Good morning, everyone. My name is Juan Gaitán, the next Director of Investor Relations. I would like to thank you all for joining us today for our 2022 resource conference call. As always, I'm joined by our CEO, Tobias Martinez, our CFO, José Manuel Aisa, and our Deputy CEO, Àlex Mestre, who will lead today's session. We will now share the main highlights of the period with a focus on reiterating the messages we provided in the context of our strategic update last quarter. Then we will open the line for your questions. A reminder, if you wish to ask a question, please press starfive on your keyboard. Without further ado, over to you, Tobias.
Good morning, everyone. Thank you so much for your time today. Let me please start by providing some context and reiterate that Cellnex has always listened to the market. We have been rigorous in all of our decisions, and we will continue to remain disciplined and committed to our public targets regardless of leadership changes. Therefore, today, I would like to take the opportunity to insist on the main characteristics of the next chapter of our equity story, which will be focused on execution and a clear capital allocation framework with an unconditional commitment to investment rating. This new chapter has the following features: Focus on free cash flow generation, with this metric trending to neutral by the end of 2023. This is one year earlier than what we said last quarter.
Securing investment rating as the overarching priority, with any future excess cash to be deployed in manner consistent with maximizing long-term shareholder value. The assessment of strategic options for minority subsidiaries in order to crystallize value and accelerate the investment rate process. An increased focus on organic growth and continuous progress on the crystallization of efficiencies and synergies in order to make sure that our OpEx and lease base grow significantly below inflation. Our efficiency plan is well on track to meet our targets, and we are starting to crystallize synergies. These levers can already be seen reflected in the solid set of results we are presenting today. The period has been marked by a consistent operational and commercial execution, with PoPs increasing 6% compared to last year, revenues increasing 38%, our Adjusted EBITDA 37% and our Recurring Levered Free Cash Flow 39%.
This outstanding operational and commercial performance has also translated in our ability to generate organic growth from new entrants. Strengthening our industrial partnership with Telefónica in Spain by renewing existing contracts or the execution of remedies in a timely manner and in attractive terms. As mentioned earlier, we have an unconditional commitment to our public target. We are reiterating our medium-term guidance. Finally, we are adjusting our executive compensation structure in order to ensure a perfect alignment between strategic targets and remuneration. I will now hand over to our CFO, José Manuel Aisa, who will provide more details on the period.
Thank you, Tobias. If we move to slide four, you can see here our performance in 2022 compared to our guidance. While our guidance has been adjusted during the year in order to reflect the closing of the Hutchison UK transaction later than initially expected, it is still important to highlight the consistent organic growth generation in the period and the strong contain of OpEx and leases in a high inflation environment on a like-for-like OpEx, and leases have grown significantly below inflation as a result of the efficiency measures in place. We have seen a controlled impact from rising energy prices due to hedging and pass-through mechanism. On the right-hand side, you can see our guidance for 2023, which is in line with market expectation and has a number of building blocks which are worth explaining.
Starting from 2022, we had positive impact from inflation in our respective revenues. The contribution from build-to-suit and organic growth generation in the period. Please remember that pass-through have a neutral impact on Adjusted EBITDA. Comparing with these revenues in 2022, excluding pass-throughs, we are expecting our revenues to grow organically around 7% in 2023. We also include change of perimeter, a bit more than 10 incremental months contribution from Hutchison compared to 2022, and the expected impact from remedies in France and the U.K. With this, we get to a business perimeter in 2023 that allow us to reiterate our 2025 guidance and provide neutral free cash flow one year earlier than communicated last quarter. As Tobias mentioned earlier, we have adjusted our executive compensation structure to ensure consistency with our strategic targets.
Our annual bonus in 2023 will be linked to organic growth, Recurrent Levered Free Cash Flow, net activity consistent with our past investment grade and ESG initiatives. Our 2023-2025 long-term incentive plan will be linked to absolute and relative this year, free cash flow and ESG initiatives. Now, since you already have the full presentation, I will just provide a few additional comments on capital allocation priorities and financial strategy. As Tobias has already mentioned, we have made the unconditional commitment to maintain adjusted lever consistently below 7x , with objective to become investment grade by S&P, as well as to maintain our investment grade status by Fitch. Defining free cash flow as Recurrent Levered Free Cash Flow minus B2C CapEx, minus expansion CapEx, plus cash received from remedies.
