Good morning, everyone. My name is Juan Gaitan, Director of Investor Relations at Cellnex, and I would like to thank you all for joining us today for our Q1 2021 results conference call. As always, I'm joined today by our CEO, Tobias Martinet our CFO, Jose Manuelaiza and our Deputy CEO, Alex Metre, who will lead today's session. Throughout our prepared remarks, we will refer to the results presentation we have shared with you this morning and then we'll open the line for your questions. And without further ado, I will now hand over to Tobias Martinet.
Please, Tobias?
Thank you, Juanjo, and good morning, everyone. Thank you so much for your time today and thank you for sharing with us our birthday because we are celebrating today 6 years since our IPO. Q and A. And let me please start by sharing with you the main highlights of the period. Our organic growth generation in the period continues to be strong and consistent with new POPs on existing sites And our build to suit program generating 5.5% growth.
We are also making tangible progress on our new efficiencies plan in a way consistent with the lease optimization initiatives teams we have been implementing in the past. 5 gs is becoming a reality, And we are identifying new opportunities arising from the need for a better connectivity where a neutral operator like Cellnex Can Play a Key, such a transport network systems. The period also provides strong financial performance with revenues increasing 40% compared to the last year, our adjusted EBITDA 45% and our recurring leverage free cash flow 40%, with our backlog reaching €110,000,000,000 when all our deals are closed. Just a few words on our right issue that we have recently concluded. It's been one of the largest offering in Europe and also globally in the last years.
And 99.5% rights holders have subscribed. So thank you very much. Thank you so much to our investors for your continued support and trust in this team. We are actively team on our $9,000,000,000 pipeline of opportunities, which we are expecting to execute in the coming 18 months. And we are assessing these opportunities maintaining our strict financial discipline.
In terms of capital structure going forward, we are keeping all doors open, assessing a wide array equity partners at local level. And finally, we are reiterating our guidance With all fronts on track, organic growth generation, all financial metrics in line with our short and medium term outlook. Integration is a critical part of our growth strategy And we can confirm that all our integration processes are on track and we are also making progress on our new ESG master plan. If we move to Slide number 3, We are showing here for illustrative purposes the expected profile of both adjusted EBITDA and recurrent leverage free cash flow during the remaining quarters of 2021. As you can see, these magnitudes will increase every quarter as we generate organic growth, make progress on our build to suit program and efficiency plan and see the contribution from new deals when they are closed.
As a reminder, we are expecting our adjusted EBITDA to grow at around 55% and our recurring leverage free cash flow to grow at around 50% in 2021. On the following slide, you can see the status of our current integration processes, which are performing as planned. In order to warranty a sustainable long term growth, Cellnex has identified, has defined and implemented a global governance model Transversal policies which can be adapted to the realities of each country. The model includes all company functions across our different markets. Scalable company policies and procedures, easy monitoring using global dashboards, and decision making roles at all levels.
If we go to Slide number 5, Just a quick review of our current footprint and financial metrics. When all our deals are closed And our build to suit program is complete. Cellnex will further strengthen its position in Europe team as the main independent telecom infrastructure operator, managing a portfolio of around 130,000 sites with presence in 12 markets, boosting our financial and becoming the industrial partner of choice for our clients. Just a quick reminder of our medium term guidance that implies an annual growth expected EBITDA in 2025 of between €3,300,000,000 €3,500,000,000 shareholding structure after our capital increase. And we can only be grateful again for the continued support from investors and for sharing the long term view of this management team.
And with this, I will now hand over to our CFO, Jose Manuel Aiza, who will provide you a few more details.
Thank you, Tobias. Team. Moving to Slide 8, providing a few more details on the period. Revenues have increased 40% to €506,000,000 in the quarter. Our recurring level free cash flow has increased 40% to €180,000,000 Our total POPs have increased 65%, including the contribution from organic growth and M and A.
