continue delivering on our strong growth story, both organic and through selective M&A. Fostering customer loyalty and building long-term industrial partnership will continue to generate sustainable organic growth. Trust and credibility is a precious asset, and we will continue to deliver on all of the commitments with the market. On external growth, we are confident we will execute on our targeted pipeline as the opportunities are still there and our firepower is fully funded.
Our ability to crystallize long-term industrial opportunities with European MNOs remain intact, both inorganic and organic, with Cellnex the partner of choice for the deployment of digital infrastructure under a neutral host model. Finally, we are reiterating our 2022 guidance, which is trending to the upper end of the full year range. Please note that the CK Hutchison UK transactions will be closed in the coming days, and all of our current metrics are also supportive of our medium-term guidance. If we go to slide number three, we are showing here the profile of our Adjusted EBITDA and cash flow in 2022, how these magnitudes are being generated during the year. As you can see, they are increasing every quarter as we generate organic growth, make progress on our build-to-suit programs and efficiencies plan, and include the contribution from the CK Hutchison UK deal when it is closed.
Our 2022 guidance implies an expected EBITDA and recurrent levered free cash flow of around 40% compared to 2021. Moving to the following slide, I would like to highlight that we have successfully completed 25 integration processes in 12 countries since 2015, with 15 integrations in 2021 only. The rest of our ongoing projects are progressing as planned. With a particular emphasis in the U.K., where we are still finalizing the remedies process before we can close the CK Hutchison UK deal. If we go to slide five, just a quick review of our current footprint and medium-term financial targets. When all our deals are closed and our build-to-suit program complete, Cellnex will further strengthen its position in Europe as the main independent telecom infrastructure operator.
Managing a portfolio of almost 140,000 sites, with presence in 12 markets, boosting our financials, and becoming the industrial partner of choice for our clients. Please note that these site numbers exclude the execution of remedies, processes on which we are intensively working today. Just a quick reminder of our medium-term guidance, which we are reiterating. It implies an annual growth of more than 20% in all our key financial metrics since 2020, with a targeted EBITDA of between EUR 3.3 billion and EUR 3.5 billion in 2025, including the impact from remedies, processes, and without the additional contribution from the projects in our pipeline still to be executed. If we now move to slide number six, let me please share some considerations regarding our ESG approach.
As a company with a clear long-term view, ESG becomes an integral part of our strategy, involving all operational areas, markets, and of course, all decision-making entities from a corporate governance perspective. Our board of directors approved last year our 2021-2025 ESG master plan. With 92 different initiatives, each of them linked to the United Nations Sustainable Development Goals. We are linking key initiatives within this master plan to remuneration, both annual variable, and our long-term incentive plan. Our ESG committee coordinates the actions to reach these goals, including talent management, equity, cultural diversity, environmental initiatives, and climate change strategy. On this slide, you can see the progress we are making on green energy sourcing, emissions reduction, our social initiatives, and corporate governance improvement measures.
With this, I will now hand over to our CFO, José Manuel Aisa, who will provide more details on the period.
José Manuel, are you online? I can continue.
Yes.
If we move to slide eight, let me please provide a few more details on the period. Our revenues have increased 59% to EUR 1.7 billion. Our recurrent free cash flow has increased 62% to EUR 637 million. Total PoPs have increased 27% if we include the contribution from organic growth and M&A. If we focus on organic growth only, our PoPs have increased 5.2% compared to last year, as a result of co-location and the strong contribution from our build-to-suit programs. Moving now to the evolution of our main financial metrics. On top of the figures just discussed, our Adjusted EBITDA has increased 60% compared to last year, with our margin expanding as a result of our operating leverage and change of perimeter.
This EBITDA growth is mostly, mainly explained by the contribution from telecom infrastructure services, organic growth, build-to-suit, and recent acquisitions, and by the proactive and efficient management of our OpEx base. The following slide explains our recurrent free cash flow generation in the period, and you can see here the contribution to organic growth from our different growth drivers, co-location and associated services, build-to-suit, escalators, and efficiencies. These elements combined generated EUR 98 million in H1 2022, a 25% growth compared to the same period last year. If we include the additional contribution from M&A and the rest of cash items below Adjusted EBITDA, Cellnex has generated again a strong recurrent free cash flow growth of 62% compared to H1 2021, sorry. Moving now to slide 11. Just a quick update on our lease efficiencies plan.