We are expecting to become free cash flow neutral by next year, one year earlier than communicated last quarter. Our free cash flow generation will further accelerate as we reach the end of our B2C programs, and this will support our rapid deleverage. Cellnex is constantly monitoring market conditions to decide the most appropriate way to tackle near-term refinancing needs. Additionally, we can always use already available and drawn credit lines to meet these needs. Going forward, generating cash flow will substantially exceed the maturities. Our commitment to investment grade should allow Cellnex to access a deeper market at compelling terms. With this, we remain now at your complete disposal to answer any question.
Thank you, Juan Manuel and Tobias. The first question comes from Akhil Dattani from JP Morgan. Please go ahead.
Hi. Good morning. Thanks for taking the questions. I've got a couple, please, and maybe I can start with your guidance and outlook in general. On the Q3 results call in your presentation, you talked about your illustrative growth drivers for the midterm. If I understood correctly, you were talking about 6%- 7% organic revenue growth and then double-digit EBITDA growth. I guess if we look at where you're now guiding for 2023 and then where your guidance sits for 2025, it looks like the embedded EBITDA growth is much lower than that. I just wondered if you could help us understand, is that prudent? Is it simply you're not going to update that until we get management change?
Just if you could generally just help us understand the difference between what you said at Q3 and your growth levers, and then what your guidance embeds at the moment. That's the first question. The second one was, the comments you made, at the beginning of the presentation around being open to assessing ways of opening your capital structure in your subsidiaries. I just wondered if you could give some comments on exactly what that means. Are we talking about asset sales of non-core markets? Are we talking about selling minority stakes in businesses? What are the paths you're looking at as you try to accelerate the move to investment grade? Thanks a lot.
Okay. Thank you very much. Listen, regarding your first question, let me answer in two ways. I think that it's important, first of all, to look at the slide, the slide number nine of the Q3 presentation as of 2022. You can see here the building blocks that you are saying, we said, first of all, that our organic growth was sustained in three main levers. First of all, contracted escalator, then densification, and finally efficiency. All these together were giving a total revenue growth of 6%-7% and Adjusted EBITDA and recurrent free cash flow of 10%-12%.
If you take more or less actual 2022 now in slide four compared to guidance 2023, for instance, Adjusted EBITDA, we are going from a Adjusted EBITDA in 2022 of EUR 2.6 billion into EUR 3 billion in 2023, which represents more or less the 10%, 12% that we set in slide number nine of Q3 2022. I think it's completely coherent, but happy to give you further comfort offline. The second question, it was about opening the capital of different business units.
Maybe Tobias-
No, it's just a pure option ability. We are open, to consider potential, co-inve.stments or minority stakes, coming from-
Mm-hmm
... some investors that could share with us the same strategy and could be helpful. For us, this is not a must. This is very important. This is not a must for us in order to reach investment grade, huh? Which is the objective is to reach on December 2024. Obviously, if we could reach earlier, much better. Again, it's pure optionality because some investors are approaching us in order to co-invest or to get interest in order to get a minority stake and sharing with us a project in several countries. It's just pure optionality.
Maybe Akhil just one final comment. Maybe, there might be also a slight difference in terms of EBITDA growth and EBITDA de-leasers growth, which is also maybe which is the criteria that we use in the slide in Q3. In any case, as Tobias mentioned also, we're happy to provide you more detail.
Thanks. Sorry, can I just. That's very useful. Can I just ask one super clear clarification, which is I completely understand the building blocks for 2023. I think that's very useful. I guess my question was more on the 2025 guidance, because, you know, if we take a midpoint of your guidance for 2023 and then your midpoint of 2025, the implied growth rate to EBITDA is a lot lower. I guess I was trying to understand, is there a specific reason for that slowdown in growth? Are there other things you might want us to think about to explain that difference?
No. Okay. No, Akhil. Listen, I think that you know that Cellnex has always been a prudent company, okay? We commit and deliver. So far, our 2025 guidance is between EBITDA EUR 3.3 and EUR 3.5. If you do your maths, I understand that you are going maybe to EUR 3.6. Take into account that also we have different elements like inflation during this period of time, the build-to-suit programs. We prefer to maintain this EUR 3.3 billion-3.5 billion as Adjusted EBITDA for guidance of 2025. If, as it tends to happen in Cellnex, things go better than expected, we will on due course increase it. Okay?
