Good afternoon, everyone. My name is Juan Gaitán, Director of Investor Relations at Cellnex, and I would like to thank you all for joining us today for our conference call on Cellnex's agreement to acquire SFR's telecom assets in France. As always, I'm joined by our CEO, Tobias Martínez, our CFO, José Manuel Aisa, and our Deputy CEO, Alex Mestre, who will lead today's session. Throughout our prepared remarks, we will quickly refer to the key transaction highlights included in our market presentation before opening the line for your questions, and without further ado, I will now hand over to Tobias Martínez. Please, Tobias.
Thank you very much, Juanjo, and good morning. I'm sorry, good afternoon now. Good afternoon, everyone, and thank you so much for your time today. As summarized on slide number two of our presentation, thanks to this agreement, we expect to acquire approximately 10,500 existing sites in France and a commitment pipeline of approximately 2,500 build-to-suit sites. Including the associated expansion CapEx, we expect to dedicate approximately EUR 6.1 billion towards this deal in exchange for a portfolio that is expected to generate an Adjusted EBITDA of around EUR 460 million on a run-rate basis, as well as a significant recurring levered free cash flow per share accretion. So, a compelling valuation in our view, given the high-quality nature of the contract with SFR and the benefits of our enhanced relationship with all players in France.
This is, again, a major step in our growth trajectory, one that shows our continued ability to crystallize value, accretive opportunities with attractive characteristics. Number one, as 5G deployments accelerate across Europe, we expect that our agreements will position as well as an enabler of digitalization by facilitating an efficient network rollout for all players. Number two, reaching long-term agreements with three anchor tenants in France. We can unlock value for all operators and amplify our organic growth trajectory. And number three, we are demonstrating once again our ability to become industrial partners for our customers. This agreement allows us to sign another long-term contract with all-or-nothing renewal clauses to deploy an attractive densification project for our client and to become SFR's preferred supplier for further developments. And number four, we are not stopping here. The European tower market opportunity continues to be significant.
We continue to provide examples of our ideal position as the industrial partner of choice for all European MNOs. This is the reason why we intend to launch a new capital increase. Now, I would like to hand over to José Manuel, who will provide you more details about this process.
Thank you so much, Tobias. So turning to the funding side of this equation, we expect to finance this transaction in a manner consistent with the way we have managed our capital structure in the past, maximizing our balance sheet capacity by coming back to the market when further value-accretive opportunities are identified. So today, we are announcing our intention to launch an up to EUR 7 billion rights issue to finance this deal, but also to continue executing our European growth strategy. This capital increase is today fully underwritten by a syndicate of tier-one banks. And on top of that, we have identified new opportunities that make our new pipeline very robust and busy, with a total volume of opportunities of up to EUR 18 billion, including our recent deal in the Netherlands and this new agreement in France.
Our equity story remains intact and is brighter than ever, with a large and growing tower consolidation opportunity for Cellnex in Europe. A very robust pipeline with an untapped expansion potential across current markets, as well as new clients, new geographies, and new tower adjacent opportunities. We have an active dialogue with all European operators. We have a unique and differentiated industrial value proposition. We have demonstrated our ability to crystallize innovative deals. The majority of our deals are discussed on a bilateral basis, and all this while keeping our strict financial discipline. With this, we are now at your disposal to answer any questions you may have. Please, let's open the line.
Thank you very much, ladies and gentlemen. The question and answer session starts now. If you wish to ask a question, please press zero one on your telephone keypad. Thank you. The first question comes from Simon Coles from Barclays. Please go ahead.
Hi, guys`. Hope you're all well. I just have a question on synergies, please, because if we think about the French market and your positioning now, you obviously own most of Bouygues Towers and are rolling out sites for them. You own all of Iliad Towers and are rolling out sites for them. And now you're going to own all of SFR's towers and roll out sites for them. So is there a decommissioning opportunity? How should we think about maybe the tenancy ratio upside from having three anchor tenants? And are you able to maybe combine the BTS agreements to make some savings on CapEx that way? Just thoughts on that, please. Thank you.
Thank you, Simon. Please, Alex, I think that's for you.
Yes, happy to take it. Thank you, Simon, for the question because it's really a relevant element since it's the very first time that we have three anchors in a single country. And this is part of our repeated equity story on intending to consolidate our presence in every country. And here we have had the opportunity to have three anchors. Then that allows for several combinations which are not embedded into the business case as you see it. However, we've managed to have the agreement of our partner to be open for this rationalization to happen. So there is something that we do not have to negotiate from the very beginning.
It is already embedded in the contracts, the possibility to both, first, decommissioning existing sites, and second, optimizing the build-to-suit program that, as Tobias mentioned, could be up to 2,500 sites alongside with the other build-to-suit programs that we have in the country, which are totaling circa additional 5,000 sites. So all in all, we have between 7,000 and 8,000 potential new sites to be built in France that probably some of them will be either close to the new sites to be built or close to one of our existing legacy perimeters. So the possibility is there. The contract that we have just signed allows for that to happen. And it is now our job to try to extract as much as we can out of that, of course, always keeping and preserving the quality of the network, which is of the utmost importance of our partners.
That's great. Thank you. And just a follow-up. If I look at the revenue guidance, it appears to sort of imply a 2% growth rate in revenues from your sites, but not much tenancy ratio upside. Is that the correct interpretation? Have you been quite conservative on that?
There is a component as you very well mentioned of a contracted fee increase linked to the 2% fixed escalator. And I would say that the organic growth assumptions for the purposes of the evaluation exercise only, which is, I would say, commensurate with our past exercises. Then the reality is that, as Alex was mentioning, we are pretty excited about the market dynamics of France in terms of future densification, organic growth generation. So that is, I would say, an upside that we prefer to keep for ourselves.
That's great. Thank you very much.
Thank you.
Thank you. The next question comes from Roshan Ranjit from Deutsche Bank. Please go ahead.