The proactive management of our lease contracts has always played a key role in our strategy, and we keep showing a solid execution, crystallizing efficiencies even in a high inflation environment. In the first half of 2022, we have renegotiated close to 1,900 lease contracts, generated EUR 27 million of efficiencies along with those generated in 2021, and we are on track to meet our 2025 targets. Moving now to our balance sheet. Movements compared to December 2021 are mainly explained by our M&A and capital allocation activity in H1 2022, mainly acquisition of minority stakes and own shares, making the most of current market conditions. Finally, a reminder of the main characteristics of our solid capital structure.
We refinance in Q1 a bond maturing this year with an associated 3% coupon by issuing a new one at a much lower cost, thus reducing the average cost of our debt.
No refinancing is required before 2024. We have close to EUR 8 billion of available liquidity at a compelling cost in the current environment. 86% of our debt is fixed, and our corporate debt has no covenants, ledgers or warranties. So we have full flexibility to make the most appropriate financing decisions. With this, let's please open the line for your questions.
Ladies and gentlemen, the Q&A session starts now. If you wish to ask a question, please press zero one on your telephone keypad. The first question comes from Simon Coles from Barclays. Please go ahead.
Sorry. Sorry to ask this, but we get lots of questions around Cellnex potentially doing a buyback. Just wondering if you could give us any updated thoughts on how you're thinking about that, particularly given the Deutsche deal has now got, but it looks like there's not much major M&A left in Europe. Then secondly, on organic growth. Can you hear me, by the way?
We can, Simon. I think that we are trying to reconnect José Manuel, but yeah, apologies for this, but we can hear you. Please continue.
Okay. I'm getting a beeping, sorry. Okay. Second question is just on organic growth. I was just wondering if we take a step back, you could give us a bit more color on where the BTS are being added with regards to is it on coverage or is it on densification? Because I think historically you've talked about it generally being densification, but it would just be interesting to hear where they're being added these days and how that's really changed in the last couple of years. Similar question on the co-location side, just to get a better idea of how co-location deployments are developing. Thank you.
Thank you, Simon. We can start with José Manuel.
Well, Simon, you know that shares buyback program, it's the company is always open to consider this optionality. Obviously, share buyback program is not part of our strategy. If I may, it's more opportunistic, it's more tactical, but is not, let me say, our priority. Again, I want to reiterate that the company is open anytime to consider opportunistically a share buyback program. Again, this is not the strategy, this is not the priority of the company. About organic growth, Alex, maybe you can elaborate.
Yeah. In relation to the build-to-suit, thanks for the question, Simon. Basically now we are seeing the demand in coverage. It depends on the countries, but for rural deployment, this is quite needed. Specifically in France, there is quite a lot of rooftop and that's densification. I think it's a well-balanced matrix of needs, what we are getting, which is really matching our expectations as we envisage that. It gives perfect hope for continuously projecting the build-to-suit demand needs as we were initially envisaging.
That's great. It hasn't really changed in the last couple of years?
I would say no. The balance is quite even in that sense. With 5G, the 5G deployment initially is being done on more dense areas, which looks more like densification. Remember that 5G is being deployed at a higher frequency, and being a higher frequency, we need more points of presence than before with frequencies below 3 GHz.
That's great. Thanks, guys.
Thank you. The next question comes from Akhil Dattani from JP Morgan. Please go ahead.
Yeah. Hi, good morning, and thanks for taking the questions. I've got two, please, if I may. The first is on M&A. I guess now that the GD Towers process is obviously behind us, I was hoping we could get some comments from you in terms of your involvement in the process and maybe, you know, the details in terms of why you pulled out. I guess the sort of questions we're getting, I guess, are around valuation, whether it's funding in the current credit environment or whether it's the deal structure. Any sort of color around that would be helpful. I guess adding to that, as we look forward, when we think about your M&A strategy, is it more now bolt on or are there other major sort of transactions that could also potentially be on the horizon?