That's clear. Thanks so much.
You're welcome.
Next question comes from Jakob Bluestone from Credit Suisse. Jacob, go ahead.
Hi, good morning. Thanks for taking the question. Not question, but I've got two, please. Firstly, if you could maybe just help us understand the change in your free cash flow guidance. Getting to neutral in 2023 already. Maybe just help us understand what's changed. Did you maybe pull forward more BTS into 2022? I think you had quite a high BTS in Q4, o r are you now including the divestment proceeds? I'm not sure if that was in your free cash flow definition in the Q3 slides. Maybe if you can also give a little bit of guidance around the BTS CapEx. I think your Q3 slides indicated around EUR 1.5 billion in 2023 and 2024. Any sort of, you know, help on just understanding what's changed there.
Just secondly, as you mentioned, on your new management compensation, one of the metrics, for the 2023 bonuses is hitting or getting to investment grade already this year. Could you maybe just help us understand, I mean, to get there already in 2023, would that require those asset disposals, or is this something from your conversations with the rating agencies that suggest, you know, you could get there just organically? Thank you.
Jakob, thank you very much for your two questions. I think somehow both of them are linked. Okay? Somehow, it's important to understand that Cellnex has an important B2C program that is negative in the free cash flow generation. At the same time, you know that we have some remedies that are cashing. Our free cash flow when talking about B2C program, you have to take into account, we should take into account those towers that we build, but also those towers that we sell. Both things have to be, I mean, both things are important, no? And this is again important to understand your second question, which is what happens, why your management compensation is incentivizing management to become investment grade if possible in 2023. Because somehow we are trying, no?
To cash in as much elements as we have. Tobias before was talking about optionality regarding potential sale of some minorities, no? In any of our business units. Now we are talking about also in the management compensation. You can see that optionality, how it is factored into our incentives. I think that trending to neutral also is a good sign.
Yeah.
In the right direction that we defined as of Q3 2022. Everything is coherent and belongs to the same ecosystem.
Maybe just ask one follow-up. I mean, just versus what you were saying in November, is there anything you'd sort of call out as having changed since then? Is it greater confidence around divestments or more visibility on BTS deployments, or is there one, any particular element that you would flag behind the guidance change?
Maybe, Jakob, let me try. Very much that in 2023, in terms of our free cash flow definition, we have also included the cash in expected from remedies in France in 2023. Okay? That helps a chieving this free cash flow neutral in 2023. There is, I would say, this incremental component of our cashing, additional cashing expected in the year. That clearly helps, no? Bear in mind that in terms of the investment grade target that we are including in our MBO, in our annual variable, just to clarify, I mean, we don't have internal target of achieving investment grade by 2023, this target, you know, directly relates to a path to investment grade.
Yeah.
It is an objective. It is a target which is consistent with this path to investment grade that if nothing changes, it is expected to be achieved by the end of 2024. Obviously, we are open, as José Manuel and Tobias were mentioning. Yeah, we are also open to options that might accelerate this event. As of today, we are not changing our targets. The only thing that we are saying is that by 2023, we are committing to this path that we provided as quarter in order to achieve investment grade by the end of 2024.
Thank you. That's very clear.
Thank you, Jakob.
Next question comes from Georgios Ierodiaconou from Citi. Please go ahead.
Yes. Good morning, thank you for taking my questions. It's a couple of follow-ups, actually. The first one is around the path to investment grade, I think from your answer, what I gathered is with organic free cash flow generation that you have now and the growth in EBITDA, you're expecting to get there around some time in early 2024. I just wanted to clarify if that's a realistic expectation on that front. Just as a reminder for us, do you have to get exactly to that level before the rating agencies make a decision, or would it be possible maybe for a decision to come in a bit earlier than you exactly reaching that target? Then, linked to that is the discussion around opening the capital structure in some of your subsidiaries.
Do you mind just giving us a bit of an idea of what are the criteria for you to consider this? I know you spoke about it in the past, but just to get a bit more clarity as to how you're thinking about it now. And also, if I could ask, whether you're having any engagement with investors as things stand. I know in the past you were approached, based on your statements, whether there's something that you are already discussing on that front. Would be great to get some color on that. Thank you.