Great. Thank you for the questions. Afternoon. Two for me, please. If I look at the implied EV per site calculation on this transaction, it seems to be towards the upper end of your, I guess, historic trend. And I know recently you have talked about the skewing of deals, sometimes to the build-to-suit, sometimes to the existing perimeter. But on both metrics, they seem to be towards the upper end. And if I look at your release today, you do talk about some additional projects. Is it possible to get some details on those additional projects or what could be driving this EV per site towards the upper end, please? And secondly, you've announced a new pipeline today, so you're very confident on the outlook ahead. Is it possible to get a bit of maybe detail on where we should be thinking, what we should be looking at?
If I look at what you've done recently, today, another example, it's been in your existing footprint, focusing on certain markets. Are there more newer markets to go to, or is it still kind of focusing on the existing footprint? Thank you.
Thank you so much, Roshan. I will maybe take the first one. I mean, for us, I mean, of course, EV per site is a reference, but any result that you get out of that calculation needs to be matched by the corresponding EV per EBITDA. So if you see maybe a higher figure, that is also because there is a corresponding EV divided by EBITDA that justifies that price. If you compare EV/EBITDA on a run-rate basis and that before IFRS 16, I guess that what we have been sharing is a multiple of around 17x , which is, in our view, consistent with past transactions. So we don't, again, I mean, if on top of the cost per site, you also focus on the EBITDA generation per site, we think that this transaction is extremely consistent with everything that we have been doing in the past.
In terms of more services, as we mentioned in the presentation, we are becoming a preferential supplier for SFR in terms of potential future opportunities in the area of densification, but this is a possibility. Of course, now that we are signing this, we are more than happy to explore what other services that we can provide, but in any case, this option is not included in the figures that we have been providing, and maybe, José, if you want to comment on the pipeline.
Of course. No, I think that as we speak, we are in 12 countries, and our top priority is to consolidate those countries in which we are, is to continue working with those clients that we have already, and I think we have a lot of work to do. The first question that was raised was about synergies. I think now it's time for Cellnex to deliver on top of what we present to you when we acquire an asset, and this is driven by synergies. This is driven by being able to share infrastructure with more tenants, so our top priority is to consolidate those countries in which we are.
Second priority, maybe we could say, is to go with current clients to other countries or to new countries, and finally, new countries, new clients. It's exactly the same equity story we have shared with you in previous equity raise. In all of them, we have prioritized our opportunities following this path.
That's helpful. Thank you very much.
Thank you. The next question comes from Akhil Dattani from JP Morgan. Please go ahead.
Yeah. Hi. Good afternoon. I've just got a couple of questions, please. The first thing, you've talked about an EUR 18 billion pipeline, obviously EUR 7 billion of which is delivered through this deal and the Deutsche deal. I just guess I wanted to understand a little bit more about the subsequent EUR 11 billion. Just to understand, is that a probability-weighted pipeline? Just to understand how lumpy that is, because obviously with the last pipeline you gave us, clearly there were some other big tickets within that. So just to understand how we think about the composition and mix of that. So that's the first question. Second question is, I guess, a more broader one around M&A and I guess related to the American Tower's entry into Europe earlier.
I just wanted to understand whether you feel that or general dynamics in the industry as a whole are in any way impacting what we're seeing in the M&A world for towers in Europe, either in terms of competitive bidding or your strategy. And I guess, obviously, in the past, you've talked about it being very relationship-driven, how you're winning and transacting. So just seeing if that's still very much how things are working, both with this deal and others, or whether you are seeing other new players. And then the only final one I just wanted to understand is that with the Deutsche Telekom deal that you announced the other week, can you just help us understand a little bit around how we should think about what sort of transactions might be delivered through that? Because presumably today, this is very much you driving your relationships to win deals.
Clearly, you feel Deutsche adds something. Just any color on what you think they add and what would be different about those deals, that'd be interesting too. Thanks a lot.
Thank you, Akhil. Maybe we can start, José, with the remaining pipeline.
Well, Akhil, I think that this answer will be very familiar to you. Obviously, the remaining EUR 11 billion of pipeline. So we were talking about 18. As of now, as of this year, we have executed seven, which is not bad. In just two months, well, no, less than two months, one month and three days is not bad this. So there are remaining EUR 11 billion, and this is a weighted probability. I do think that the industrial capabilities, credentials of Cellnex allow us to have unique deals and in the vast majority of the situations on a site-by-site basis or exclusivity basis. So this is quite unique and belongs somehow to the credentials of Cellnex. I think that, Alex, you can answer that.
Yeah. So in relation, I guess it was on how the competitive landscape may be changing after the last transaction of American Tower in Europe. I think that was more or less the question. So I think you pointed out correctly that one of our ingredients of success is the relationship element. And the relationship element is obliging you to be close to the clients. Sometimes those clients are not very big, are small clients, and you need to devote time and invest, generate confidence and credibility with all those clients. This you can do it if you are on the ground. When you are just looking materiality, that element is not always there in Europe. And this is one of the peculiarities in Europe, which is there is a lot of granularity of partners that you need to cultivate.
We believe that this element is still a competitive advantage for Cellnex. Being on the ground, creating those relationships, we believe is still going to be part of our pipeline generation, especially as José Manuel was saying, we are now on 12 countries. The domino effect that we've been able to show since the very beginning, we expect to also make it play on those new geographies where we are now starting to be established. Those deals, not all of them are as big as the one that we are today showing, but it is a pipeline that allows to foster that relationship. I think the last question was in relation to the deal in the Netherlands. The deal in the Netherlands is having, we would say, two angles. The first one is, well, to confirm that Deutsche Telekom people is welcoming the relationship with Cellnex.