And if we focus on organic growth only, that is excluding any change of perimeter, POBs have increased around 5.5% compared to that year as a result of the continued network densification process we are seeing across Europe and in line with our medium term guidance. Moving now to our main metrics in Slide 9. On top of the figures just discussed, our adjusted EBITDA has increased 45% compared to last year and our margin has increased to 76% strong 74%. If we look at the figures in the table, you can see that this adjusted EBITDA K Growth is mainly explained by the contribution from Telecom Infrastructure Services, organic growth, build to suit and recent acquisitions advisory efficient management of our cost base. Payment of leases have increased due to a larger site portfolio.
On the following Slide 10, which explains our recurring level free cash flow generation, you can see the contribution organic growth from our different drivers, colocation and associated services, build to suit escalators and efficiencies. These elements combined generate $24,000,000 in a period, a 20% growth compared to Q1 last year in the period. I mean, we also take the additional contribution from our recent deals and the rest of cash elements below adjusted EBITDA. Q3. Cellnex has generated a strong recurring level free cash flow growth of 42% compared to last year.
Moving to Slide 11, you can see our progress on our new efficiency plan. Please note that site management has always key role in our operations and we have been extremely successful extracting efficiencies out of our portfolio in the past, But we just want to provide additional visibility in our new plant so you can track our progress. We have renegotiated more than 700 ground lease contracts in the period, generated $4,000,000 of annualized efficiencies Moving to our balance sheet. Movements compared to December last year are mainly explained by our M and A activity in the period. Increase in total assets as a result of our M and A activity and the corresponding increased liability as a result of the issuance of debt in this period.
Please note that this picture does not include the proceeds of our recent capital increase. And a quick word on our goodwill. As you know, we undertake a prudent purchase price allocation process in the context of our M and A activity that prioritize the allocation to fixed assets. So the goodwill you see in our balance sheet
tax
rate. Therefore, this never It's not associated with a consideration paid in the cost in the context of any M and I deal is just And finally, in Slide 13, A quick update on our capital structure and liquidity position. We have around €23,000,000,000 of available liquidity, Q1, including €11,000,000,000 of undrawn credit lines. Our net debt after our recent capital increase is close to 0. Strong backlog of contracted revenues at around €110,000,000,000 An average debt maturity of 7 years with a highly competitive cost of around 1.5%.
No significant refinancing is expected before 2024. 86% of our debt is fixed And our corporate debt has no covenant, no pledge, no guarantee. This solid capital structure allow us to be in comfortable position today and maintain our financial flexibility as we assess a wide array of available options let's please open the line for your questions.
Thank you very much. Questions. Thank you. The first question comes from Akhil Zetania from JPMorgan. Please go ahead.
Yes. Hi, good morning. Thanks for taking the questions. I've got 2, please, if I may. The first On your organic growth, you talked about obviously strong ongoing performance, but I wondered if you could just give us a bit of a flavor Of the sorts of organic EBITDA performance you think the business is running at today?
Obviously, with all the M and A that's running through the numbers, it's quite hard to isolate that. And when we think about the organic growth going forward, maybe if you could give us a bit of color on the sort of embedded organic growth you think is In your 2025 guidance, that would be helpful as well. And then secondly, on M and A, you mentioned
You feel that the M and
A that you're looking to, the €9,000,000,000 of M and A could take up to 18 months. I just wondered if by saying that, You're implying that, that is the sort of scale of M and A you expect to do? Or could there still be other variability within that clearly in the past you've tended to deal much Faster. And when we think about the mix of deals going forward, you've obviously had some very large transactions in the last 6 months or so. I wonder if you can just comment as you think about your pipeline and opportunities you're looking at today, Are there still any sizable tickets out there of the sort of, I don't know, let's call it, anything up to €10,000,000,000 size?
Or are we talking about a much more bolt on tight M and A strategy for the coming year or so. Thanks a lot.