That's the first question. Then the second one is more for questions specific to the quarter and your PoP growth. If I look at Q2, it looks like you lost just over 200 in Holland. I just wondered if you could comment on what's gone on there, just so I understand that. Whereas on the other side, Italy and Portugal are very strong. Obviously I'm just keen to understand what's driving that and to what extent we can extrapolate those strong numbers. Thanks a lot.
Well, thank you. I take the first one, which is about the transaction with Deutsche Telekom M&A strategy. Again, you know that we are always insisting and repeating that we are not obsessed about size, number of sites or markets. Having said that, for us, since the very beginning from an industrial and a strategic point of view, Deutsche Telekom, Deutsche Funkturm was and is a fantastic industrial equity story. It's a great industrial project. I want to tell you that this is the reason why we were assessing. I think it's our duty as a management, as a company, to assess properly any and every kind of opportunity, because again, it's part of our core business.
This is the most important priority, or it was our priority to assess properly, to understand if it fits with our strategy or not. Unfortunately, doesn't fit with our strategy as an industrial player long term. You know that this is not just about, let me say, financial discipline. This is about strategy fit. You know that our role is an industrial one, so it means that we have to consolidate the asset. But this is not just from a, let me say, an accounting point of view. I am not just talking about consolidation from an accounting point of view. I'm talking about our role of management, managing the asset, managing the company, which is key. I mean, we cannot renounce to be as we are.
We are an industrial player again. Unfortunately, I can tell you that we couldn't find a fit. This is the reason why at certain point of time, Deutsche Telekom, Cellnex understood that there is no way to keep going on the process because the full respect for Deutsche Telekom requirements and that's it. I mean, that's life. I want to underline that it was not about valuation. It was not about you know returns. It's a strategy fit, which is the first question that we are always assessing when we are starting a project. Again, unfortunately, because the company is not just about acquiring assets in Germany.
It's to establish long-term partnership with a great customer, which is Deutsche Telekom. I want to be very transparent on this regard. Second one, our. Well, what happens now? What about our M&A strategy? Well, you know, for us it's very important to keep going on the 12 countries where we are today to consolidate our market presence. In a way, you are right. Maybe it's more a bolt-on transactions rather than a big transformational deals. Who knows? Maybe in two, three years from now. Currently, in the short term, it's more about consolidation on the existing countries. It's more about a bolt-on projects. Well, in two or three years from now, who knows, no? What could be the market structure.
Very sorry for maybe this long answer, but I think. You're right, you know, the Deutsche Telekom transaction deserves a bit of clarification, no? At least from our side.
Maybe coming back to more operational topics.
Yes. PoPs.
Yeah.
PoPs in Netherlands and in Portugal, no? In the Netherlands, what we are and you well spotted is the loss of PoPs, which were perfectly factored and forecasted by the merger of Tele2 and T-Mobile. You may recall that the moment that we did the transaction it was a transaction that we did with T-Mobile but it was just before the operational merger with Tele2. We were fully, let's say, aware of that something to be happening, and this is the synergies that the two operators are looking for and were perfectly factored on our acquisition business plan. In the case of Portugal, well, it's the expected growth coming from the new entrant.
As you may recall, we reported to all of you a contract up to 1,500 sites with Digi, which is one of the new entrants. This is starting to be executed. In that sense, I think we could make a projection on growth at least up to those sites in the coming months.
Great. Thanks so much for the answers.
Thank you. The next question comes from Luigi Minerva from HSBC. Please go ahead.
Yes. Good morning, everybody, and thanks for taking my two questions. I would like to perhaps go a bit deeper on your capital structure ambitions. I was wondering now what is your view about
Your credit rating in these conditions, whether your ambition is now to aim, for example, to an investment grade credit rating. If that is the case, what sort of leverage ratio policy you would have to adopt in order to achieve investment grade? Secondly, I wanted to go back to one of your comments on slide two, when you say you're open to consider further options with all stakeholders. You've touched on the share buyback option. I was wondering, what are your thoughts about potential debt repurchase? And perhaps, yeah, what sort of pecking order you have, if you think about a share buyback or a debt repurchase or perhaps a higher dividend in your framework? Thank you.