We did the first transaction in Switzerland. Now we are repeating in the Netherlands. And on top of that, we are, let's say, working together on this digital infrastructure fund. I think the details of the fund were already disclosed at the right moment. That allows us to have an additional vehicle in order to consolidate tower transactions, but on top of that, being able to be exposed in a commensurate manner in other types of assets, as we have already described. So it is an interesting venture that we intend to start together with Deutsche Telekom, but it's totally led by Deutsche Telekom Capital Partners as the managers of the fund. Next question, please.
Thank you. The next question comes from Georgios Ierodiaconou from Citi. Please go ahead.
Yes. Good afternoon. Thank you for taking my questions. The first one is actually a follow-up on the pipeline. And perhaps coming from a slightly different angle, this transaction has a lot of upfront investment from your side. There's not a stake sale. There's no big chunk of BTS. And you mentioned the EUR 18 billion pipeline. It's quite striking to see how you stay within the seven times net debt to EBITDA range, roughly, with that kind of size of transactions. So my question, I guess, is twofold. Should we expect structures of deals where there are delayed payments in order to allow you to fund this over time with cash flow? Or should we expect that there could be other equity instruments, perhaps direct issuance of equity to some of the sellers in order to be able to fund this EUR 18 billion pipeline?
My second question is just specifically on the targets on cash flow that you've set for this transaction. Is it possible to share with us any tax assumptions behind this, whether you assume a full rate of tax or whether there are some benefits that may accrue as part of the transaction? Thank you.
Thank you, Georgios. Maybe the first one, José Manuel, if you want to.
No, of course. Georgios, thank you for the question. I think that, let me answer as we have always done. So nothing new here. Year 2019, we asked for support for EUR 1 billion, and we invested EUR 11 billion of pipeline. Year 2020, the same. If you do just a rule of thumb, if we ask for support for EUR 7 billion, you get EUR 18 billion of pipeline. Super simple. Super simple. It's nothing. We are not breaking any rule or anything that we have done before. Let me give you another answer. There is one thing that we have learned. Anytime we have asked for equity, you have seen how rating agencies have improved our business risk profile a little bit more. It's very gradual. It's not a big change, Georgios.
It's nothing that one day from the other, you are going to see a big jump. If you take a rating agency report back in 2018 and you get it today, you will see how maintaining the same credit quality, we have been able to go more into that. In your calculation, you have an underlying hypothesis, which is the seven-time negative EBITDA. Well, this is your assumption. Maybe Cellnex has a commitment, as always has had, with new equity, which is to reinforce further the business risk profile of the company. So when running your numbers, please take into account this element. Finally, you are talking about build-to-suit, and you are talking about upfront. You are right. When we present to you EUR 18 billion, it's a combination. It's a combination. And you can see this clearly in slide number six.
In slide number six, on the left and on the right, we tell you build-to-suit projects, tower portfolio, transformational assets, tower adjacent. We say to you that these can be shared deals, asset deals, cash. So there are many elements that have to take into account. Build-to-suit is a key component. Cellnex has always scaled build-to-suit in order to first meet the requirements of the client, second, facilitate funding for Cellnex. Obviously, we will use it.
[crosstalk] That was a final question. Yeah. Basically, I mean, this figure that we have shared is included in our evaluation exercise. That comes directly from our model. Basically, we are starting with our expected adjusted EBITDA in year 2019.
Then we are applying our traditional, I would say, maintenance CapEx guidance, in this case, of around 2% on revenues, no change in working capital, an interest expense assumption, which is directly associated with our own capital structure assumption in order to fund this deal. You know that for M&A evaluation purposes, we tend to factor appropriate financing. So we assess the quality of the cash flows of this project and that we come up with appropriate capital structure, not too different in this case from other transactions. So maybe you can assume 40% equity, 60% debt. So our interest expense assumption is the result of this capital structure. And in terms of taxes, it's our own assumption based on the local taxes that we are expecting to pay at that point in time.
With basically these three cash items below EBITDA, you get to the recurrent cash flow figure that we have provided. If I may, regarding the tax component, in France, we have, I would say, a portfolio of assets and shares. These allow us, from a tax perspective, to optimize significantly the total tax bill to the French tax authority. Everything is well thought in order to maintain our metrics and our strong conversion of EBITDA into cash flow.
If I could confirm something from your answer, is it fair for us to assume that the pipeline you are envisaging will have less upfront and more, let's say, stakes to acquire in the future of build-to-suit programs that are of bigger scale, something more similar to Holland versus what we've seen today?
I'm afraid that will be in the same way as previous situations. So if you take out every single capital increase we have done, you will see that, roughly speaking, the proportion of build-to-suit and upfront in general has been similar. I expect also the same thing here. No big changes, to be honest.
Okay. Thank you.
Thank you. The next question comes from Andrew Lee from Goldman Sachs. Please go ahead.
Yeah. Good evening, everyone. I had a question on the clarity you can provide on the value accretion you deliver from deals. So I think one of the aspects that investors are struggling with a little bit is, in the past, you've done deals at a multiple on a year-one multiple that is, let's say, roughly average 20% below your existing multiple, your current trading multiple, should I say. And the last couple of deals, Deutsche Telekom and this one, have been done with a smaller gap between your current trading multiple and the acquisition multiple that you've paid. Now, when people have done analysis on the IRR of the deals, they've got to a pretty value accretive number. But nonetheless, it's becoming slightly harder for investors to understand the value accretion of deals. So I wonder if you could talk through how you talk through that with investors.
And specifically on that, I wonder if you could talk potentially about the free cash flow per share accretion, EBITDA accretion that you might expect from the incremental EUR 11 billion of deals you're talking about. Just how you would comfort investors that the deals you're doing today are as value accretive as the deals you were doing two years ago. That's the main question. And then I just had a follow-up question to Georgios about that, the balance of the types of assets you're buying within your deals. It does seem a little bit like actually the existing tower component of the deals you're doing has become a bigger component. And build-to-suit and fiber backhauls, the proportion of all deals announced over the last year, I think, is slightly lower than it was the proportion of the deals done through 2019.
