Earnings Call: Q4 2016

Feb 17, 2017

Hi. Good afternoon, everyone. My name is Juan Gaitán, and I'm the Head of Investor Relations at Cellnex. I would like to thank you for joining us today for our full year results conference call. I'm joined today by Tobías Martínez, CEO, and José Manuel Aisa, CFO and M&A director. They will lead today's presentation. We have earlier today posted our presentation, which we will refer to throughout our prepared remarks, and then we'll open the line for a Q&A session. Now I'll hand over to Tobías Martínez. Please, Tobías. Well, good afternoon, everyone, and thank you so much for your time today. Let me please start by highlighting the main milestones of the period on slide number 4. We have again posted a solid set of results based on four pillars. Number one, our recurrent levered free cash flow has increased by more than 60% since our IPO, May 2015. Second, we have generated organic growth ahead of our guidance. Third, our business profile has dramatically improved as a result of the development of our European platform. And last, we continue to have a robust balance sheet with flexibility to continue capturing new growth opportunities. On slide number 5, you can see the strong performance of our key value metrics, with an adjusted EBITDA growing at 23% per year and a recurrent levered free cash flow per share growing at around 30% per year during the last couple of years. Moving to slide number 6. Here, it's important to highlight that at the beginning of 2016, we guided to 3%-4% organic growth. And we came in ahead of that guidance, which show the strength of our current operations. Including the change of perimeter during 2016, total PoPs have increased by 19%, and our consolidated customer ratio by 6%. Additionally, DAS nodes have increased 13%, and we expect this new activity to become a meaningful contributor to Cellnex Telecom infrastructure service, going forward. In terms of organic growth drivers, you can see on slide number 7 our view for new organic PoPs, as well as the progress of our decommissioning and build-to-suit program. New PoPs from multi-tenancy are expected to be generated at a similar rate as the guidance provided last year. Our decommissioning program shows 25% progress, including agreements or redesigns, and a 73% progress for our build-to-suit program, including our last transaction with Bouygues Telecom in January 2017. Additionally, our efficiency program, I can say you that it is on track. And we have recently signed a commercial partnership agreement with JCDecaux to strengthen our position in the DAS small cell business. And the CFO will later provide you more details on both work streams. Moving to slide number 8, I would like to emphasize that as a result of our recent deals, we have dramatically improved our business risk profile by diversifying both in terms of geographies and exposure to new high-quality customers. It is also worth mentioning that pro forma basis, it means including the full year effect of our deals announced in 2016 and 2017 in France, 62% of our revenues will be generated by telecom infrastructure services. Our current backlog represents today 14 years of revenues or 8 times our net debt. On slide number 9, you can see the result of our geographical diversification efforts. With around half of our adjusted EBITDA to be generated outside of Spain, again, on a pro forma basis. Cellnex has become a key player in terms of number of towers worldwide, our efforts to create a European platform translate into the map on the right-hand side, with the last example being the agreement we have recently reached with Bouygues Telecom. Let me please take the opportunity to summarize on slide number 10 the key characteristics of our last project in France. First of all, let me highlight the high quality of the assets. Second one, the high visibility of the revenues. Third, a new paradigm created in the tower industry by shifting from the classic master lease agreement to an innovative master service agreement. Fourth, a tax-efficient structure. The fifth, a phased cash outflows, providing financial flexibility. Sixth, the validation of our disciplined international expansion strategy. On a run rate basis, when all sites have been transferred and built by 2022, we are expecting an EBITDA contribution of EUR 61 million per year. I will not go through the details on slide number 11, but I would highlight at least four key ideas. First, thanks to this deal, we are becoming the second largest independent tower operator in France, gaining a scale from our first investment in September 2016. Second, increasing our presence in a highly dynamic market as it is France. Third, the attractiveness of our portfolio offers high-quality organic growth potential. Fourth, we are acquiring assets in areas with very high barriers to entry, around 24-36 months to build new sites in the main cities of France. Moving to slide number 12, just a few words on our strong balance sheet with headroom to continue pursuing accretive M&A. We have close to EUR 2 billion in cash and available debt, a long-term and fixed capital structure in place at attractive terms, and full flexibility that will allow us to optimize available funding alternatives. We will remain disciplined and stick to our criteria. There are ample opportunities available, and as we have demonstrated with recent opportunities, we will not overpay. Before moving to José Manuel Aisa's section, let me please highlight in slide number 13 that today, we are presenting again a solid set of results. We are posting strong organic growth and progress on our additional value-enhancing initiatives. We are taking the first step to become a European leader in the DAS and small cells sector. We are creating a European platform executing value-accretive acquisitions that improve our business profile. We have a robust capital structure in place. Enough firepower is still available to continue growing while optimizing funding alternatives. We continue to pursue growth opportunities with discipline and with a selective M&A approach. We are successfully integrating our recent portfolios into Cellnex, and Cellnex is today recognized as the player best positioned to consolidate the European tower landscape. Now, please allow me to hand over to José Manuel Aisa, our CFO and M&A director, who will go through our 2016 business and financial performance. Please, José Manuel. Thank you, Tobias. Good afternoon. As a reminder, please note that additional information can be obtained on the investor relations sections of our website, where there is a detailed Excel file and should be also the annual accounts of the company. If now we go to slide 15, you can see here the evolution of PoPs and our consolidated tenancy ratio, with increases mainly explained by consistent organic growth and change of perimeter. We have managed to add more than 900 organic PoPs in the period, reaching a tenancy ratio of 1.62, including M&A. Additionally, we are pursuing new organic growth opportunities in all business areas, with a special mention to framework agreements with mobile operators entering new markets, decommissioning and build-to-suit projects, and other recent agreements with JCDecaux to strengthen our position in the small cells market. This partnership applies when an opportunity arises in Spain and Italy for an initial period of 18 months, in venue with current JCDecaux presence or when a new tender process is launched to manage advertising sites. It is based on a preferred partner approach, relying on JCDecaux existing capabilities and adding on top of that our own capabilities to increase the value position. Moving to slide 16, you can see here