Okay. Hello, everyone. This is José Manuel. Your first question, you know that we have always been committed with the credit quality of the company. Since the very beginning, Cellnex has been a step by step improving the business profile, improving every single angle of the credit quality. This is a process that I'm pretty sure is not going to be stopped here. Your question is about when. This will come in due time. Now, right now, what we are doing is exploring different alternatives, seeing, working with rating agencies, understanding how our deployment build-to-suit is working and thinking, going step by step. Our commitment always has been maintain and improve the credit quality, and this is the main message we have to share with you.
Maybe the second question, Juan Gaitán.
I think there was a question on share buyback as well, José Manuel, which might be related to.
Okay. I take it. Fine. Okay. Regarding the share buybacks, and you know, we during the first part of this year were very opportunistic, and we acquired some shares. In fact, was more than 1% of our capital. I think we will continue being very opportunistic with every single security that is trading. Okay? We have to do it. We have always done a very clear, well, IRR comparison between our current projects, our current securities being traded. We have been, as Tobías was saying before, fully committed with our strategy view, but also with our M&A discipline. We will continue in this way, improving credit quality and at the same time being very opportunistic in the market.
Yeah. Thank you, José Manuel. If I may just quickly follow up on the second question. How would you feel about allocating part of the firepower to repurchase some of your bonds, which are trading well below par?
In fact, this is one of the opportunities we could do. In due course and taking into account the different elements. Also, you know that we are restricted very often. When you ask this question, what I have to remind you is that Cellnex can operate on the market following the law and the recommendations of the regulator. No? Yes, this is something that may occur. Again, following always the very clear criteria of comparing where we can allocate best our capital.
Okay, great. Thank you very much.
Thank you. The next question comes from Andrew Lee from Goldman Sachs. Please go ahead.
Yeah, good morning, everyone. Obviously, lots of questions around the DT Tower deal, and it appears there are multiple interesting takeaways from what happened there and what it could show for the future. For example, those buyers that you're losing out to have a much lower required IRR on deals than you do, for example. Just had a few questions around this and, looking forward rather than backwards. Firstly, are you seeing similar competition from private investors to other tower portfolios as you saw for DT? And do you think differing debt financing opportunities are part of the reason for that? Secondly, do you think smaller MNOs have greater demand to strategically partner with you, Cellnex, than versus larger operators like Deutsche Telekom?
If you don't mind, the third question was, are you seeing demand from private investors to take a stake in Cellnex, given they're, yeah, very, very keen to deploy capital in this space? Thank you.
Thank you. Thank you, Andrew . I will try the first one, and then I will let the team. On the first one, this could be the case, but also I have to tell you that, having been involved in this process for a long period of time, like I mean, we were quite comfortable with the financing package associated with this opportunity. We don't have visibility on the rest. Also from our perspective, I would say that we were quite comfortable with the conditions associated with this specific opportunity. The main reason, as Tobías highlighted at the beginning of this session, was a strategic one.
It was our ability or inability to play an industrial role rather than IRR valuation.
Correct. No, I want to underline the comments from Juan Gaitán. I mean, it was not an IRR issue.
We had the strong conviction that our financial package was super competitive, I can tell you. I mean, we obviously are not aware of the different financial package of our competitors, but I can tell you that we know how is the market today, no? I want to be extremely clear on that. It was not an IRR problem. The industrial angle of this project for us was extremely accretive. Again, it's not just a pure financial discipline. It's more than that. It's an strategic fit, which includes, obviously, the financial discipline.
The main issue was the lack of strategic fit and the lack of capacity of Cellnex in order to consolidate and to run the assets and to run the company, which for us is a must, you know.
On the second question, Andrew, I think that our value proposition is valid for all mobile operators in Europe. I mean, what we can offer is very clear. We want to build a long-term industrial partnership, not just around towers, but around digital infrastructure in the future. I guess that what we can offer is different from what financial sponsors can offer. We do believe, as we have demonstrated in the past, and as we believe this will happen in the future, that this proposition will be appreciated by all types of mobile operators regardless of their size. Okay. On your third question, this can always happen. I mean, we are a listed entity. Anyone can buy our shares.
It looks like these type of investors is interested also in digital infrastructure across Europe. One possibility to deploy capital for these investors could be becoming, at some point, a shareholder in Cellnex. Clearly, yes.