Regarding, regarding the investment grade, you are going in the very right direction. Georgios, it's clear that if we were able to get to became below seven times the EBITDA according to Standard & Poor's on a sustainable basis, we could became investment grade at that time. You are suggesting that this could happen at the beginning of 2024? This could happen at the beginning of 2024 or first half of 2024. Yes, I think that this is an option that might be on the table, that can be on the table. The second question to be asked-
Second question, Georgios, is about three conditions now there to summarize. First it's a potential candidate has to be a minority shareholder. We are not considering to sell down majority stakes. As you very well know, this is not just about a question of consolidation. It's a question of role and responsibilities. The second one is to share the strategy. I mean, this is not because we are looking for how to find some financial investor because we want to delever the company. It's more than that. It's about to share the strategy. We have our path, our business plan in every country, so very important to share the strategy.
The third one is, in a way, these kind of investors can help us in order to develop our existing business plan, which at corporate level, obviously it's about one of the main milestones will be to reach the investment grade on December 2024 as Juan Jose said earlier, but if we could do it earlier, much better. Also at the local level, I mean, just to recall that, for instance, we have a minority shareholder in Switzerland, which is Swiss Life. So such kind of investors suits perfectly with us and fits with our strategy. This is the idea. To be open because some investors are approaching us and, well, so at certain point of time, why not to consider it?
Again, it's pure option ability. Those three conditions are the principles.
Are there any current discussions on this already, or is it something for the future?
No, Georgios, it's for the future. We are not planning. We are not having discussions. Well, it's a different chapter of our strategy and being very transparent with you. Why not? No, to listen, why not to consider, at this point of time? It's a question of option ability in this new chapter of our strategy.
Very clear. Thank you.
Next question comes from Andrew Lee from Goldman Sachs. Please go ahead.
Yeah. Hi, everyone. Apologies because I'm just I had a further follow-up to Akhil and Georgios' and everyone else's questions just around the sale of assets. Just a question around what you do once you get to investment grade status. On the asset sales, I guess, following from Georgios' question, what really strikes home is your focus on the minority stake sales, as opposed to full 100% stake sales. I think it was in the third quarter results where you adjusted your M&A strategy in a big way. You mentioned that you could sell 100% stakes in smaller subscale assets.
Obviously, where there's less ability to really exert strategy and commercialization in those markets, why are you preferring to and majoring on selling minority stakes versus those hundred percent stake, hundred percent subscale stake sales? Begin to get a sense of a bit more of a sense of what the rationale for that is. Secondly, on investment grade status, once you hit that investment grade status, could you just give us an update on your thinking about shareholder returns? Any sense of preference between dividends and buybacks if you do start shareholder returns and also a sense of the timing over which you could give a statement on shareholder returns. Could you give that immediately post reaching investment grade status?
Could you give it in advance? Yeah, just trying to get a sense of when we could see a shift from you spending money to paying out to shareholders. Thank you.
Thank you, Andrew.. José, do you want to?
Okay. Well, at least, yes, start by the second one. Once we get to investment grade, we will assess, as we said to you in Q3 2022, we will assess a new dividend policy that can be forecast, can be buyback. This is something that has to be defined. Second, we will define a capital allocation policy that allow us to foster interesting projects, no, that we also share with you as of Q3 2022. Everything is subordinated to becoming investment grade. Okay? The first part of your question was regarding between shareholding or disposal of a whole asset. There are two criteria here.
If we are going to sell a business in one country, for instance, it's important that this business in that country has already get to a point of matureness, no? It has to be mature somehow. If it is at the very beginning of the process, we are going to leave... We run the risk of leaving money on the table, no? We should run that asset for a while before disposing all of it. Second, very important is the subordination. If we were to sell a whole business, we have to be very careful of not subordinating the debt at the level of Cellnex Telecom, S.A.
We said to you that, we are thinking different options, but there are clear criteria in terms of value and debt subordination of Cellnex Telecom, S.A. debt.
Thank you.
Thank you, Andrew. Next question comes from Sam McHugh from Exane. Please go ahead. It's not available now. We can maybe go to the next one. Following question comes from Emmet Kelly from Morgan Stanley. Please go ahead.
Yeah. Thank you very much, Juan, good morning, everybody. I've just got a couple of questions, please. The first question is on the topic of potential European telco consolidation. This is probably emerging, I think, as the core debate in the telco sector with, I think, telcos suggesting that Ms. Vestager in Brussels might change her view on consolidation and allow pan-European consolidation. Can you just remind us, please, how your contracts are protected in the event of consolidation and maybe some, we'd say, network reconfiguration opportunities that could bring you in the future? My second question, please, is on 5G. I think about a year ago, Oscar Pallarols said that just, I think, 20% of your PoPs had been updated and upgraded to 5G. Can you maybe just give a quick update on that stat?