the progress of our efficiency plan. As anticipated last year, the main contributor to this program is our site management project, with around 30% of the targeted savings already achieved. We have devoted CapEx of EUR 31 million between cash advance and land acquisition, with paybacks of five years and average saving per ground lease above 20%, with a resulting contract length beyond 15 years. We are also making good progress on our additional initiatives, with around 50% of the targeted savings already achieved. Our ultimate objective for the efficiency plan will be for savings to offset higher future costs due to the pricing and increased operating activity. We can show a flat OpEx performance on a like-for-like basis going forward. On the next slide, you can find a comprehensive explanation of our adjusted EBITDA evolution. You can see how the negative impact of the DTT simulcast in 2015 is more than offset by the switch-on of the new TV channels. Together with organic growth contribution and change of perimeter, explaining the strong adjusted EBITDA increase in the year of 23%. In other words, EUR 290 million of adjusted EBITDA. If we now focus on the adjusted EBITDA margin evolution on the next slide, operating leverage coming from organic growth increases our margins by 1%, broadcasting by an additional 2%. If we adjust for pass-through cost and revenues, we end up with an adjusted EBITDA margin of 43%. Slide 19. We will now focus on our capital allocation for the year. We have devoted 90% of our total investment to M&A, with 8% allocated to expansion CapEx. We deploy organic growth CapEx with a strict return criteria of low teens unlevered IRR. As you can see, the majority has been dedicated in 2016 to our efficiency plan. Slide 20, regarding capital structure. Our debt maturities profile as of February 2016 present the first maturity or an average maturity of around seven years, with no material refinancing required before 2022, and protection against potential interest rate hikes due to the fixed cost nature of our debt. Slide 21, there we provide an updated snapshot of our capital structure after our last bond issue in January. We have a long-term capital structure in place at attractive terms with EUR 1.8 billion of liquidity between cash and available credit lines. Let me now explain on slide 22 our recurring levered free cash flow generation in the period. I would like to start by highlighting that the cash conversion ratio of EBITDA into recurring levered free cash flow in the period has been a strong 87%, with a total figure increasing 30% when compared to the recurring levered free cash flow of 2015. Looking now to revenues, the contribution from all the different businesses line increase with a very well-contained cost base, leading to an adjusted EBITDA growth of 23% when compared to last year. Maintenance CapEx is in line with our guidance and of 3% of revenues, and our change in working capital is positive due to a one-off revenue collection measures, but expected to be neutral going forward in line with our guidance. Interest paid reflects our capital structure as of December, with coupons already paid in Q3 and taxes reflecting the implementation of tax management measures. All in all, we are posting a 15% revenue growth, which implies almost doubling our recurring levered free cash flow growth when compared to last year. Moving now to our balance sheet on slide 23. Cellnex leverage for the period has reached 4.6 times net debt annualised EBITDA after investing more than EUR 700 million in the year. Our balance sheet reflects the increase in fixed assets due to our recent acquisitions. Recurring net profit, adjusted for one-off non-cash tax effect last year, increases 38%, and net interest increased mainly due to accrued cost in the year. On shareholder remuneration, we will pay EUR 22 million in 2017, a 10% increase over the dividend paid in 2016. Moving to M&A activity in 2016. On slide 24, we explain what we believe is a new paradigm in the tower industry. Our ability to create master service agreement with our clients from scratch, making sure these services will not be accounted for debt as it is were accounted following IFRS 16. We offer a wide array of services beyond pure real estate in order to strengthen our long-term relationships with our clients. Slide 25. You can see here how we think about cash flow generation from recent acquisitions. The cash conversion ratio from EBITDA into recurrent levered free cash flow is above 60%. The new deals are expected to generate EUR 103 million on a pro forma full year basis, around 26% of the recurrent levered free cash flow generated in 2016. Please note that all these estimations, especially the recurrent levered free cash flow, is after considering financial expenses borne by Cellnex. All this has been achieved with an efficient and flexible capital structure, and by applying our strict investment criteria. Moving to slide 26. In terms of financial outlook for 2017, we believe we can provide a recurrent levered free cash flow at least 10% higher than in 2016, in line with consensus. Looking at the different contribution lines, it is important to highlight that our adjusted EBITDA is expected to reach between EUR 330 million and EUR 340 million. Our CapEx guidance, both maintenance and expansion, remains unchanged, and dividend payable in 2017 will increase 10% compared to 2016. There are other things that belong to the recurrent levered free cash flow, such as the working capital that should tend to be neutral. Also, the interest expense paid that should follow our coupons. Finally, the tax payment, that should be slightly above our payments in 2016. Finally, moving, I think that is what's next. We are focusing on several opportunities in Europe, both proprietary and auctions, while maintaining our strict investment discipline. The next section addresses several key topics that are very well covered in the slides. This is a new section that we have called frequently asked questions, but I think that these questions will come across in your Q&A session. Please, Juanjo. Yes. With this, we can start the Q&A session. Good afternoon, ladies and gentlemen. The Q&A session starts now. If you wish to ask a question, please dial 01 on your telephone keypad. Please be informed that there might be a short silence while questions are being registered. Thank you. The first question comes from Simon Coles from Barclays. Please go ahead. Hi, guys. Thank you for taking the questions. It is Simon Coles from Barclays. I was just wondering if you could give us a few more details about the partnership that you have signed with JCDecaux, and maybe some indication on how the economics are going to work on this partnership. My second question is, around the Bouygues deal, I was just wondering, is this the sort of structure for deals that you would like to do in the future, in that you stagger the payments and the transfer of towers if you are buying towers, or you say that you can remain flexible on the balance sheet? My final question, just a quick one. If you had any guidance for mid-term outlooks for the Netherlands and U.K., I know they are very stable businesses and very cash generative, but I just wondered if you had any thoughts on that. Thank you. Yes. We go first on the JCDecaux answer. This is Àlex Mestre, Chief Commercial Officer. This agreement certainly has been signed recently. It is sort of an agreement that we are both parties trying to have a common approach to the market. We have been trying to deal with the small cells as initial deployment for this new market. Both together, we believe we can add jointly a set of tools together that can speed up a