Okay, thanks. Very helpful.
Thank you. The next question comes from Roshan Ranjit from Deutsche Bank. Please go ahead.
Good morning, everyone. Thanks for the questions. Two for me, please. You mentioned that the UK deal should be closing in the next few days. Is it possible to get a sense of the appetite you've seen for the, I think it was 1,000 sites which you have to sell off as part of the remedies, where that interest is coming from, industrial players or financial investors. Secondly, I guess a longer question. The Augmented TowerCo, I think we're now over a year since you first announced the Augmented TowerCo in Poland. At the time, you talked about, you know, porting that model across to some of your, you know, existing, more established markets.
I think at the time you said there could be opportunity in France, clearly, given all of the anchor customers you have there. I think, Tobías, you mentioned just now on the call about focusing on your consolidated footprint. Is it possible to get a sense of how the discussions are going with your existing anchors around the Augmented TowerCo, and any progress which you can talk about there would be super helpful. Thank you.
Thank you. Thank you, Roshan. Maybe I can take the first one. We have some restrictions in terms of information because we haven't reached a binding agreement yet, but it is imminent and it is basically this interest in the discussions are being deployed with existing tower operator in the country. It's an industrial player. Okay.
It would be simultaneously, if I may say, in parallel, closing the deal with Three UK and signing the agreement also with the remedy taker, of course. We have to submit it in front of the CMA. Everything will be disclosed in a few days. Yes. On the augmented tower company, as we already mentioned to you, we are in the process first to understand in the best way possible the implications of operating this new layer of value proposition. This is what we are doing with Polkomtel in Poland. But of course, and in parallel, what we are trying to assess properly is where could be interest from other players all over the different geographies, no?
While there is an obvious one, there is a player in Poland, which is also our anchor, where logically discussions are happening because the other two players in Poland are already having something similar. It becomes a very natural evolution in Poland as a next step, no? What is clear also is that there are different possibilities for this to happen, no? That could happen on a for one anchor on complete national geography, and then we look for a second one. Could happen in those areas where the two operators are already sharing, and they can look for a monetization process by which we would be managing an active network already with two tenants from inception.
That may sometimes happen in rural areas or in specific regions of one country. There are several schemes by which we could be, let's say, extending that concept in other geographies with other anchors. What we can tell you is that we are actively in talks. The interest is high, but as we also intended to say to you is that nothing will happen in 2022. This is a level of discussion that it requires time. The CTOs of the other side, as you can imagine, is another layer of comfort that we need to provide. Our expectations remain intact on the capacity to deploy that Hutchison asset in the future on our side.
Thanks for that. You said nothing will happen in 2022, so should we be thinking about progress in Poland in 2023 or progress in Poland and other geographies in 2023?
Some progress in 2023 in Poland or other geographies.
Okay. Thank you. That's helpful.
Thank you. The next question comes from Stan Noel from Bernstein. Please go ahead.
Hi guys. I wanted to know, you have obviously a huge pipeline in terms of build-to-suit, more than 22,000 sites still to build. Also your competitors are building a lot of new sites. Do you see beyond those new sites a need for more build-to-suit in your footprint? Or do you feel that these will basically achieve the delivery on the need for the 5G grid of your clients? Then, going back to the 12 countries where you are and the bolt-on deals that you may be looking into.
I mean, assuming you achieve all you want to achieve in those 12 countries, whether in terms of build-to-suit and portfolio tower portfolio acquisitions, before talking about the transformation deal, would you say that your job is done, and then you can focus on those share buybacks and returns to shareholders? Or there will be potentially opportunities to go to new territories, whether it's in Europe or outside Europe? Thank you.
Thank you, Stan. Tobías. I take the second one because it's more a strategic one. Currently, we have around EUR 6 billion pipeline on our existing countries and just running with our customers. This is our priority to serve our anchor tenants, but also to improve the organic growth. Therefore, we have a lot of opportunities in front of us to consolidate going forward with our customers. We are again always considering all of the options. But buyback, again, is an opportunistic one. Buyback is we cannot consider as a part of our strategy.