Thank you, Achille. On the first question, as you know on the Slide 10 of the presentation, we are providing a recurring equity cash flow bridge that explains the difference between Q1 2021 and Q1 2020. You can see that we are generating $24,000,000 of incremental liquidity flow coming from a basket that we call organic growth. So basically that is our build to suit escalators, inflation, efficiencies because that has an impact that generates a saving on our travel leases, new locations and associated revenues. So basically this $24,000,000 translate into 20% growth compared to last year, including of course the build to shorten excluding any M and A activity or change of perimeter.
I think that This is the element. When asking for 2025 guidance, if you consider this percentage of growth more or less Q1 by quarter you can see that we can grow this up to 20% as we are presenting to you. If you recall at full year it was 17% of our recurring free cash flow in this case. So this €24,000,000 is projected will drive you to the 2025 target on top of what we do have as an M and A activity. Q3.
So we feel very comfortable. Thank you. On M and A, Jose Manuel, you want to comment? On M and A, again, this is you know that we have been as you were suggesting at the beginning, we have been very active, extremely active in the M and A front during the last few months. I think that now we are presenting to you what small M and A activity, but very interesting one.
I think 5 gs is kicking in. 5 gs is going to have an impact on the M and A going on. And we would like to take our time in order to give to take our next steps. So I do think that the remaining €9,000,000,000 we will use this 2018 period time. So we are on track.
I think we are on good track, time. But still we need longer to think to assess and to deliver on time.
In other words maybe To complement, we cannot extrapolate our M and A activity in the Q1 for the rest of the quarters of this year, Kiel. I think this is sometimes happens when it happens, but we are not foreseeing such strength of activity on the M and A in the next coming
Your next question comes from Roshan Ranjit from Deutsche Bank. Please go ahead.
Great. Good morning. Thank you for the questions. It's 2 for me, please. You've given some interesting slides towards the end of the presentation around creating more space on towers both on the rural And in the urban sites.
Can I ask, are you currently coming up against some constraints in terms of space OEM limits and therefore having to be a bit more innovative around how you can host some of the other tenants? And tied to that, can you please give an update on the situation in Italy? There's been increasing news flow now, and I think there's been some reports written by the MPs to the Parliament to actually get something done on the emission limits by autumn. If you can Tell us what the latest is there. And secondly, on the next generation funds, again, you've provided some high level view in your slide deck.
What markets do you think you can benefit the most from? And The logistics of applying for the funds, is it your customers that would apply? Or can Cellnex directly apply for these funds and deploy them accordingly. Thank you.
Yes. Thank you, Russian. This is Alex So on the first question, I think probably you're referring to Slide number 18 And also probably maybe Slide number 19. So what here we are trying to illustrate is not An issue in relation that we are having constraints on the spaces on the rooftops, for instance, in the case of the feature. It's more What we are intending to illustrate is the capacity that alongside with our clients and in That case also there is 1 vendor involved, but there are other vendors working in order to have our contribution on a faster rollout of 5 gs having combined antennas, which are multiband passive if you look at the central picture, which is the bottom part of the antenna plus the active 3.5 gigahertz antenna on the top.
And that's quite helpful because we are doing an intervention in order to deploy 5 gs, which is also helping To put some order into the landscape of the rooftop. So the visual impact is clearly improved And those new developments around antennas are helping us, let's say, that alongside we are rolling out faster the 5 gs. We are also having a better, say, structure rooftop on the antennas. The next slide in Page 19, if you were also referring to that, this is team. Another example of the things that we are developing alongside the vendor ecosystem in order to have also sort of a street works kind of systems, which are shareable because in many cases this is one of the elements that the initial designs are lacking The capacity of the equipments to be shared and this is our late motif, isn't it?
Then we are also trying to influence on the development. That's a bit the rationale for illustrating those features here. You were asking also in relation to Italy on the radiated emissions. That's true. And we are in general optimistic on the way that the radiations Being emitted are actually measured all over Europe.