So just if that is true, if you could just talk about the justification for that, that would be helpful. Thank you.
Oh, listen, Andrew, thank you very much for the questions. Very interesting. The first one regarding the multiple gap. Well, for me, what is key as a long-term investor to create value for major holders, I don't think the multiple enterprise value EBITDA of year one compared to the enterprise value EBITDA of year one of the transaction is the key driver. I tend to think that there are other ways to look at, and you know which is the most important? It's the gap between the cost of equity and my equity IRR. And what I have learned, and I'm pretty sure you agree with me, is that the cost of equity in the last quarters have gone down. And on the other hand, Cellnex has maintained in the M&A golden rules. Therefore, we are creating value for shareholders in the long term.
I think that the way to create value is through this gap, not the multiple gap. The multiple gap is a result of volatility, is a result of many elements. But as a long-term investor, this is, as I said, what I have to look at. And I think that our gap between your cost of equity and our IRR every day is a little bit more because of this, I would say, monetary policy in which we are right now. This is a long-term investor should look at.
But if I may say, sorry to interrupt you, José Manuel is also about the contracts. I mean, it's a simplification just to talk about multiples because it's about contracts. So if you have a long-term contract, it's when we are in a position to talk about valuation. So I think, again, just to reinforce the José Manuel message, we are keeping in the same rules. But sometimes some contracts are worth a higher multiple because they are stronger than other contracts. It's not just about the number of towers. It's about cash flows. It's about the strength of the contracts. So this is very important to keep in mind. So if not, maybe we are not comparing apples and apples. Sorry to interrupt you, José Manuel.
No, no problem, and the second, Andrew, regarding the type of assets. I think that if you look at our history and the four, five years that we have been doing, there has been a mix of everything. There has been a mix of everything. For instance, I remember the deal with more build-to-suit component has been our Polish deal, well, four months ago. I have never seen something as, I would say, build-to-suit driven in one deal compared to the upfront. On the other hand, you are right. We have also seen the Hutch deal, which is very different. Maybe there is no build-to-suit, but there are other kinds of contractualizations, well, there are build-to-suit, but there are also kinds of contractualizations that allow us to have visibility on the cash flows.
At the end of the day, build-to-suit is a way to defer the payment and to have visibility of cash flows to get an equity IRR. However, last deal, Hutch, you can find that the upfront payment is proportionately higher than other cases. Maybe build-to-suit component is less, but the contractualization is also there. So I think that in your underlying hypothesis, there is a third party which is not in the, which is key in order to answer. Both of them have the same impact in the equity IRR, and in terms of credit, for instance, you are right. The later we pay, the better. However, it depends on the client. Hutch, as you know, has the highest corporate rating in telco in Europe, and even though we have to pay more money upfront, the counterparty is, in terms of corporate rating, so high that this is offset.
This is very well reflected in the rating agency report of Fitch and Standard & Poor's. So I would like to, in your way of thinking or in your question, yes, there are two criteria that you are raising, build-to-suit and upfront, but I think that has to be considered with other ways of contractualized growth and finally by the credit quality of the counterparty. And therefore, if you take all this into account, you get the same IRR that remains stable in a context in which the long-term interest rates are going down. And therefore, we are creating value for our shareholders. It's a question of time. And you can see, just to finalize, Andrew, but in slide nine, you can see perfectly well how we are integrating different businesses.
The day in which all is stable has a green tick on the box. Maybe our EBITDA can be doubled significantly, as in your projections can be very clearly seen.
Yeah. Thanks very much for your answers.
Thank you. The next question comes from Sam McHugh from Exane. Please go ahead.
Yeah. Thank you. Just two questions for me, please. And the first is a bit of a follow-up, I guess. And I just wondered if you could give us a bit more detail about your organic growth assumptions on the deal and how they compare to, I think, the 8% CAGR in PoP growth that we recently outlined as their own medium target in France. I guess judging by your previous answer, you're assuming more like 2% colocation growth, maybe a terminal tenancy ratio of less than one and a half, which does look relatively low compared to Bouygues. So that's the first question. Is that right? And then secondly, about your golden rules and specifically the equity IRR hurdle rates. And this is just a clarification.
Are these based on the base case you present to us in the slides, or are they based on the kind of higher kind of synergy colocation decommissioning benefits that you can also accrue? So when you come and talk to us about IRR hurdle rates, are you assuming just what's on the slides or more? Thanks very much.
Thank you, Sam. Maybe we can start with the second one, Juanjo.
Yeah. This is Sam. This is for us, I think it's key. We have never presented to you, I mean, significant synergies. Maybe there are a little bit. We can never say never, but this is not we are presenting to you efficiencies. We are presenting to you what we can do with that asset, but not what we can do getting three anchor tenants in a country. That synergy, and this is not in the numbers, okay? So we present to the market the projects on a standalone basis always.
And maybe coming back to your first question, I would say that we are aware of our clients' public statements on their plans in France, and we admit that they are quite supportive of our plans. But I guess that we prefer to be cautious. We prefer to be prudent. When those statements are translated into actual demand, we will be more than happy to upgrade our view. But again, for modeling purposes, we are sticking to exactly the same way to model organic growth in the past. So yeah, the sort of rates that you were assuming, those are the ones that we are actually paying for and quantifying. And then if anything happens that allow us to be more optimistic, then that should be an upside compared to our acquisition business plan.
Sorry, Tim, and if I can just ask one follow-up, actually, not related to those. Thank you for putting the slide on the integration project progress at the back. Can you just maybe explain what you mean by Industrial Model integration plan? What does that mean? Is that the progress towards beginning to achieve synergy?