little bit the deployment of this market. Our budget is not being influenced by this agreement so far. We need to see, yet, the go-to market on the two countries where we are initially having this commercial agreement in both sides. We intend to At least continue with the growth on DAS and small cells. We categorize both product lines into a single one, which is what we call densification of macro sites into smaller sites. Here we can attack the market with two products, DAS, which is distributed antenna systems, or small cells. We have reached a 13% growth during 2016, and we expect that we should be able, of course, to follow the same growth we have been achieving so far. Taking into account, and there is on page 31, an assumption on how we understand the market will grow from 2018 onwards up to 2025, where the analysts are projecting a CAGR of roughly 20% per year. That is the intended approach onto that market, both parties together. There are three slides devoted on the appendix, four slides actually, from slide 30 to slide 33, which are focusing all the different typologies of deployments for densification, and there is one as well related to JCDecaux. Yes, so question, Simon, you were asking about the structure of the Bouygues deal, if that is something that we want to replicate going forward in terms of phasing. Yes. I think that the Bouygues deal represents a good example of what we would like to implement in the next deals. First of all, it is a deal that is coming from an MNO, so directly from the client. This is really important, in which we can develop our competitive advantage. If you ask me, which is the competitive advantage of Cellnex compared to other players, I would say is to be able to sit down with a client and to draft from scratch a new MSA. A new MSA, which is no longer an MLA. We have evolved here and tower in Europe allow us to, step by step, be in the front door, and to develop new confidence, to understand the needs of our clients, to meet these needs, and to create value in the long term for both. These are win-win agreements. Yes, this is a new paradigm that meets not only the requirements in terms of technical aspects, but also from accountancy aspects, as this is no longer a pre-existing lease, but just a pure service as a pure infrastructure service as you can find in other sectors. Any question? There was a last question on opportunities in the Netherlands and the U.K. Well, the Netherlands and the U.K. are in the first step of our development in every country. Only to remind you that we categorize, we have three categories or three steps on our market development. The first one is an introduction on every country where we always identify small opportunities, relatively speaking. We are talking about hundreds of towers always. Then allows us to get better relationship with the customers and to identify further opportunity for growth. Growth, gaining a scale is the second step, in our market development. The third one, when we are in the second step, we are always talking about thousand of towers, approximately in the transaction. Then at the third stage is where we have a nationwide coverage or nationwide footprint. When we are able to approach our customers and then to submit decommissioning programs in order to capture and to maximize the efficiency on top of the organic growth. All in all, means that we have identified previously, potential next steps in the Netherlands and in the U.K. As you can imagine, we cannot disclose our potential next steps in every single country, but no doubts about potential opportunities in the Netherlands and the U.K. Otherwise, we didn't invest on those attractive markets. That's very clear. Thank you very much. The next question comes from Charles Thorne from Jefferies. Please go ahead. Thank you. I have three questions, please. It's Charles Thorne here from Jefferies. The first one was on Italy, and specifically, Fastweb have spoken about a small cell deployment, in that country in the 3.5 gigahertz spectrum range that it had acquired with Tiscali last year. They've spoken about actually using a proprietary cabinet footprint in Italy for the small cell deployment. But it'd be interesting to know if there'll be any opportunity for Cellnex to support that. Or do you think Fastweb will rely solely on their own infrastructure? The second question, it leads on from that. It's also another question about the JCDecaux commercial alliance. Small cell deployments come with many challenges and not least getting access to the ground level street furniture. We've seen with Fastweb, they'll try and use their own cabinets. When it comes to the JCDecaux commercial alliance, it seems like you've got a fantastic opportunity to get access to that ground infrastructure. It's just Spain and Italy at the moment, but should we expect to see the geographic scope of that commercial alliance expanded? Also, will that commercial alliance sit with the CommsCon management team? So, a question there on JCDecaux. Then lastly, on the Bouygues deal, and you've touched on this already, but it does feel like a bellwether for European outsourcing. It fits amongst the very few MNO sale and leaseback deals that haven't been driven by leverage pressures at the MNO. It'd be interesting to know how you found working with the Bouygues management team and compare that to other management teams at other MNOs. Also, any sense that there are discussions for expanding that agreement by you doing more sale and leasebacks in France. So, thank you very much. Thank you. Àlex will answer your first questions on the small cells. Okay. In relation to deployment of small cells into the dense urban areas, you are right. There are several, let's call it urban real estate, that can be used. We have already, today in our existing contract with Barcelona City Hall, we have experience on rolling out through traffic lights and pole lamps. Also, in Milano, we are using light poles to deploy small cells. To have the cabinets is, yes, another possibility, and I think is one of the new areas, as well as using advertising panels. This is, let's say, how we see our agreement with JCDecaux, which is another potential real estate. Technically, there are certain characteristics that this urban real estate must have, is that it has to have some height, cannot be just close to the floor. You need ideally 3 meters, 4 meters height in order to do the small coverage that the small cell is supposed to do. Moving to the second question, I understand if you were wondering whether the agreement we are having today with JCDecaux could be exported to other regions other than the first two. Absolutely, yes. However, since we understood it's first better to test in the areas where Cellnex is already having a very important footprint, we decided to do this first commercial agreement in those two countries. In relation to the third questions, I may start, and Tobias, you may follow. I think the point is The relationship with the It's like- The new management, I understand. I understood. Yeah, that's right. It seems to me that Bouygues management have shown a very progressive mentality towards passive infrastructure, more progressive than any other operator who didn't have leverage constraints. Yeah. It'd be interesting to know how your experience there differed with the type of conversations you're having with other operators. No, thank you. This is a very good example of our strategy. As José Manuel Aisa said before, for us, it is very different when we transact with a customer rather than other players in the market. To develop the customer relationship is key for us. If you remember, our first transaction with Bouygues was in