Can you say whether you're seeing accelerating 5G rollout, whether it's, network densification, and increased demand for secondary PoPs potentially from 5G? Thank you.
Yeah. Thank you, Emmet. This is Àlex Mestre for your question. In relation to telco consolidation, I think it's worth to mention, no, because that it seems to be a trending topic that it will be for a while on the first line, especially on the transaction in Spain, which is now under scrutiny, no? The element that we have to protect our contracts has been there since inception, so it's something that we have taken into consideration since the very beginning. There is a
A reason for that, you may recall that our first transaction in 2015 was the acquisition of the, outside of Spain, the acquisition of wind towers in Italy. That transaction was already under the potential consolidation since many years. It was already the discussion between Wind Telecom by then and Hutchison, no? We already took that into consideration by then, and the way to protect ourselves around that is basically due to the concept that we call all-or-nothing at renewal. Most of our contracts are either 15 or 20 years, and at that moment, there is a renewal event that both parties we are sitting and we are all very clear that either we renew everything or not, no.
That's, we believe in a strong mechanism in order for us to, well, factorize in a very reasonable way a second term of the contract that will go for 30 or 40 years, no? That's something which is embedded in every single contract with anchors that we have been doing. It is true, which is not an element which is on the third party's contracts, no? Which are longer term and are more, let's say, driven by commercial dynamics, no? That would be on the first part of your question. On 5G, well, it is true that we've been lagging, and I think this is a well-known fact now all over Europe, especially when compared with other geographies on the deployment of 5G.
Especially because even some countries have not yet plan or gone ahead with the new, with the newer spectrum that allows that 700 and 3.5 GHz, no? On those countries where those frequencies are already allocated, we are starting to see some traction. One way, let's say to monitor that is the concept that we are also mentioning on our laws, which is around the engineering services. We do perform a lot of engineering services on our existing sites in order to have those sites ready for 5G.
In some cases, we, yes, generate an additional revenue around that, in some cases not, because as you know, when we do and when we did the transactions, 5G was part already of that reserve space that the anchor was reserving for himself in order to have certain space for growth, no? Yes, it looks 5G is already coming finally, and that traction is already seen on our activity.
Thank you.
Thank you. Next question comes from Sam McHugh from Exane. Please go ahead.
Morning, guys. Hope you can hear me now. A couple of questions, please. Just on the free cash flow guidance again and the divestment assumptions. In France, you have, I think, expecting to receive EUR 800 million from the divestment, and in the past, we've been kind of guided to it roughly being 50/50 between 2023 and 2024. Is that still the assumption, or is it a bit more front-end weighted and assumed it comes in in 2023? That's the first question. Second one is then on tower in Poland. I think you still have the minority outstanding that at some point, presumably, you will buy. Are there any assumptions embedded in the guidance on an acquisition of the minority in Poland? Then sorry, the last third one was just on energy costs.
Any kind of help you can give us on how that EUR 230 million step up is split between Italy, Poland and other markets would be really helpful. Thank you.
Thank you, Sam. It is true that actually we are expecting an acceleration of the cash in associated with the remedies in France. Maybe now you can assume that 70% to be received in 2023, with the remaining 30% to be received in 2024. Okay? In any case, as so very well suggested, it's just a timing issue. The total scope of the remedies is unchanged. On the second, yes, also I think that you are right and we do have a minority. We have Iliad as minority in one of our Polish company, one potential scenario would be to swap that minority by Iliad with a new investor. Okay? Just to do a swap.
This is one of the elements that we were talking about optionability before, it makes sense. Maybe we could swap. We could roll up, no, this minority from OnTower Poland to Cellnex Poland. That would be another opportunity. Yes, we would not be interested initially in acquiring that stake from Iliad. On the third question, Sam, if you don't mind, could you please repeat it? I think that had to do with the pass-throughs.
Yeah, just on the energy pass-through, how it's split between the different geographies.
I don't have the detail. Apologies for that. I mean, It is true that for 2023 on a consolidated basis at group level, we are expecting a delta, EUR 230 million more of pass-throughs, revenue pass-through in 2023 compared to 2022. Let me please come back on the, on the geographical split. Yeah.