That is, I would say, a holistic process that we have seen. I mean, it's like a very internal know-how that we have been deploying over the last years. It's a way of doing things. It's a way of integrating not only assets, but also companies, people, implementing our own culture. So I would. Digitalization of the functions, reduction of the administrative task, standardization of all the elements in order to replicate the way of working, which is information systems. It's many things, nothing to do with synergies, okay?
Operational blueprint, which is not related to the commercial aspect in relation to achieving synergies or not. So it's our factory.
Very good. Thank you very much.
Sam.
Thank you. The next question comes from Jakob Bluestone from Credit Suisse. Please go ahead.
Hi. Thanks for taking the question. I just had a question on slide eight where you talk about some of the various opportunities. You talk more about things like small cells and edge computing. And just to understand, when you look at this pipeline, is this still mostly traditional macro sites, so kind of a similar revenue mix to in the past? Or are you assuming within this pipeline a greater contribution from slightly more immature areas? Thank you.
Thank you, Jakob. No, the focus continues to be macro towers. That is our core activity, our core business, and the area where we see the majority of our opportunities going forward. Of course, we also have the intention, I would say, to try and extend the level of service and the array of services that we provide to our anchor tenants. So in a combined way, on a joint basis, we identify the opportunity to provide more services, assuming that we get the same returns, assuming that we manage to achieve the same cash flow generation profile, we are more than happy to do more things beyond macro towers. But again, we see those initiatives as an extension of our existing relationship, but the majority of the pipeline as of today will be devoted to macro towers.
Thank you.
Thank you, Jakob.
Thank you. The next question comes from Giovanni Montalti from UBS. Please go ahead.
Thank you. Good afternoon. My questions were actually already answered, but maybe a quick follow-up, if I may. You obviously mentioned 18 months as the time horizon for the new pipeline. I mean, obviously, in the past, we've seen a much quicker execution. Just wondering if you can share with us some color on whether execution could be quicker than expected as it has been the case in the past? Thank you.
Thank you, Giovanni. Thanks for your time. Giovanni, I think that 18 months is commensurate. So we are saying within 18 months. And I do think that it's a good period of time, okay? So we would stay exactly with the same figure we have always given to you. Look, one of the elements or one of the cons to talk about weighted is that this is a probability. But if it happens, it happens. And then maybe the pipeline, the firepower is used up before expected. So also taking into account this, this is a weighted probability of pipeline during the next 18 months. But for instance, there can be a big opportunity, which is in mode number three, which is very big, Hutch. There was a probability. Maybe the probability was 50% as of July 2020, but it happened.
It happened, and it occupied a very big part of all the pipeline that we presented as of July 2020. So always when answering these questions, weighted probability during that period of time. We do not have the crystal ball, but yes, we do have a methodology that we do not change because it's simple, it works, and it's very professional. And this is what we are trying. We are not going to change. But it is true. It can happen that a project that we give 20% probability, which is massive, is happening before than later.
Very clear. Thank you.
Thank you, Giovanni.
Thank you. The next question comes from Fernando Cordero from Banco Santander. Please go ahead.
Hello. Good afternoon, Cellnex Telecom. My three questions and the first one is related also with the pipeline. And I would like to know to what extent transformational deals, as you have defined in the previous capital increase or rights issue, how many of those transformational deals, if any, are included in the pipeline. In that sense, I'm just wondering if there are deals in which you are or if you maintain your views on just being open to pay partially with business holding shares to these transformational deals. My second question is on the synergies. You have discussed already the potential synergies with your existing portfolio in France, but in your tower portfolio.
I would like to understand as well what kind of synergies you can foresee on your fiber to the antenna project that you are starting to develop in the market, given that the site portfolio is larger. We also should assume that potentially the take-up or the number of tenants in this FTTA network would be also higher and consequently the profitability of the project. The last question is related with the leases assumption in this deal that you are presenting. If I take a look on the average lease per site that is embedded in your numbers, I would obtain close to 1% CAGR in the seven-year period. So I'm right assuming that you are not foreseeing a material leases optimization process in the portfolio that you are buying. Thank you very much.
Thank you, Fernando. Maybe I will start with the most boring one on leases, if I may, which is also a short answer. No, I mean, we are factoring, I would say, of course, incremental contribution on leases of our Build-to-Suit. Also, maybe some ability to manage the existing office space that we will be contributing into Cellnex France. But it is true that in our view, there is, I would say, room to manage leases. I don't want to say better, but I know it to extract efficiencies beyond what we have included in our evaluation exercise. Maybe the second one or.
Yes, on the synergies, yes. So if we take the case of France and we take the example of the build-to-suit, as of now, we would be having three programs of build-to-suit of 2,500 each. Our intention at the end would be not to build 7,500 sites. There is a synergy there which is not factorized, but contractualized-wise, it is into this last contract, as we emphasize on our documentation, allows us to play around that concept of saving build-to-suits. And when you save a build-to-suit, when you look at the tower cash flow, you are saving first the CapEx of the new tower and second, one lease per each tower you save. Okay? So it is clearly very contributing. But I think, Fernando, your question was more related to the fiber to the tower.
So as of now, yes, as of now, we have one program of fiber to the tower with one of the three anchors. Okay? So we are deploying fiber to the portfolio of one of the anchors, which is Bouygues Telecom. It is also true that the other two anchors are having their own fiber programs on which we are not directly involved. Okay? But those programs are basically FTTH and also with the investment vehicles and backhauling. Therefore, at least in one portion of our portfolio, yes, there is the possibility of mutualizing the fiber to the tower. And that's the reason we are, let's say, looking at that as an adjacent sort of asset because it's mutualizable. And why not, on the other portfolios, we would be having the possibility of also offering the fiber, even though it would not be ours potentially, to the other two anchors.
We believe here that there is a very interesting enabling role that Cellnex could play around those three players in order to generate efficiencies which, at the end, will redound in favor of France in terms of having a proper allocation of the CapEx, not in passive infrastructure, but in 5G deployment, densification, etc., etc., that will be, let's say, what will be most appreciated by the citizens.