September, and only, let me say only, and remark only, after four months, we together, the Bouygues management team and us, we have been able to reach an agreement on 1,000 of assets and a very high quality of assets. So very sensitive transaction for both parties. This is the reason why I fully agree with you. Management of Bouygues, I think it is very positive, is very open to consider maybe even a full outsourcing on the existing infrastructures. Well, not only on the existing infrastructures, sorry, because, we have reached a very important build-to-suit program of 1,200 new infrastructures. Is your dialogue with KPN in the Netherlands in a similar place, or do you think it will take longer? Well, we try to do the same with all of our customers, no doubt about that, not only with Bouygues, you are right. But this is our, let me say, commercial approach. Thank you very much. The next question comes from Henrik Herbst from Credit Suisse. Please go ahead. Yeah. Thanks very much. I had a few questions as well. Firstly, in terms of your decommissioning schedule, so the 2,000 sites, you are saying 25% is in progress. What does that actually mean? Does that mean we could expect that to happen in 2017, and it is already included in your guidance? Then on the same topic, the remaining 75%, does that have the same operator or operators as the first 25%. If you, I guess, firstly prioritize what is it you're working most with, and then, I guess maybe that's the same order, but which of these options or opportunities are you the most excited about and think will contribute the most if we look a couple of years out? I think that's it. Thank you. Yeah. In relation to your first question on decommissioning, yes, certainly now we are on this 25% of achievement. I think the first and relevant element here is that we are proving that decommissioning is something that is feasible totally. This has been repeatedly a question that you have been mentioning as well, that this is not well. It is possible, and we are actually doing. The reality is, and this is also true, that it has taken a little bit more time on the preparation for the plans of decommissioning, which is a quite detailed analysis of pairs of towers, the operator's towers, our tower, define which is the survivor tower, how to move the fiber if the fiber is there. So it is a very detailed technical analysis that has to be performed before moving ahead with the decision of decommissioning a tower. I think the second part of this question was whether if the remaining 75%, we intend to ship with only one operator or several. The same or- Yeah, I think it is going to be clearly spread among different MNOs and different countries. There was a third question on the new markets opportunities that we are currently assessing. Maybe it's a question for you, Tobias. Well, the idea is, as we said earlier, we are currently in five countries, but we are in different stage of market development. We want to develop in every single country our strategy in order to gain scale for growth and then, to be able for consolidation. This is our first priority. Second one, focus remain our target. We are looking for opportunities in Europe. Sometimes, the opportunities will come as a public tender, as a competitive process. But the company, it's working always very proactively approaching customers, identifying opportunities, and then, let me say, to create or to define new opportunities in a bilateral discussions. Obviously, I cannot disclose in which and where we are working, but, we have a very attractive pipeline of opportunities in Europe, and we will disclose them when we execute or when we can disclose. Thanks. Can I just follow up, actually? On the first question, so the 25% that you say is in progress, do you expect to have that done this year? Or is it more sort of it's in progress and it will be over the next few years or couple of years? Thank you. Then, actually on the pipeline as well. Is it more skewed towards your existing markets or new markets, would you say? Thanks. For us, the 25% means fully contracted the commissioning projects. That's the concept of this 25%. Yeah, normally, it should be in process of the commissioning to be fully achievable within the 2017 year. The second question, our main priority is to consolidate our positioning on the existing markets. It doesn't mean that we cannot analyze or to approach other opportunities in Europe. Okay, thanks very much. The next question comes from Charles Menadue from Kepler Cheuvreux. Please go ahead. Hi, good afternoon, everyone. Just two questions from me. On the PoP growth, organic PoP growth. You achieved 4.5% in 2016, which is better than your guidance. Do you expect to achieve this growth rate again this year? Then again, on the PoP growth, the 34% over 2016-2019. I assume this is an average, overall all countries, but do you expect to see large differences in terms of growth per country? Thanks. Hi, Charles. On the guidance we have provided for medium term, basically, we want to be consistent with the guidance we provided at the beginning of the year. It is true that we have been ahead of that guidance in terms of organic growth for this year, mostly because Q3, there was quite a high activity. In any case, given the landing profile of how we attract new PoPs every quarter, I think it's problem for us to provide exactly same view for the medium term. That is why we are keeping these are 3%, 4% guidance in the medium term. With any more information we get from our customers, we may be adjusting that. But this is the sort of information we have today and a level we feel comfortable with. In terms of organic growth being generated by different countries, exactly the same as you are seeing during 2016. The profile will be consistent. Countries are providing similar levels of organic growth, obviously with slight differences. For example, the Netherlands, you know that their penetration rate is already quite high. But on the previous markets, the trend we are expecting is exactly the same as seen in 2016. Okay, that's clear. Thank you. The next question comes from Ottavio Adorisio from Société Générale. Please go ahead. Hi, good afternoon, gentlemen. I have three questions, if I may. The first one is on JCDecaux. I have to be honest, I was a bit surprised on that one because basically in 2014, Vodafone did sign similar agreements with them. It's a worldwide agreement. It's a 15-year contract, and it's almost the same sort of content of the agreements you signed yourself. I would like to, if possible for you, to give some color how it's going to work between the three of you. Is Vodafone going to have access to the same sites that you're going to use and you're going to have another mapping at different sites and so on and so forth? The second one, it's on Italy. I've seen that you're recording pretty good growth on the PoPs. It's no secret anymore, Wind and Hutchison are basically merging. Wind is basically owner of the contract, and therefore it's very likely that the Hutchison antenna will be moving at some stage. I was wondering if, have you seen any movements on that side? I've seen that the growth in Italy is relatively robust, especially when compared to Spain, and I was wondering who are the PoPs that actually are moving towards your towers. The third, it's a follow-up from a previous answer to JCDecaux again. It's talking about the fact that the budget for the JCDecaux has not been formulated or at least has not been finalized. I was wondering, if that means that the free cash flow guidance you provide today, it's growth of any investments you have to make on that particular agreement, or it's basically already been accounted on