No worries. Thanks, guys.
Thank you. Next question comes from Ondrej Cabejsek from UBS. Please go ahead.
Hi. Thanks for the presentation and for taking my questions. I've got two, please. One is on the lease optimization efforts, which I think clearly you're stepping up. You're already at 10% expansion CapEx sales, and you're guiding for that ratio to remain for the foreseeable future, at least 2023. I was just thinking in terms of the guidance for the lease cash out next year. You're saying EUR 850, which is, I guess, reflecting the efforts that you're putting into this. If I look forward into 2025, you initially got it for something like EUR 830.
If you keep on investing more heavily into optimization at the 10% to sales, is it rational to expect that that number could actually end up in 2025 being closer to EUR 800 million? That's one question, please. Second question on the new European Commission proposal around the Gigabit Infrastructure Act. There's the aim to include tower companies within the scope. Just curious if there's some kind of initial assessment from you in terms of what that could mean, for example, around, you know, mandatory co-location or opening up at different rates than you are currently. Any read on that draft would be very helpful. Thank you.
Thank you, Ondrej. please accept our apologies. We are having some difficulties understanding. might have something to do with your line. maybe on the second question, we can try it, Tobias?
Yes. No, Ondrej, thank you very much. You know that, I am the chairman of the European TowerCos, Independent TowerCos. We are fully contact with the European Commission talking about the GIA. Currently, it's the GIA, the name. You know that, was the GIA, but now it's the GIA. We are having discussions about that. That, for us, it is not an issue to open our infrastructures in order to host other players. We understand perfectly that, all of us are in different countries, and currently it's it depends of the country. Some TowerCos are already a electronic communications telecom operator. I mean, there is no new, for instance, for Cellnex in certain countries. We are already re-regulated by this.
For us it's very important also the benefits. The benefits, it's if you are into the GIA, you will be at European level. You will be an electronic communications telecom operator, which allowed us also to ask for co-location services in a wholesale basis in the rest of the infrastructure. It doesn't means that this is, let me say, a regulation in terms of pricing but is providing access. I think access is one of the principles of the benefits of the profile of the Tower Cores. I mean, we are as a telecom infrastructure companies, we are extremely happy in order to open our doors for third parties. This is very clear.
Very also clear that this regulation is not cost-oriented or not something like that. Happy to provide wholesale access. We are talking about wholesale access. Let's see what will be the end up of this regulation, which we expect that it would be a regulation, not a directive. It seems that will take also time in order to be approved by the rest of the European authorities. Again, it's under discussion among the different memberships of EWIA, which is the European Wireless Infrastructure Association. Let's see. So far so good. We are having a very high degree of interaction with the European Commission about that.
Well, assessing pros and cons, we do see that this is more benefits than cons.
Ondrej, if you don't mind, I repeat your first question. Sorry about that.
Yes. Can you hear me better now?
Yes, please. Go. Yes, go ahead.
Okay. Thank you. The first question was really around the expansion CapEx now being guided to be around 10% as opposed to the previous range, 9%-10%, and then what implications that has to your lease costs. Because you already are guiding for a decline year-over-year in 2023, so at EUR 850 million. If you continue investing at 10%, part of which is going into lease optimization, the question was, you know, previous guidance, 2025 was about EUR 830 million in terms of lease costs. If you keep running expansion CapEx at 10% of sales, is it now more rational to expect that the optimized number by 2025 would potentially be closer to EUR 800 million as opposed to the original EUR 830 million? Thank you.
Thank you. Thank you for your question. Expansion CapEx has several topics, not only leases. Now, you can see the split within the SFC. You have.
One part of it goes straight forward to leases, but the other goes maybe to open, you know, the door to improve the tower so that a new entrant, you know, in maybe in Italy or, and in Portugal can join our tower. Expansion CapEx, it's very important for different topics. You know that in Portugal we have a new entrant that also is going to provide a significant organic growth for the group. Regarding the total quantum of lease, you know that this year in 2022, we guide you initially to a number which was around EUR 800 million. I mean, you see that now it's circa EUR 790 million.
It's important to take into account that this also depend on the impact of the CPI, okay. On the leases. All in all, I think that the guidance we are giving to you is prudent, is compliance with other years, and we think it's sustainable. This is what we are looking for.