Maybe also another question. Transformational deals in the pipeline?
Well, we tend to factor one always. We define transformational deals as those in which we have more than 15,000 towers or sites. Yes, we always take into account one. When you talk about equity, no, no. We do not take into account new equity given to this new client. We do it just on an enterprise value basis with the build-to-suit included and all the investment we can do, but nothing else. But yes, of course, we always take into account transformational deals. In this case, one.
Okay. Makes sense. Very clear.
Thank you. The next question comes from Giles Thorne from Jefferies. Please go ahead.
Thank you. My first ques`tion is on the Build-to-Suit again. When the SFR towers went into Hivory or got renamed Hivory, SFR booked a Build-to-Suit program of about 1,200, if I remember right, and now it's up to 2,500, but essentially the same anchor. So I just wanted to know what's happened in the intervening period of time. When Hivory was created, it was post-New Deal. So there's something else going on that would be interesting to learn about. So that's my first question. My second question is, in the absence of explicit terms around the equity raise and a suspicion that you're not going to give it to us now, could you talk about how you think your cost of equity looks right now? Do you think it's too high, too low? Where do you think?
I think we can probably guess what you're going to say, but that would help inform what the likely discount is going to be. Thanks.
Thank you, guys. I guess that maybe we can provide more flexibility in terms of the rights issue calendar, at least our base case in terms of subsequent steps and calendar. Maybe I will start. José Manuel, please correct me. Or, I mean, as of today, I mean, based on the delegations that we currently have in terms of authorizations, I mean, we cannot launch as of today a EUR 7 billion rights issue. So that's why we need to wait for our next AGM to renew that delegation, and that will be the moment that we can officially launch this process. So basically, you should be expecting more visibility in the coming weeks, months.
Yeah, but maybe I would like to underline that we have an underwriting, which is, I think, more important, if I may say. So an underwriting of EUR 7 billion, it's very relevant for the company. And I think we are providing substantial visibility on this regard. So, well, as very well said before, Juanjo, we should set our ordinary general assembly, which is expected at the end of March, as we are disclosing in our press release. But we have a full underwriting of EUR 7 billion of capital increase, which is, I think, very relevant.
And on the first question, well, spot the diffs because it is true that there are differences between the MSA that was established at the inception of Hivory and the one that we are now intending to have in application at the moment of closing. One of them is the build-to-suit, as you said. The reason for the difference is the time horizon. The original one was 1,200 in three years. Now we are talking about 2,500 in eight years. That's the reason of the difference. When you look at this time horizon, as we were mentioning before, other players in France have forecasted much bigger needs in terms of points of presence. So that's one point. Secondly, we have an exclusivity.
Any Build-to-Suit deployment that could go during this period and would be required would be on the hands of Cellnex to provide. Second, a very important element, which is a change from the original MSA, just to make sure that you have also spotted this, the 2% escalator. The original MSA was not including any escalator, not being indexed to CPI. As of now, we've moved to, let's say, gold standard, let's put it like that, 2% escalator on every year adjustment of the fees.
Thank you.
Thank you very much. The next question comes from Fabio Pavan from Mediobanca. Please go ahead.
Yes. Hi, good evening, and thank you for taking my question. Actually, first of all, congratulations for these two deals, the one we are commenting today and the other one in the Netherlands. My point is many things are happening in the European tower sector, and I think we can share the view that there has been an acceleration in the latest few weeks. Would you share the view that this is also partially linked to the fact that maybe visibility on the 5G opportunities is finally increasing, or do you think this is a process that would have been already in place even without this increased visibility on 5G? Thank you.
Thank you so much, Fabio. Alex, you want to?
Yeah, happy to take it. So honestly, we do not see as a major driver of acceleration for the process the potential 5G demand. Because the potential 5G demand normally is an upsale in some cases. In other cases, as we discussed in the past, it is perfectly fitting on the original spaces that the anchor tenant was already securing at inception. So probably the market dynamics that accelerate this movement that you are mentioning are different than the 5G opportunity. 5G opportunity helps, especially on the densification element. So yes, it could be more points of presence, but not because there is an upsale on the top of the existing towers in a massive way. So probably we need to search for other elements than just only 5G for this acceleration. Next question, please.
Thank you. The next question comes from Ottavio Adorisio from Société Générale. Please go ahead.
Hi, good afternoon. I have a few questions, actually. It's time for that. I'm just brand new. The first one, it's on the deal with Deutsche. As part of the deal, you agreed to co-invest, and in the press release, you say it's a way of actually financing deals that is not just debt or equity. So I was wondering, why do you need to co-invest when you can, in one go, raise EUR 7 billion on equity raising and consider that you raised almost twice that amount in less than 18 months? So the issue is that and why you haven't used that particular vehicle to do today's deals, or you can't use that vehicle to do any other deals.
So the issue is that I just want to see if that co-investment is just a way of pitching to Deutsche tower business in Eastern Europe and potentially use that vehicle to buy those towers, or you genuinely want to use that vehicle to do deals that don't really involve buying towers from Deutsche. The second one, it's basically related to all the issue of synergy that's been discussed. It's not clear because your contracts are not really public. But could you tell us, not just in France, but all over your footprint, if you're able to basically move clients' antenna, especially the anchor antenna, from one tower to another tower? And the third one, there were talks about IRR. I would like to move to paybacks. The deals are changing. Things are shifting.
And I believe the CEO mentioned the fact that we don't just have to look at the economics, but also the length of the deals. And I agree because your contract tends to be much longer than all the tower cos are owned by operators. Therefore, you have a significantly longer time for you to earn your capital. So my question is, all the deals you've been doing recently and before after the IPO, is the payback time on your capital lengthening or is it the same? You clearly say that the IRR is roughly the same when you compare it to your cost of equity or your cost of capital. But what about the payback? Thanks.