Again, it's not our priority, even though we are always paying attention on the opportunity in order to launch a tactical buyback. Again, we do believe that obviously allocating our firepower with our existing customers and leveraging on our existing markets is always more accretive for our Cellnex shareholders' value creation. This is the reason why we are prioritizing organic growth or expansion projects with our clients, because it's a very low level of risk, and obviously a very attractive return and multiple, which is not the M&A. Maybe, Alex, you can take the-
On build-to-suit?
the build-to-suit question.
Yes. On the build-to-suit, what we are envisaging is that, and actually it has been proved, that there is some additional demand above the committed volumes. This is something that we've been, let's say, representing to you. Is this going to go much further on the existing geographies with the existing clients? Well, it remains to be seen. Actually, the volumes that we have are material. As we said before with Simon, no, there are two types of build-to-suit, the ones devoted to coverage and the ones devoted to densification. No?
At certain point in time, we believe that the densification path is going also to move towards different type of deployments like small cells, because indoor coverage is required, because the densification is and the bandwidth being used per user is that big that will require, let's say, more.
PoPs at lower level in order to have less coverage, in order to serve more people, no? This is something that it will evolve in the coming years. The plans we have on build-to-suit now are lasting until 2027. We believe that within that period of time, the build-to-suits will remain on the levels that we have already disclosed to you.
Okay, thank you.
Thank you. The next question comes from Jakob Bluestone from Credit Suisse. Please go ahead.
Hi. Good morning. Thanks for taking the questions. Two questions, please. Firstly, you mentioned that you expect your guidance to come in or so you expect to come in at the upper end of guidance. Can you maybe just give us a little bit of color behind that? We obviously see the results, but you know, is it just sort of the inflationary upward pressure on revenues or what? And then just secondly, can you maybe just be a little bit specific around the sort of timing or that you expect on the execution of your residual M&A pipeline? I think when you did the rights issue originally, you said you expected to complete it within 18 months, which would be sort of the end of 2022. Are you thinking a longer timeframe now?
Just any update you can give on the timing would be helpful. Thank you.
Thank you, Jakob. On the first question, the main reasons are when we provided our guidance, we were including some assumptions in terms of, well you know, organic growth, build-to-suit, contribution from new deals, namely the CK Hutchison transaction, and also more recently the impact from remedies both in France and the U.K. What we are seeing over the course of this year is that the negative impact in 2022 coming from the U.K. is going to be lower than we initially expected, and that is why we are expecting now the 2022 results to reach the upper end of this range that we provided at the beginning of the year.
Obviously the main reason is this, the less negative impact from remedies in the U.K. On the second question, well, the reality is that, I can-
Sorry.
I can start. Yep.
No, maybe I take the second one, Jakob. As you can imagine, when you have to assess properly the German or the potential German transaction, the pro-Deutsche Telekom project, you have to pause, you know, and the rest of the projects because it's a big elephant in the room, huh? Obviously, we are extending, if I may say, the period of time in which we want to execute additional transactions. I think, regarding the M&A strategy, it's very important to underline the word of selective M&A, as I said earlier. It's about consolidation on the existing markets where we are today. Second one, to execute expansion projects, which is maybe not exactly an M&A.
We are not acquiring companies, but we are investing in very attractive projects, working with our customers in the countries where we are today. You will see in the next coming maybe 12 months, being 100% transparent with you. Having the Deutsche Telekom project in the middle of this 18-month period of time, obviously, we deserve more time in order to execute the expected pipeline.
Maybe if I may, we may have paused the M&A. What we have not paused is the organic-
Yeah
... activity. I think we haven't probably stressed enough one of the key elements which are on the first page of the presentation, which is the renewal for another 30 years of one anchor contract that goes above north of 4,000 PoPs. This has been one of the questions that in the past, we recall you were asking, you know. How the first renewals coming into the scene and how we should project those renewals in terms of discounts or whatever. Now we are pleased to announce that this is already fully signed. More than 4,000 sites are being secured for another 30 years.
That goes alongside with an agreement with this same player by which we will provide around 1,800 fiber to the tower services by the acquisition of those fibers on from that client on our site, which is going very much in this element of fiber to the tower expansion. This is the very last mile. It's less than 500 m from the backhauling to our tower. But as you can imagine, this is an additional element of a value proposition for other potential tenants on those sites, you know. We are planting our roots of our towers with those fiber to the tower projects.