your free cash flow guidance? Thanks. Okay. In relation to your first question, honestly, we do not know the details on other potential agreements that our partner may be having. The truth is that at any moment, we've been having any kind of restriction on rolling out the go-to-market of the agreement, which is only commercial, going to your last point, but it is only commercial agreement, on those two markets. So far, we do not foresee any restriction with any MNO on deploying this agreement in Spain and Italy. The second question was actually in Italy, the growth in Italy. Growth in Italy, there are several factors. I think we've been also press releasing some agreements we've been having with one, let's say, broadband operator in Italy. This is one of the elements. Also, one of our several decommissioning projects is in Italy, which in turn brings also additional point of presence. That's basically the main elements above, let's say, the regular growth that has been guided into this presentation that we are having in Italy. Regarding the third question, Ottavio, we have presented to you what we think is a prudent approach to 2017, and I think everything is embedded there. If during the year our view has to be updated, we will share with you as we have done, but so far, this is our best estimation. Okay. If I can just follow up on the very first one. You said that clearly the agreements with JCDecaux is not exclusive, it is just commercial agreement. For the two countries where you are going to cooperate with them, would you have access to all their sites, or there has been some restrictions? Full access to any sites that we jointly may have. So in that sense, there is no restriction. Fine. Thank you. The next question comes from Fernando Cordero of Banco Santander. Please go ahead. Thank you for allowing me to make some questions. The first one is as a follow-up on the 2017 guidance, also understanding what is your, how can I say, way of presenting the guidance. I just would like to check if the building the blocks exercise for this guidance is as we can, how can I say, foresee in the sense that after the €275 billion organic or, sorry, €279 million EBITDA for 2016 plus the €38, €39 million EBITDA coming from a change of perimeter during the year 2016, it implies that your guidance is assuming that the organic growth is going to be between 1% and 4% EBITDA growth. In this organic growth also including the Voi deal. Just would like to, how can I say, to check the math and at which extent this organic growth is quite conservative. My second question is regarding the growth expansion CapEx, the organic expansion CapEx, particularly on the effort that you have made during 2016 on efficiencies and particularly on ground leases. In that sense, I just would like to know first, at which extent have you been buying land, not just renegotiating the ground leases contract, and at which extent should we expect the same activity or the same CapEx for the next couple of years? Finally, on the dividend, although it is quite clear that Cellnex is not focusing yet on dividends. I would like just to, how can I say, to know if you are changing your dividend policy as you are guiding to a 10% growth in dividend for 2017, or if it's just, how can I say, derived from the fact that your recurring levered free cash flow is expected to grow 10%, so 20% of this free cash flow on dividends is just growing 10%. In other words, what should be the dividend policy going forward, 10% growth per year or 20% of the free cash flow? Thank you. The first question is about your estimates on our guidance we gave to you. Regarding the Voi deal, we do think that in 2017, the impact of Voi deal on the EBITDA should be rather limited. When doing your estimation, please factor into the equation this, that being conservative or not will depend also on a change of perimeter of the impact of this deal into the equation. Regarding your second question, which is about expansion CapEx, you are right. I think we are quite happy with this program. Most of the program comes from renegotiation and cash advances than ground lease acquisitions. This is something that is important to say. Very specially when you say what is going on in the next years, you can see that this EUR 57 million represents 7.5% of total revenues, which is within our guidelines between 5% and 10% of revenues devoted to expansion CapEx. I do think we will follow this guidance. Step by step, I think that we will be able to increase further the ground lease negotiation program, which is very interesting. Finally, regarding your dividend statement. Let me say to you that this dividend suggestion, this dividend payment in 2017, 2018, 2019, it is a crystallization of our dividend policy. If you know that the 20% recurring levered free cash flow had to be commensurate with also the growth of the company, the net income of the company. We do think that this is a crystallization for 3 years, that in a quantity of money that makes sense with all the patterns that we commensurate this 20% recurring free cash flow. Our dividend policy was a little bit maybe more developed than what you say. I think that is all, Fernando. Thank you very much. Just if I may, a follow-up question on the ground leases. Given your current experience, where you are finding the most interesting, how can I say, financial profile of the ground lease renegotiation? Renegotiating, buying the land? I would say to you that the renegotiating first, cash advances, and buying land. This will be the order. Okay. Thank you. Very clear. Sorry, just to clarify, Fernando, we are seeing that cash advances is a very powerful tool. I would say that this is representing the savings we are seeing today are mostly coming from this. Buying land is something we are starting to do, but, going forward, that could be also a very powerful weapon to take into consideration. Thanks again. Thank you. The next question comes from Aaron Shaw from Bank of America. Please go ahead. Hi, guys. Thank you very much. It's Aaron Shaw from Bank of America. I've got three questions. The first one is, in the U.K., I guess there's an asset available that offers significant scale, but it would also mean dialing back the progress you've been making in reducing the broadcast exposure in your portfolio. Would you tolerate, I guess, bidding for this asset in order to cement greater scale in a Big Five European market? Or is it something that you wouldn't really consider because of the progress you've made on broadcast and reducing that exposure? Question two, the Bouygues Tower deal, I think that's been appreciated as quite an interesting deal. I was just wondering whether you could confirm that the sale process was conducted on an exclusive basis with Cellnex being the only bidder. I was wondering whether you are confident that you can carry on doing this in future negotiations. Essentially wondering why would an operator not choose to conduct discussions with multiple parties, including American Tower? Just on that, did that provide support for you pulling out of an FPS deal where otherwise you'd be bidding at quite an elevated multiple? Question three, on your growth guidance, I guess there could be a material step change in growth in some of your geographies, particularly in Italy, if and depending on when the fourth operator chooses to build. Would you consider such growth to be incremental to your 3%-4% guidance? Those are the questions. Thank you. Well, many questions, Aaron. Let's see if I am able to answer all of them. Otherwise, you help me to remind, because it has been quite a thorough set of questions. Well, the first question was talking about Arqiva. Arqiva, as in any