Thank you, Ottavio. Maybe Alex, first one on the rationale of the vehicle.
On the vehicle, yes. So, well, of course, the vehicle, it is proven to be useful to co-invest with Deutsche Telekom to acquire Deutsche Telekom assets. And this has been the first investment of the vehicle. Is it sure that this may happen in other regions, Eastern Europe, as you mentioned? Well, no, there is no confirmation that this is going to happen, but it could be reasonable for this to be considered by Deutsche Telekom in the different regions depending on their strategic interests in each one of them. So the vehicle is already there and properly established for this to happen in the event that this is considered as such. Then in other types of assets different than the Deutsche Telekom ones, as you may recall, when there is a tower deal, we always have the possibility to consolidate.
This has been one of the first elements that we thought it was necessary for someone like Cellnex investing in the vehicle. The other element that potentially could be interesting for us, the vehicle, is on, well, sculpting adjacent types of assets beyond the towers that the vehicle could be exploring, could be at a certain point even leaving the investment, and we would be already there and potentially having the opportunity to consolidate that asset if it has been proven as an interesting asset. That's one of the additional elements that we believe it could be helpful for us to participate in the vehicle. Doing that alongside with one major player like Deutsche Telekom and with one major telecom infrastructure like Cellnex, probably it brings opportunities that otherwise would be a little bit more difficult.
Maybe I would like to add some comments about the vehicle with Deutsche Telekom, which I think it's a very smart structure in order to combine for Deutsche Telekom monetization in one way, but also a vehicle in order to create value for the future. I mean, it's not a sell and lease back transaction, or it's not just receiving an upfront fee payment. It's an in-kind contribution. Therefore, they have a vehicle. They have an investment with Cellnex, which is fantastic because we are both in the same country, like Netherlands, so it makes a lot of sense from an industrial point of view, and it's a way also to create value going forward.
Second question, maybe our potential for synergies and the possibility to move a few keys around?
Yes, unfortunately, our contracts cannot be made public. But when we have an MSA, for instance, and we've been debating about the concept of master service agreement versus master lease agreement, one of the main aspects of the MSA is having the tower company the possibility to move PoPs, points of presence, from one tower to the other because that's actually the substance that lies behind a service agreement and not a lease agreement where the client controls the portion of the asset that it has contractualized. So in all those MSAs, the capacity is embedded into the contract at inception.
However, on top of that, what we are doing, especially since we are, let's say, becoming more and more frequently having a second anchor per country, what we are trying to embed is into those contracts, having already also embedded into the master lease agreement the capacity to decommission sites or have build-to-suit optimization, precisely as we have done in this contract, as being represented on our presentation, or we did it with Iliad in Italy, but I think also we disclosed a bit of those capacities, or NOS in Portugal. So more and more, we see the possibility to embed that into those subsequent contracts after the first deal in one country.
The third question on the payback, José Manuel.
Paybacks. If IRRs are maintained, rather speaking, paybacks are also maintained. We could talk about how to estimate paybacks. We can estimate paybacks about the asset return, about the equity return. There are many elements here. For me, what has been maintained is the proportion between the payback and the length of the contract. If you recall, Ottavio, and you have been with us since the very beginning, the first deal we had had a payback which was shorter, and our contracts at that time were shorter. Right now, maybe our paybacks are longer, but our contracts are longer. As a sophisticated investor, both things are on net present value equal. For me, it has to take I mean, payback has to be taken into account at the same time, the contract, the underlying contract that goes with it.
In this case, for instance, we are talking about an escalator, and this is changing also because not only we have a very long period of time, but also we have already a contractualized growth, so payback change, but if you take into account the length of the contract and this feature, you will see that this, let's call it.
Proportion.
Proportional payback, thank you, is very commensurate with the previous ones. At the end of the day, I think that the IRR is the best indicator, the equity IRR.
José Manuel, the thing is, thank you very much. Just to follow up because on the vehicle, so that means that the EUR 11 billion left from your pipeline could be even higher because the EUR 11 billion referred only to your components of the investment.
That is correct. I mean, we are not including in this calculation any potential future initiative articulated through the fund.
Yes, exactly. Correct.
The fund is not consolidated on our books, okay? And therefore, when we give you enterprise value, the enterprise value of, in our books, on a consolidated basis, 100% with the build-to-suit programs, as we always define. Obviously, we are devoting an equity ticket for the vehicle, and this equity ticket will be deployed, and therefore, will create other opportunities. But we are not taking into account this into the EV.
Thank you.
Thank you, [audio distortion].
Thank you. The next question comes from Nick Delfas from Redburn. Please go ahead.
Yeah, thanks very much. I just wanted to probe a bit further on tenancy growth because, obviously, by doing this kind of acquisition, you're going to hopefully have more efficient OpEx, do your build-to-suit optimization, maybe decommission some sites, but you're not factoring in any tenancy growth. And I just wanted to understand, is that simply because these sites are in areas which are already well covered by the three operators, and most of the site growth is going to come in the rural areas? Is that the reason for that? So that's the main question. And the second question is, I don't think you've said it, but how much decommissioning of sites do you think you will see? And a similar question, really, for your assets in Portugal. Thanks very much.
Thank you, Nick. Maybe I can start with the second one. Short answer is it is true. We haven't said so. That is typically an information that maybe is part of the upside that we are expecting beyond the financials that we share with the market in the context of an announcement. So it would be a matter of assessing properly what is the potential. But given that this possibility is not included in our numbers, at the same time, we are not disclosing that. Maybe one clarification on tenancy rate increase. We do factor tenancy rate increase, but it's been quite prominent. Maybe something around, what, maybe 2% or 3% organic growth rate, tenancy rate increase on existing sites. So we do factor some organic growth on top of the Build-to-Suit contribution in the escalator, but we tend to be quite conservative.
This is what we can pay to the seller, okay? Another thing is how sellers grow, organically speaking, year by year, which tends to be more compared to what we factor into the valuation model.