I think it's worth to emphasize that even though the M&A has been paused, the organic has continued.
Thank you.
Thank you. The next question comes from Fabio Pavan from Mediobanca. Please go ahead.
Yes. Hi. Thank you for the presentation. Thank you for the clarification on Germany. Listening to your answers, my question probably is, provided Cellnex aims to play an industrial role, a role in the countries where it operates, and also provide the comments on the credit they need and to maintain, to pay attention to credit quality. Finally, we discuss about interest from private investors for this kind of assets. Probably the question for you, to conclude this long conversation is, would you ever consider to open the door for private investors, in the local subsidiaries where Cellnex operate? Thank you very much.
Well, yes. It's when we said earlier in our conversation that we are always considering all of the alternatives, all of the choices, we were including this optionality. You are completely right. We are not against, let me put it that way, having private co-investors. Obviously, again, our strategic role matters. I mean, we have to consolidate, which means that we have to run the company, we have to run the asset because we are investing for the long term. I mean, when we talk about long term, we are talking about 30 or 40 years from now, and we know very well that private investors will exit at certain point in time.
We have to understand if this private investor, let me put it that way, I'm very sorry, is just putting money. If this private investor is helping us in order to accelerate the execution of the business plan, this private investor is lowering the risk of execution, more than welcome. More than welcome. Also we like to be selective because if it's a question of financing, it's a question of capital structure at a certain point in time when we are assessing a project, well, it's completely valid. We are not against. I am not against, again. The appeal is lower.
I mean, because if the question is to find a way to finance a project, well, we have several levers in order to structure the capital structure of the project. Again, we are not against private investors, but we have to understand, again, the strategic fit and the long-term commitment. Otherwise, well, if it's just about financing, it's a different story.
Thank you.
Thank you. The next question comes from Sam McHugh from BNP Paribas. Please go ahead.
Yeah. Morning, guys. Just two quick questions. On the U.K., we've obviously heard tons of press speculation about a merger between Three and Vodafone, and you're obviously having to, you know, make the divestments alongside closing the deal. I don't know if you would say anything about, you know, what the probability of the deal not closing in the U.K. I don't know if you can say anything about whether there are other delays behind this project that could be related to M&A. I know it's super sensitive. The second more mechanical, just you have very high CapEx versus the build-to-suit sites in 2Q. Is it just that the payments to the MNOs can be lumpy, or is there anything specific in that? Thanks very much.
Thank you, Sam. On the second question, the explanation is a pre-payment that we have made to SFR in the context of the build-to-suit program. That explains the relatively high figure compared to previous quarters. In any case, the size of the build-to-suit program with that MNO is unchanged. It is simply that we have made a pre-payment this quarter. On the first one, I would say it's a negligible probability of non-closing, not closing the deal. We are making progress on all the different fronts. First, we need the binding agreement with the remedy taker. Subsequently, just a few days after that, we will be in a position the moment that we have the green light from the CMA to close the Hutch UK deal.
Yeah, it's almost there. Maybe to recall, you know, again, our contracts are fully protected in front of potential merger. Full protection.
Yeah.
I think it's important to recall, and obviously our agreement with Hutch, it's meeting the same standards of previous transactions.
Super clear. Thanks, guys.
Thank you. The next question comes from Georgios Ierodiaconou from Citi. Please go ahead.
Yes, good morning, and thank you for taking my questions. I've got a couple of follow-ups. The first one is around the comments you made earlier about a financial investor in one of your subsidiaries. Earlier in the year, you are suggesting that there was interest. If I get your message now, unless they bring something industrial to the table, you don't really see the rationale. I'm just curious whether something has changed in your thinking or whether the idea of selling parts of the subsidiaries was more as one of the moves you are envisaging to fund a more major deal, and therefore now the probability of that happening is much lower. Just any clarity on that will be great.
Then the second question, and I know you made some comments earlier, I just wanted to understand from your perspective, do you think you need to be investment grade in the medium term? I acknowledge you have good access to financial institutions, and other source of funding, but, isn't it fair to assume that over time you will need to have an increasing percentage of your debt in bonds, and therefore, moving to investment grade could be more strategic? I'm just curious to hear your thoughts on that. Thank you.