other investment in the landscape for Cellnex, has to comply our strict M&A criteria. This is very important. If not, I am very sorry, will not be Arqiva or nothing else. Just to remind very quickly, our M&A criteria is low double digit in terms of equity IRR. Second, improvement of our cash flow visibility or business risk profile. Finally, the accretive impact on our recurring levered free cash flow per share from year 2 onwards. So it is quite strict. This criteria, and just to answer another question you were saying regarding FPS, was the fourth question, I think. You said to us that, obviously, this opportunity did not meet our criteria. So I am very sorry. Others will come who can have another criteria. When talking about American Tower, which is your third question, I think. American Tower has always been there. It is not the first time it has been in Europe. Back in 2011, it was competing with us with our first towers in Spain. So it has always been there. Our competitive advantage is not only the upfront payment, is, as we said before in other answer, is to be able to sit down with the client, to build up a new MSA contract, to understand their needs. That is really important. Your second question was about Bouygues. Bouygues' process was a competitive process. Of course, it was competitive process. Maybe it was not in the press every day. It was competitive. If we were able to win, it is because we were able to do a unique offer. Unique offer from many angles, not only the upfront payment, but also our capacity to understand their needs today and tomorrow. In order to do so, you need credentials. You need industrial angle. You need partnership in the long term. This make us unique in comparison with others. Finally, you are talking about, I think it was- Growth. Fourth MNO. Fourth MNO, we have always been very vocal. Should have an impact in 2018, not before. We have been consistent with this message. What the guidance represented to you is consistent. Okay. Thank you very much. That was very clear, I guess. I have just got one more question. Just in terms of your EBITDA guidance for next year, would you say that is quite conservative? Does it take maybe a more pessimistic view of your business? To me, it looks a little low, especially considering where consensus is sitting. Well, it is the same answer as before. I cannot change the answer. It depends. First of all, we are a prudent company. We have a track record of commitment and delivery. Second, I will say to you that Bouygues, and it is clearly stated in that page, should crystallize in a very limited way in 2017. Please, if this change, we will somehow share with you new views. But in the meantime, this is our best. Estimation, and we will see in the next coming quarters. We have to be prudent, if I may. Okay. Thank you, guys. The next question comes from Luigi Minerva from HSBC. Please go ahead. Please, Mr. Minerva, go ahead. Sorry, I was on mute. Good afternoon, everyone. Thanks for taking my questions. The first one is on the Bouygues deal. I was wondering if you are able maybe to share some color about the deal, maybe from the mobile network operator's perspective, and particularly with regards to the treatment in the IFRS 16 environment. So the service agreement that you have, will Bouygues have to basically report it as part of a long-term lease in their net debt definition, or does it stay out of the net debt with IFRS 16 new rules? The second question is on cross-border synergies. Traditionally, other tower companies have always stated there are no synergies. I see you have a slide in your presentation making the case for it. If you can probably a bit elaborate on your views on that. I think you are better positioned than others in Europe to comment on that. Thirdly, just to go back on the dividend guidance and the dividend outlook. So, if I understand well your numbers, effectively, we are talking about 9.1 cents of DPS in 2016, which can become 10 cents in 2017. Now, consensus on Bloomberg for 2017 is about 21 cents. Are we getting this right, that you are well below consensus on your new dividend outlook? Thank you. Well, many questions. Let's see. First was about IFRS 16. I do not know how our different clients can treat this from an accounting perspective. What I can tell you is that we are working on MSAs, no longer in MLAs, which means that IFRS 16 defines very well what is a lease and what is not a lease. Therefore, if anyone understands the criteria and takes our contract, will categorize this contract as an MSA, and therefore, under IFRS 15. But this is the treatment. The accounting treatment depends on the different parties. Regarding the cross-border synergies on page 34. The only intention of page 34 is to tell you that when talking about cross-borders, you have to look at the countries, yes, but also the clients. At the end of the day, if our competitive advantage is to sit down and to develop a new contract with a client, therefore, if you have already a common way of communication with this client, this can be somehow repetitive in other geographies. That is very important. Towering is about clients, not about towers only. You were talking also about Well, on the dividend? The dividend. This is also that Fernando Cordero raised the point, and obviously, the market consensus in dividends were following the 20% recurrent average free cash flow. Now we are saying to you that we crystallize this 20% recurrent average free cash flow commensurate with net income, M&A growth. We crystallize for three years as a 10% growth in relation to 2016 payment, therefore, this is a new guidance and cannot match the consensus that you have in front of you. We do think it makes sense for these new three years, and to do what we have to, which is to create value for our shareholders. Okay. Thank you very much. Very clear. The next question comes from Max Gilbert, from New Street Research. Please go ahead. Hi. Thank you for the question. I just wanted to ask with regards to the 700 MHz that is going to be allocated to mobile services in 2020. What impact, if any, does this have to revenues? Sorry, Max. I guess your question has to do with the second digital dividend and the allocation of spectrum. Yeah, exactly. On slide 15. Okay. Okay. Well, Max, and any of my colleagues please correct me. Our base case is that, in terms of broadcasting, the vast majority of the content was already moved below this 700 MHz band during the first digital dividend. From a technical standpoint, it is quite easy for us to remove the impacted content below this band, while keeping the number of national multiplexes. That is our base case, and we do not think that process is going to have any impact on our existing revenues. Then on top of that, also bear in mind that by allowing or by making available more spectrum to our customers, and as our mobile services will be provided, will be developed under this new framework also, we believe that our operators, our customers, will also be able to maybe offer us a brighter landscape for further organic growth. Maybe just to add on the top of that, is that there is a broad consensus at E.U. level that sub-700 MHz is going to be mainly devoted to broadcasting. In that sense, with the factor that Manuel mentioned before, that most of the multiplexes in our case in Spain are already moved there, we believe this is quite a stable, let us say, scenario. Okay, thank you. I actually have just one further follow-up, if you do not mind. On the TETRA contracts, also on slide 15. Just to try and understand. The contracts are being renewed in Catalonia and Jerez. Are they a small portion of your total TETRA exposure, or how should we think about