Thank you very much.
Next question comes from Maurice Patrick from Barclays. Please go ahead.
Yeah. Hi, guys. Hopefully you can hear me okay. Look, if I listen to the responses you've made to a number of the questions so far, it's very much around accelerating the leveraging towards investment grade and not buying in minorities and maybe selling minority stakes ourselves. Look, when it comes to some of the organic investment opportunities ahead of you, I know you're spending or looking to spend 10% of sales again on expansion CapEx, but has your sort of view on the hurdle rate of some of these projects changed? I mean, the idea is to get to investment grade as quick as possible and to make your executive compensation also based upon that. I wonder whether your view on the hurdle rate for some of these investments has changed or moved up slightly.
Thank you.
I think that the first part of your question, we are, we agree. Okay. You are going in the right direction. The second is thresholds. Yeah, I mean, it's clear that also in Q3 2022 release, we gave to you a new, let's call it risk and reward policy, capital allocation policy, by which Cellnex was factoring 6% or 8% spread on top of the 10-year IRS swap in that, in that coin, no? If we are talking about Swiss francs or we are talking about euros or we are talking about pounds. Obviously this is more the money than before, and it we think it makes sense in an environment of higher interest rates.
Somehow, yes, you, we are in agreement with you, no? We tend to be, I mean, coherent with this environment and to ask more for our investments.
That's very helpful. Just a quick follow-up I can. When we think about things like the ground lease buyouts and the rent renegotiations, are you less excited about some of these kind of moves in the light of that to manage your lease cost?
I mean, this is an activity, as you know, that historically where we have been devoting a substantial portion of our expansion CapEx. Today, this is an area that we find extremely interesting. Maybe in the past, the study has been more focused on cash advances, but we are more than open also in the current environment to consider straight land buyouts. In terms of intention, in terms of strategy, this is something that fits perfectly with what we want to achieve. Maybe in the current environment, in a very high inflation environment, it is something that we want to do even more. As also Manuel was mentioning, being extremely rigorous on how we deploy that capital.
Also makes sense in the in this more recent, in the current macro environment to be even more selective in terms of how we assess these land acquisition opportunities.
Super clear. Thanks, guys.
Thank you. Next question, Frank, comes from Jerry Dellis from Jefferies. Please go ahead.
Yes. Good morning. Thank you for taking my questions. Just moving back to the issue of minority stake sales, you know, you mentioned that there are certain assets where you'd be leaving money on the table to consider full divestment. Does that not also apply to some of these potential minority stake sales? Across the rest of Europe perimeter, your tenancy ratio today is about 1.24x , and obviously still at 1.2x in France. Can we take it that those assets are probably not candidates also for selling minority stakes, since they do appear to be rather sort of under-monetized at this stage?
My second question is just that, you know, in the statements on minority stake sales, you've linked that to the idea of achieving an investment grade rating potentially quicker. I wondered if you've run that idea by the credit rating agencies and what have they said? In particular, how do you deal with situations in which minority investors in subsidiaries might be requiring dividend payments. Thank you.
The last question you raised is regarding subordination that, as we said before, it is a clear criteria when defining what kind of asset or shareholding we can say, okay, we can sell. You are right, this is key. This is key. This has to be assessed in detail. Your first question, you were raising one KPI regarding the maturity of one asset, which is the tenancy ratio. This is one KPI, but there might be others. For instance, the pending build-to-suit program. How many anchor tenants do we have in a country? We were talking before about lands, cancer advanced lands. How many rounds we have done with landlords to somehow improve the leases?
For sure, the tower co-consolidation, what can happen in that market regarding how many towercos there are, if they are going to consolidate or not in the future. It is not only one KPI. I think we are taking into account several angles. When we execute this, you will see that it makes sense from different criteria.
Could I just follow up and just ask whether potential investor partners need to bring any particular industrial expertise or whether these transactions are likely to be purely financial?
No, there is no. We do not require industrial track record. It's more a financial one. The profile of the investor would be more a financial one.
Thank you.
Next question comes from Luigi Minerva from HSBC. Please go ahead.