There is a need for harmonizing the way that this is measured And we are, let's say, working on this, but The good element is that it really seems that we are going towards that durations In all the countries and that would potentially include Switzerland, which is one of the countries that there is, let's say, a different methodology when measuring the meter radiations. And the last part of your question was referring to the next generation funds. Well, we are precisely this week on the process of every government submitting To the EU, the different initiatives, we are quite involved in many of them. And there are a bit of All kinds of different alignments and consortiums being created. So in some cases, we are leading it.
In other cases, we are supporting our clients' initiatives. And in other cases, we are just behind our clients. So we strive to be as compelling as possible in order to present projects which are very much aligned with the needs Of the European society, especially that has been proven after the pandemic. So how important is having good connectivity and so on and this is where we have put most of our focus on providing good coverage everywhere.
Great. That's helpful. Thank you. If I could just add, as the Fed say that any benefits from the EU fund will only kick in from, I guess, fiscal year 2022, I. E.
There's nothing in your guidance from benefiting from the EU fund this year?
No, our guidance does not include any benefit from this possibility.
Great. Thank you.
Thank you.
Thank you. Your next question comes from Simon Cowes from Barclays. Please go ahead.
Morning, guys. Thanks for taking the question. So I know the focus is still on macro towers, but This quarter, you had 40% growth in DAS and small cells. So I'm just wondering how you're seeing the demand develop there. You've obviously signed a couple of agreements So is that the opportunity in the shorter term?
And then I guess longer term, I was just wondering if Could you give us some more color on how you see the small cell environment playing out? Because I guess some might suspect that The barriers to Extra is slightly lower and some of your peers have preferred supplier agreements with their majority shareholders. So It seems like a slightly different environment versus the macro towers. So I'm just wondering how you see that going. And then maybe just to add to that, how big an opportunity do you think it could be in Europe?
Thank you.
Thank you, Samuel, for the question. In relation to the DAS and the small cell, Honestly, we have not changed our view. So we've been quite prudent since the very beginning on the small self deployment. What we are seeing is, let's say, some sort of traction more in indoor coverage, which is one of the elements That our collateral to our small sales, our small sales is initially, let's say, understood as something which is outdoor, where the systems and indoor coverage is one of the areas where we are, let's say, putting some effort because, yes, there is a need there. And in terms of how We see the market going forward on that.
Still we are very much on the prudent side because with the new bands Being made available for the MNOs, there is still the capacity of what we've been talking in the past of squeezing the macro. So when we would be talking about much higher frequencies like 26 gigahertz and this kind of elements that might be different. We are not yet there. So our effort is very much Well, deploying small cells where we have this capacity and as you know, thanks to the Arkeva deal, we have capacity to have access to the London urban furniture. And yes, there is some developments There, but just with the MNOs where maybe lacking a bit of frequencies and clearly it's a good example on how correlated is the access to the spectrum versus the need of small cells.
So in that sense, we do not see any major, let's say, change on our forecast on how we believe the market may evolve, neither because the demand is the organic demand or because other, let's say, clients are vertically integrated with our company. So we don't see that as potential barrier for us having access to this market when actually may develop in the future.
Your next question comes from Sam McHugh from Exane BNP Paribas. Please go ahead.
Hi, guys. Apologies. I have two questions and one follow-up. I'll be quick. The good thing about your POP growth this quarter was it was a bit more skewed towards co location versus BTS.
And it does feel like BTS will naturally ramp up, but do you think you can sustain kind of 3% -ish co location growth over the next 12 to 18 months, number 1. Secondly, Tobias, you're always very deliberate. And in your opening remarks, you highlighted that all options are open regarding M and A, But specifically, you felt the need to call out equity shareholders at a local level. I just wondered why you wanted to mention that. Should we be thinking about bigger deals in total, but just you're not owning 100 percent of them.
And then the clarification was on EMF rules in Italy. I just wondered if your 2025 efficiency targets, make an assumption that they get changed or whether that could be incremental upside to the 2025 target. Thanks very much.