TETRA going forward? Thanks. Basically, what we are offering here is a renewal of existing contracts. Basically, this guideline should be regarded as a continuity of what we already have. First, a clarification that network services and others is not representing a huge contributor to our top line. In any case, this is simply a way or good news in the sense that we can keep what we already have. I think the question is if Catalonia is really waiting a lot on the TETRA networks, the answer is yes. It is a big bulk of the TETRA part of our business. Okay, excellent. Thank you very much. The next question comes from Mark Murphy from Macquarie. Please go ahead. Hi there. Mark Murphy from Macquarie here. Just three, hopefully, straightforward questions. Number one on the RTVE Spanish broadcast contract. I was wondering where you are on that in terms of negotiations. Number two, then on fiber backhaul, I was wondering what the opportunity is for that in terms of fiber to the tower on the new build Bouygues towers in particular. Then the third question, just on the French consolidation risk in terms of the telecom consolidation risk. I know you have some sort of contract protection with Bouygues, but what is the potential impact on that EUR 61 million EBITDA run rate number if, say, the market was to consolidate down to three? Thank you. Maybe the last question, I have not been able to understand. Can you repeat, please? Yeah, sure. On French consolidation risk. If the market consolidates from four telcos down to three, I was wondering what sort of impact that might have on your acquisition with Bouygues and the new towers you built for Bouygues. Would it impact your EUR 61 million run rate EBITDA? Yes. Starting from the last one. This is fully taken into consideration. The sites that we are starting from scratch, as you can imagine, we are not factorizing that. The existing customer ratio in rooftops in big cities is not high neither. There is no impact on EBITDA, and it is well preserved. On the second question, I think was related to fiber to the tower. Yes, this is something that we are still having, let's say, discussions with our customers. Logically, we are trying to have our contribution, especially on those new projects where the towers have to be built. In many cases, it is not the primary core focus of those projects, but we keep having an interest on having a presence on that new field. For the first one. Regarding the first question, and I think it is a question that maybe was asked before, but the thing is, we have been awarded with this contract, recently awarded, and we think in terms of EBITDA, there shouldn't be any material impact. We are quite satisfied, and this demonstrates our ability to somehow renew or to be awarded the contracts of the Spanish broadcasting market. Perfect. Thank you. The next question comes from Íñigo de las Cuevas from CaixaBank. Please go ahead. Hi, everyone. Thank you. Coming back to the MSA, do you know if rating agencies will also not consider it as debt, and could this raise your rating? Thank you. No. Listen, I was talking about IFRS 16, asking you about all the other impacts that you are asking. Yes, I take the opportunity to talk about IFRS 16 on our balance sheet. You know that rating agencies already adjust IFRS 16 in Cellnex balance sheet. They have multipliers, and they have some kind of ways to transform the OpEx that we devote to leases into debt. Okay. Okay. Thank you. The next question comes from Domenico Ghilotti from Equita. Please go ahead. Good afternoon. Three questions, if I may. The first is a clarification on the French consolidation risk. I did not understand what kind of protection you are getting from the contract. The second question is on the network service agreement, just a follow-up on your previous answer. Just to check if I understood properly, you are basically saying that you are expecting some kind of stability in this business in 2017. Is it correct? Last point on your free cash flow generation, I did not catch the reason for the quite significant working capital contribution in the last quarter. Despite this one-off, if I understood properly, basically, you are now counting on quite significant improvement in the free cash flow generation regarding the free cash flow generation for 2017. Basically, this was not so one-off, if you are able to, let's say, to grow starting from this significant base. Thank you. Let's just start by the last one. The working capital adjustment, as we said, is one-off because we have changed our policy in terms of how we manage the capacity to charge to the clients. I think we are doing good progress, but I think the All the work has already been done. I don't think we can optimize further. If so, we will communicate to you. But we are very happy because we have really great value. We have really been able to optimize to understand well the payments criteria and to normalize this. This is regarding the third. The second, just a very short answer. On network services and others, basically, the news you are reading now is that basically that improves our ability to continue renewing what we already have. The way to think about network services and others in 2017 is basically on a stable basis. So, no degrees and no much growth should be expected. So similar levels than in 2016. Okay. Yes. On consolidation, well, as you can assume, we've been exposed in other transactions to a long time foreseeing mergers, that finally happened. So we've been having quite a lot of time to identify it and protect ourselves on those. Please allow me not be very explicit, but in the case of France, I think there are two elements. One is, the initial tenancy ratio for all those towers is quite low. On the towers where there are two MNOs already having sharing agreements like Bouygues and SFR, this is fully taken into consideration on the transactions, and this is the first transaction in Bouygues for the typology of the towers. Also, as a second, I think, very important point, in these transactions, we always kept the all or nothing renewal clause, which is something that makes quite, let's say, strong any risk of losing any sites at any moment because there is a redundancy of sites. I think the proven part of that is what is going on in Italy, that we are not being affected by any of it. Okay. Thank you. The next question comes from Jonathan Dann from RBC. Please go ahead. Two questions, please. The first one, I think Wind has talked about having 60% plus of their new Italian sites fibered. Would that involve, or would that be something you are interested in or involve, I guess, amendment type revenues? Then secondly, will you be renegotiating an MLA to an MSA with, I guess, KPN, Telefónica, Wind? Answer to the first question, yes. Of course, we are interested, and it is part of our day-to-day discussions with our main customer in that case. On the second, I think, we are adding another, let us say, commercial tool in our portfolio of elements that we can have in a discussion with an MNO. We are open to have these kind of discussions, when an MNO is interested on having a different consideration of the services that we are providing to them. Can I ask a follow-on on the JCDecaux contract? If I understand rightly, there is a JCDecaux-Vodafone arrangement, but then separately, there is a third party. I think there is a third party that somehow owns 30% of that site deal. How does the actual negotiation work? I think we are all quite confused. Yes. As we previously referred to that point, we do not know the details that our partner may be having with other MNOs. However, in the discussion that we have been having for closing that agreement in