Yes. Good afternoon. Thanks for taking my two questions. You know, the first one is a clarification on your medium-term guidance. You had the ambition to reach the Recurrent Levered Free Cash Flow per share level between EUR 5.5 and EUR 6, medium term. If I remember well, that assumed in terms of perimeter underlying the deployment of the M&A firepower. Now, obviously with the change in strategy, I just wanted to understand whether that item of the medium-term guidance still holds or whether it's no longer valid. Secondly, if you could give us an update on the process to appoint the new CEO. I appreciate it's in the hand of the board, yeah, whatever you can share with us would be helpful. Thank you.
Okay. Regarding the first question, Luigi, this EUR 5.5, EUR 6 per share was not mid-term, was on a run rate basis. It is a little bit more than mid-term. Mid-term, we can be talking about 2025, but this run rate will be circa 2030, 2031, I don't know. Yes, this is a timing point, which is important. On top of that, as you can see in our presentation as of February 2021, when we share with the market this EUR 5.5, EUR 6 per share in terms of recurrent level free cash flow, we were clearly indicating that this number could be obtained with an optimized balance sheet.
Obviously, if we don't optimize the debt level, this company delever it significantly, and therefore, maybe the Recurrent Free Cash Flow is less, but you will receive more dividends, no? In exchange of. Somehow, if you are going to do your numbers, you have two alternatives, or you run your model on a run rate basis with an optimized balance sheet, and you will get to this number, or you run your model without optimized balance sheet, but please consider the Recurrent Free Cash Flow and on top of that, the dividends that you are paying. At the end of the day, make something which is coherent, no? About everything. Maybe, Tobias, you can. Yes. Okay.
Well, Luigi, you know that this is a topic in which is difficult to disclose any information when we are under discussions and the process is going on. Well, as you very well know, the board started the process to appoint my successor in January, immediately after I informed them of my intention to resign. Up to date, it's too early to comment on when specifically when we will be in a position to announce the name. I have to be prudent, as you can imagine.
However, we will do so as soon as possible, obviously, and we will in any event to provide an update on the process ahead of my departure in June for sure. For sure. Again, I understand perfectly your question, but as you can imagine, I'm not in a position, no, to be more specific because now it's we have to wait for the final outcome, if I may say so. Again, I fully understand your question, but hopefully you can understand that I cannot be more specific on that.
Absolutely. Thank you very much for the comment.
Thank you, Luigi.
Thank you, Luigi. Next question comes from Nick Delfas from Redburn. Please go ahead. Okay. If Nick is not available, last question will come from Fernando Abril from Alantra. Please go ahead.
Hello, good morning. Thank you for taking my questions. Just a couple of follow-up on expansion CapEx. I don't know if you can break down a bit more your 10% expansion CapEx over sales for 2023 between main items. You know, ground lease optimization, OpEx efficiencies, adoption of sites. Even more importantly, what unlevered returns do you expect from these investments? Second question is on colocations. I think that the colocations in Q4 have accelerated. I don't know. I guess that Portugal is helping now. I don't know if you can give us a guidance of colocations rate for next year or this year, 2023.
Thank you so much, Fernando. On the second question, I guess that we haven't seen any. It is true that we have seen a quite strong Q4, and we are extremely happy about that. At the same time, we are not seeing any structural change in the different trends we have seen on a per market basis. Italy continues to be extremely strong. You know that there is a new entrant deploying their own network. Exactly the same case in Portugal. We are starting to see a ramp-up associated with the network rollout by Digi. Yeah, very strong quarter, but at the same time, I guess that we prefer to be prudent and say, and see how 23 goes.
We are sticking to our guidance, which is more than 5% POP growth, including B2C. Okay. On expansion CapEx... Sorry, Fernando, you had a follow-up?
Yeah. On
No.
On ex... Uh.
Yeah.
No, no. Nothing on it, please. Sorry.
No. On expansion CapEx, I guess that historically what we have seen is maybe a split of 60% leases, so ground lease efficiencies and 40% activities associated with incremental organic revenues. Whereas maybe this year in 2022, what we have seen is maybe this split be more 50/50. Okay? So between efficiencies and organic revenues. We think that in 2023, the same split applies.
Okay
... 50/50 between incremental revenues and the management of leases. That is what we are expecting for 2023.
Okay. I'm more, particularly more interested in on the leases side. I don't know if you can comment on returns or of these investments.
Yes, of course. We have a payback, which is circa 8x, 10x. Okay?
Okay. Okay. Okay. Thank you.
Welcome. Thank you so much. We have now reached the end of the session. I would like, we would like just to thank you for your attention and your time. Thank you so much. Bye-bye.