Thank you so much, Sam. I will start maybe with the first one and I will leave Tobias and Jose Manuel to comment on the second maybe there was a third. So I might be we might be requiring to for you to repeat that. Apologies. The first one is the asset is yes.
So roughly, I mean, very big figures. We have provided a 5.5% organic POP growth. The simple composition of that is roughly 3.5% coming from peer to peer location and additional maybe 2% coming from Bluetooth. Do we think that is sustainable in the coming quarters? Clearly, yes.
I mean, it's not maybe too different from what we have seen in the past. We think it's solid, predictable and also underpinned by the general densification needs that we are seeing across the globe. And and the remaining 2% is as a result of the progress that we are making on our build shop programs. So we are not expecting any change in trends in the coming quarters. The second question?
There are no, Sam and you for us.
No, no, no. Go ahead. No, no, no. And my view is just to maybe to recall that we keep open all of the option ability in order to coinvest with someone at local level, but someone means not just for pure financial requirements or looking at new equity or additional equity. This is not the trigger.
This is not the driver. The driver is always the strategic fit. I mean, when we found the right partner In order to secure, to reduce the risk, the execution of the business plan or to accelerate the consolidation in one country, if you look at our footprint in the 12 countries, we are investing with our customers as well. So, well, just to recall, this is not for a specific purpose. We are not reiterating that because we are thinking in something specific.
It's just because, well, The company remains open, but obviously just with the restriction that for us is very important to get the control, not just for accounting purposes, because at the end for us, it's very important
To take
the management of the company, to develop the management role work in the project. I don't know if Jose Manuel is
in Alba's Hector, yes, no. Answer. Sorry, Sam, maybe we are not sure there was a third question.
Yes, apologies, there was, sorry. It was on the EMS rules in Italy. I was just wondering if your efficiency targets included any assumptions on those rules changing? And if they don't or even if they do, how big do you think the incremental opportunity is for optimization of BTS and decommissioning in Italy if the
Well, in principle, we have not taken any consideration of that flexibility going forward into the efficiency plan.
Your next question comes from Jacob Bluestone from Credit Suisse. Please go ahead.
Hi, good morning. Thanks for taking the questions. I've got two questions, please. Firstly, just on similar line To Sam was just asking around the funding, you outlined on Slide 20 a range of alternative available funding approaches to M and A. And I was just wondering, I mean, is this sort of what how you more intend to fund future M and A Rather than going down the rights issue route in the future, is that how we should be reading it?
And that perhaps you'll be doing fewer rights issues going forward Once you've now that you've completed this one. My second question was just on France. You very helpfully have provided split out of the French business, the French unit in your Excel sheet today, which is always Quite interesting. I just had a question on the margin there. I think you report $78,000,000 of EBITDA on $85,000,000 of revenues, So something like a sort of 92% EBITDA margin for the French business.
I was just wondering if you could maybe help us understand Why the margin is quite so high? It looks like that there's no utilities or close to 0 utility charges in the French business.
So maybe it's just a
sort of cost allocation, but just interested on how sustainable is that very high margin That you reported for a French business. Thank you.
Thank you, Jacob. I will maybe start with the more question. I will ask Manuel to elaborate on the first one. The uncertainties, yes, I guess, there are some slight differences compared to the to other markets in the sense of I mean, for example, in France, we are not providing the electricity service. It is up to the mobile operator to sign an electricity contract with electricity supplier.
So we are not important in that link of the value chain That increases the margin. And then also the it's a very high margin that also is that is associated With the contracted revenues that we are receiving from anchor tenants, I would say that as Osmosis explained this margin. Maybe a
bit accelerated for the 5 gs rollout. I mean, all of the telecom operators are accelerating the 5 gs rollout, but it's not relevant. It's not a relevant percentage. The vast majority, it's about pure, let me say, traditional kind of service.
Yes regarding the first point this slide in fact is not the first time we share with you. This is just pure optionability. It does not mean anything about our capital anything but our capital structure It's full of flexibility, okay, but not in us. So we do see and I do think as a CFO that Telenex has built not only a very strong balance sheet, but also has been able to build different financial instruments that allow us to increase our freight power in different ways. Work.