Okay, Georgios. On the first question, the demand is there, the appetite is there. Conversations are ongoing and as always in these type of conversations, I mean, it is important to reach agreement in terms of course, valuation, but also corporate governance and the different roles of the different entities involved in those agreements. Okay? Structurally, nothing has changed. We are not reassigning a different probability of those agreements being reached in the future. Okay. On the second question, José Manuel, you want to elaborate? I'm not sure that he can hear us or maybe he's muted. As we have been discussing, I mean, we are open to this possibility.
We appreciate that in the current environment, this is something that makes sense for us to consider maybe more, you know, because clearly the macro situation has changed compared to maybe one year. Clearly there is merit in assessing this possibility. As Tobías was mentioning at the beginning of the call, this is a new scenario that we are assessing, but also in combination with the different strategic implications of such a decision. Today it's a matter of again, first of all, admitting that it's a possibility that makes perfect sense. We are trying to combine this possibility with the rest of our strategic priorities.
If I could follow up on that, based on your conversations with the other rating agencies, what is it that you need to do to get to investment grade?
It's something that we are still working on. You know, we have a very direct and intense interaction with them. Now it's a matter of understanding what type of public official commitments we should make in order to reach that. Again, I mean, as you know, we are already investment grade by Fitch. As you know, we have BB+ by S&P. They like our leverage profile. They like our deleveraging path. Also, I would say that in the past, we have made the decision to keep optionality, to keep flexibility from a financing perspective in order to pursue our growth strategy. No?
It is just a matter of sitting with them and understanding what type of a commitment, official one, we should be making in order to reach potentially that investment grade.
Thank you.
Thank you.
Thank you. The last question comes from Fernando Cordero from Banco Santander. Please go ahead.
Hello, good morning, and thanks for taking my two questions. I just would like to just to discuss a little bit the organic performance year -to- date, and particularly quarter-over-quarter, because this has been the first quarter in which the comparison is fully organic with no perimeter changes or material ones at least, this was the first quarter. I would like to understand how we can extend the 2.2% growth quarter-over-quarter that we have seen in the second quarter can be extrapolated to a full year, implying close to, let's say, 9% yearly growth on that front, no? In that sense, again, willing to understand your views if we can already extrapolate this organic performance. The second question is related with your pipeline.
Already quite clear the views on timing, execution, and so on, but also trying to put or to quantify a little bit what could be your willingness to be more involved in, let's say, greenfield projects rather than on existing portfolios. Just to understand if you can give us some color on what amount or what percentage of your current pipeline is devoted to greenfields rather than to existing portfolios. Thank you.
Thank you, Fernando. It's on the first question, it's maybe too early to say. I mean, obviously the full year performance will very much depend on the remaining two quarters. Based on the trends that we are seeing and also the remaining changes of perimeter during the year, you might expect quarterly performance in line with what you are seeing today. Also remember that we have seen a one-off effect in the Netherlands, which is no longer to be seen for the rest of the year. Let's see what are the results provided by our markets during the rest of the year, and we will reach a conclusion.
I guess with information we have, we have today, you might extrapolate what you have seen this quarter to the rest of the year. On the
Oh, yes. On the pipeline. Just to Fernando understand better. When you say greenfield, you mean new geographies on towers, or new type of projects, in relation, not towers or adjacencies? No. I don't know exactly what you mean. Yeah.
Yes, exactly. Particularly, projects in which you will be investing in new assets. When I say new assets, no existing ones, that is everything excluding already existing portfolios.
Okay. Well, I think it's maybe a bit difficult now, but clearly the intention is to continue investing in our core assets and growing with our clients with adjacencies. That would not be, I think, part of what you are asking for. I would say that on greenfield, we would be thinking on a figure that would be, I don't know, 50% and on that range on absolutely new projects, not linked to our existing core assets or anchor clients. It's just a figure.
Okay. Thank you.
Thank you. Ladies and gentlemen, thank you for joining. We have reached the end of the conference. You may now disconnect your lines. Thank you.