Okay. So, I mean, because when I look at the 2022 to 2029, I think Simon asked the same question. You've got 4% growth in revenues, but you've got a 2% escalator and 2% growth in sites. So it doesn't look like you've got anything in there at all for tenancies.
There is something. Maybe we can comment offline, but maybe there is a portion which is devoted to the, I mean, if you compare EBITDA year one before IFRS 16, and then they bridge to EBITDA run rate before IFRS 16, there is a component which is directly associated with escalator, a small portion also devoted to our organic growth assumptions, tenancy rate increase, and then the contribution from the build-to-suit. So there are mostly three components.
Okay. All right. Thanks very much.
Thank you.
Thank you so much, Nick.
Thank you. The next question comes from Florian Andreucci from Bank of America. Please go ahead.
Yes, good evening. Thanks for taking the question. I just had two outstanding. Firstly, I wanted to ask again on your pipeline. I just wanted to understand a little bit the momentum behind your pipeline. So could you just maybe tell us how sort of the opportunities in the current pipeline have been building? I mean, did you have them for a while? Have you seen some new opportunities coming up recently? Are most of those or the majority of the discussions sort of bilateral processes, something I think you had mentioned at the beginning?
Given you mentioned that there is sort of also a transformative deal in the pipeline, and now there are not that many, I think, very big tower portfolios outstanding in Europe, I just wanted to ask you, especially about Germany, if there's anything, if you could comment anything around that market, in particular, given we have recently seen another deal by American Towers here. Then the second question would be just around regulation. I think you're now pretty. I mean, you have a pretty dominant position in France if we include the deal with SFR. Could you share any thoughts around regulation? Are you comfortable that it's not sort of an issue going forward? I know that probably no tower in the world is really subject to regulation, but yeah, just any thoughts and if you're fine on that front. Thank you very much.
I can think of Florian. Maybe Alex, you can.
I can start for this last one. Yeah, happy to take it. We see ourselves as pro-competitive by definition. When you look at the deal we are today sharing, it was a tower company that was controlled vertically by one operator. That was not even considered part of the independent tower market by the French competition authority. At the moment that someone like Cellnex takes the control of a company as such, automatically, we are fully inclined to share that asset because this is our mantra as much as we can. That potentially, on the contrary, this is something that maybe other players which are vertically integrated are less inclined. You were, well, asking us about a market where we do not have any presence, which is Germany, but it's going to be interesting.
So, you have now a new entrant with a material portfolio and two other tower companies with vertically integrated concepts which are going to be Vodafone on one side and Deutsche Telekom on the other side. And there is the opportunity of a new entrant. So which is really one-on-one. So it's going to be interesting to see the dynamics and how this is played. So we will be spectators of that, but very much eager to learn the dynamics of a market of this kind. But we see ourselves as totally open to share as much as we can and not creating entry access barriers, other than the contrary: lowering as much as we can all of them.
What's up with pipeline opportunity in Germany?
I mentioned a little bit about the dynamics of Germany, but the pipeline, well, we continue to scout all over. And first priority, consolidating in the market where we are already having presence. This has been our mantra since the very beginning, and we've been executing very much following these guidelines. And second step is collateral markets in the region where we are now having presence. And clearly, there are still opportunities, but all of them have to be properly cultivated, and this is where we always continue on.
Thank you, Alex. Maybe the last question.
Yeah. Thank you. The next question comes from Emmet Kelly from Morgan Stanley. Please go ahead.
Yes. Good evening, everybody, and congratulations on the deal you announced. I have a couple of questions. The first question is, I think it's a question I asked you before, Alex, which is on the New Deal in France. So you now have three anchor tenants in France, and I guess each of these are obliged to roll out 5,000 new PoPs under the terms of the New Deal with the regulator. And then you've now got three separate build-to-suit contracts with each of these tenants. Are any of these build-to-suit contracts now including these New Deal sites, or could there be further upside from the New Deal as these new sites are rolled out? And secondly, I know SFR and Bouygues have got a network share deal together in a lot of rural parts of France.
Is there any scope, you think, for, we'd say, Single RAN to emerge as a theme in France if SFR and Bouygues do decide to do that, and what the implications would be for your agreements, please? Thank you.
Thank you, Emmet.
Yeah, so the market dynamics in France are very interesting. Also, recently, it was published, Iliad, let's say, withdrawing negotiations with Orange in relation to a potential RAN sharing agreement, which is also an interesting dynamic. Just to recap a little bit, our Bouygues Build-to-Suit deal is mainly on dense areas, okay? There is another Build-to-Suit deal that Bouygues put on the table, but it is not with Cellnex. So in that sense, when you look at potential RAN sharings, always are normally deployed in white areas or non-dense areas, which is where the New Deal, going back to the first part of your question, is intended to be deployed.
Probably the InfraCo, which is the joint company that Bouygues and SFR are using as a vehicle for these RAN sharing agreements, is going to be in play at a certain point in time in this rationalization of build-to-suit sites that we are intending to analyze with the three players on the same table. Out of that, probably we will be able to generate certain synergies. However, the full picture is not yet on the table, but clearly, there is an opportunity along those lines. This is something which is not only now in France, but is starting in several countries in Europe and somehow also linked to the European recovery funds, which are intending to improve the coverage in rural areas.
So it's going to be interesting, the dynamics for extended coverage on rural areas and how those play around new towers to be built and RAN sharing agreements. We will be intending to facilitate all of that because when operators share, this is actually the first stage for Cellnex potentially playing a role on that.
Super. Thanks so much, Alex.
Appreciate it.
Thank you very much. There are no further questions. Dear speakers, the floor is yours.
Thank you so much. We have now reached the end of the session, and thank you again for your time today, and for any remaining questions. The team will be at your disposal as always. Thank you so much. Take care. Bye-bye.