Italy and Spain, we have not found any restriction in relation to sites, in relation to MNOs, from the side of JCDecaux. If there is anything, it is not going to affect any potential rollout that we would be doing with JCDecaux. Okay. Thank you. Can I ask, and I will be cheeky and ask a fourth. On the Linkem contract, I think the press release mentioned access to 8,000 sites. How many do they currently use? Basically, Jonathan, access to thousands of sites is simply a conceptual way of saying that they have access to all of our towers in Italy. Specifically, the sort of speed at which they will be using these towers, it is in line with previous quarters. They are a significant tenant today. Cannot be too explicit because of commercial restrictions with them. I would say that out of the 1.3 tenancy ratio we have in Italy, they are contributing on a consistent basis to our organic growth, which we generate every quarter. Thank you. The next question comes from Nicholas Marr from Exane BNP Paribas. Please go ahead. Yes. Good afternoon, guys. I will try to be quick because the call is starting to lag a bit. Just on two quick one, on the small cells economics. You have been unconvinced or still trying to crack the magic formula for a while. Do you think you have it now? You are happy that you are able to roll out small cells and reach a, let us say, low teens to mid-teens kind of equity IRR on the projects? Second, you have a slide talking about close to, I think, EUR 1.8 billion of available financing that you have now. Quite a lot of that will be earmarked for the retail deal. Looking at your net debt EBITDA over the next three years, you are still above 4 times. Do you genuinely have that much headroom in terms of tackling all the new opportunities that you are talking about? Or will we just be condemned to have an equity raising, let us say, to fund the next large deal in the next 12 to 18 months? Yeah. In relation to the small cells, we devoted four slides trying to give some color on the business model. Page 30, there are two of the basic business models. I think with all that information, you will be able to figure out a little bit the main terms and parameters of how this could work. Also we try to illustrate some conversion in terms of the DAS and the small cells on page 31. However, in any case, this has to follow and has to fall into our criteria and golden rules of investing. If that would not match, then this kind of project would not fit in our interest. No? Finally, regarding the credit lines available. Listen, I think it's very good news to have, first of all, a long-term maturity scheme in front of us, in which in the next five years, we have headroom somehow to use these credit lines. This is a lot of money, EUR 1.8 billion. Obviously, we fund many projects or should fund many projects, one of them being BUHIC. Also be aware that BUHIC deal is not going to be paid tomorrow. As we have been saying, this is a process, and during this process, we will also generate more cash. So, I wouldn't say 1.8 less 800, they have EUR 1 billion. No, I would say that the beauty of this project is that somehow we have time to invest. No? I do think that right now, if you look at how much money Cellnex has invested in the last years, we have invested, roughly speaking, around EUR 1.5 billion, and we have EUR 1.8 billion to invest more. So I think it makes sense. That's a lot of money. As you know, Nicolas, you can use this money just to acquire 100% of the enterprise value or maybe 51% of a target which is levered. So this is a multiplier. No? So it depends how you fund the deal in terms of partners. Partners, yes, partner, no. Operating finance, yes or not. So maybe it's more sophisticated that say, "Okay, this is the headroom. That's all. Game over." There are many things here that should be commensurate with the answer. Okay. But you mean you are now relatively comfortable to play with the, let's say, the 4x-6x net debt EBITDA range, and will care later on about coming below the 4x to something a little bit more sustainable? Well, Nicolas, we have always been clear in this regard from the very beginning in the IPO also. We do think, and I do think personally, that four times on average in the long term makes sense. This is the point, which means some years will be above four and other years below four. But on average, we have to have a healthy, as you are suggesting, four times. In my view, four times EBITDA makes sense in a company that has a backlog that is impressive. Our backlog, and you can check this in the presentation also in the annual accounts, EUR 12 billion. This is the backlog we have right now. So net EBITDA is a good estimation. While I wouldn't use as the only estimator to see if the company is highly leveraged, below leverage or whatever. I think it's one criteria, but there are several angles in Cellnex. Okay. Thank you. The next question comes from Nelson Bernardino from Haitong. Please go ahead. Hi, good afternoon, everyone. Just two very quick questions from my side. The first one still relating to the fourth quarter results. You had a nice bit at the EBITDA line due to low OpEx of EUR 106 million, even lower than the third quarter, despite having more assets. Is this just due to normal quarter-on-quarter fluctuations, or is this the kind of level of OpEx we should expect going forward? Also, I know you commented that American Tower has been in the European market for a long time, but given the multiple they paid for FPS Towers, do you feel that they are more aggressive now? Thank you very much. Again, on quarterly OpEx, bear in mind that we do see some fluctuation in terms of maybe some quarters you can see some utilities adjustments. Others, general services, for example, that depends on one-off costs we contract on a given quarter. So it's quite difficult for us to give you quite a monolithic figure from which to extrapolate going forward. That is why we are comfortable providing you with our 2017 guidance, because all in all, OpEx should be performing quite flat. As you very well mentioned, you will see some increases coming from increased operations, but also you will see the effect of the efficiency program. So all in all, you should be expecting OpEx performance on an annual basis similar to 2016. Yes. Your second question was about American Tower aggressiveness. Listen, I don't know if they are more aggressive or less than before. We have an M&A criteria. We follow these rules. For us, the value creation for our shareholder is key. We are not going to change this game if American Tower is there or not. Not at all. No, in other words, maybe, sorry to interrupt you, Manuel, only to reinforce the message that our project remains as it was in the IPO time. Because for us, I think, let me say, it's a very good news to get American Tower in Europe, that this is the proof that Europe is attractive for the American Tower Company. It's the worldwide leader. There is no doubt about that. So this is a proof that we are in the right market, in the right place. If you look the U.S. market, and benchmark with Europe, you would be agree maybe that we could get two, three big telecom infrastructure companies like in the U.S. market. So all in all, I think it's the natural development of the European infrastructure telecom market. Perfect. Thank you. Ladies and gentlemen, there are no further questions in the conference call. I now give back the word to the company for the final remarks. Thank you. As we have no more questions, we can conclude this session. I would like to thank you for your time, and if more questions arise, as always, I remain at your disposal. Thank you so much and have a great weekend. Bye-bye.