And this is maybe you can see that we are a crossover company, but we are able to issue at a very long term maturities at 12 years, please. You can see how our coupons are very adjusted. You can see how banks are giving us credit lines long term with no hedge, no plates, no guarantee, no covenant. So we tend to I tend to feel maybe it's a personal point remarks. That many times I am not able to explain well that Celinex is not only about net debt EBITDA, But also about other qualitative elements that some stakeholders like credit lines or bondholders Appreciate.
And maybe what I would like to share with all the market again is that Cenus is plenty of financial flexibility to do many things in the next quarters. Okay. Nothing else apart from that.
Got it. Thank you very much.
Thank you. The next question comes from Georgios Irodia Kono from Citi. Please go ahead.
Yes. Good morning, and thank you for taking my questions. I have two questions and one quick follow-up, please. So my first question is around the growth in colocations we are seeing in Italy. I was wondering if you can give us a bit of color between the mix of the growth Iliad, fixed wireless access, maybe any cancellations you are seeing from the From the Twin Conference, just to get a bit of an idea of what's driving the growth there.
My second question is on your agreement with Hatch. Yesterday during that call, they suggested that some of the all or nothing agreements they have with you have some amendment clauses In the event of consolidation, do you mind just giving us an idea of how that works and does that mean you commit less capital, which You can then redeploy into new deals just to get an idea of to the extent you can comment on the dynamics and integrations of that. And then my follow-up is on the EU recovery front. I know you commented on that earlier. It will be great if you can give us any color on the mix of countries where you see the most benefit.
So We kind of get an idea of where to expect this kind of growth to accelerate. Thank you.
Thank you, Georgios. Maybe you can start with the 3rd one. Short answer is mostly Spain in Italy. Those are the markets where maybe we can assign a higher probability of being successful. Coming back to your first question, the majority of organic growth we are generating is, well, first of all, it's a traditional MNOs.
Q1. So in the quarter, no activity, no commercial activity translated into POPs from fixed wireless access, so 100% MNOs. Tenure of this as you can imagine the vast majority is coming from ILEAP. On the second question, I can maybe list Alex to elaborate. Just maybe as a just to start, you know that our MSAs, our contracts with anchor tenants, Those are fully protected against any type of consolidation.
That will be a change of control event, so we are protected against that. Just to provide you one example, we have already seen that in Italy with wind and had magic in the past with no impact on our current cash flows and also we are not expecting any impact on our future renewals because again the all or nothing clause applies. It's a binary decision. But I don't know, Alex, if you want to comment anything else.
Of course, always would be the option of the nothing, if there is merch, but that has to be totally assessed. The beauty, let's say, or the consequence of this all or nothing is precisely exactly that. Whatever happens before that, as Juanjo said, as we have proved in the past, it's not going to impact cash flows with our anchor.
Thank you. Your next question comes from Otavio Adoresi from Societe Generale. Please go ahead.
Hi, good morning gentlemen. A couple of questions on my side as well. The first is related to your cost savings and the second is Somla, the renewal for your contracts. In cost savings, you provided guidance for 2021, 2022. And you also spelled out the 2 drivers, the lease optimization and the exploitation of the network of synergies.
I guess that in the quarter, most of the savings, they still come from optimization of the leases. So I was wondering for your targets you have for 2022 of €25,000,000 to €30,000,000 How much will be from network cost synergies and how much will be from lease optimization? And also, it's possible If you can give an update of your €900,000,000 to €100,000,000 of recurring OpEx and lease savings by 2025. The reason I'm asking for that is because in the previous call, we were wondering about the synergies you can get by optimizing your network now that you're completing most of the acquisitions. At that stage, you say that you still have to check the real overlaps.
So you're still going with the due diligence. The check, I mean, the contract at MSA, MLA. And for the MLA, you have to check the willingness of the clients to move. So I believe it's still a work in progress, that guidance. So if you cannot provide, let's see, any sort of numbers.
If you can see, if the €900,000,000 to €100,000,000 it's a base case scenario or it's a conservative Or there could be upsides to that given the how negotiations are going and the integration plans you're currently implementing. Now you go to the second question is related to tower renewal. In your intro, you basically said that you're celebrating today the 6 2 years in the IPO. A lot of times has passed by. So a lot of emphasis on new contracts and new acquisition.
But I believe that you're now also reaching close to the first renewal. If I'm not mistaken, because now just my memory since the IPO, the very first deal you signed was with Bebel In Telefonica, Spain, that was in 2012. It was for only 10 years. And then was the Bolt one in 2013. So I believe that over the next 1 or 2 years, you do starting some renewal.
A lot of things have changed in terms of our Riutu contract. I believe that stage was mostly MLA, now MSA. Of course, there was no BTS at that stage. You do have now augmented our core strategy. So I was just wondering if
you can start spending a
bit more give us a bit more granularity, if already you start engaging with the clients in terms of renewal And how it's going? And if pricing will be the main lever or if the clients willing to basically get more services from you and potentially even changed from the MLA to an MSA. Thank you.
Q.
Yes. So thank you all, Tavyo. This is Alex. Yes, you have good memory. The first contracts that will expire is the Babel contract with Telefonica, and this is On 2022 and then the next ones are also Telefonica, and that was properly disclosed at the right moment.
So Well, those are good times, as you well suggested, to maybe reconsider what could be a change from the initial status quo. So, of course, we are not well, never we expect until the last minute to have a discussion around these type top topics. We engaged discussions much earlier and part of the elements that we've been developing Since we first signed those contracts, could be on the table. But the most important thing that will be preserved is what we, let's say, indicated by the beginning that those contracts potentially be renewed With a tunnel of pricing, which is plusminus5%, as we already disclosed previously. So nothing different than that is going
Coming back to your first question of Thadio, we are not expecting EMEA to crystallize in the synergies in 2021, 2022. It is true that by 2025, we should be seeing more. Maybe an easy, simple split would be like 75% Of the total figure we provided coming from your renegotiation of current terms, so efficiencies and maybe an additional 25% coming from this mostly vitreous optimization and that's why at this stage we will look at our base case. And obviously, as we over these quarters, years, we have more information. Happy to revisit that figure.
Thank you.
Thank you, Talia.
Thank you. Your next question comes from Fabio Tavano from Mediobanca. Giovanca, please go ahead.
Yes, hello. Good morning and congratulations for the results. Very quick one on my side. I was wondering if you may elaborate a little bit more on the 5 gs opportunities that you think may arise In the near future. And also, I was wondering if you share the view that The resilient recovery plan may speed up finally investment on 5 gs for what concern Europe in general.
Q. Thank you, Fabio. Well, I will say to this one, if you want to complement. No, I would say that for us, Clefarth is an opportunity that we are hoping to see translated in a number of fronts. 5 gs, we believe that Well, depending on the final frequencies to be used in the actual deployment of 5 gs, if we see hybrid frequencies being used, that will be translated into smaller sales.
So there will be a loss of coverage to be compensated with more sites. So hopefully, we will be seeing more densification diversification that can be translated into more collocation, so new tenants and existing sites, but also in the areas where we cannot provide a service, Maybe there is an opportunity to provide even more sites beyond the current build to suit programs that we have signed with clients. So maybe more currency rate increase And also more build to suit. Also, we believe that while maybe at this stage we are cautious about the small cell opportunity, So out of coverage, especially on the small sales, maybe we see more demand from clients when we see a final rollout of 5 years. So So macro sites will need to be complemented with small cells and also that is an area where we can we want to play a role.
We are seeing today demand full EBITDA coverage based on the AS. So that is an area where even today we are making tangible progress football stadiums, hospitals. As we are providing visibility on in the presentation, we are finding also an interesting opportunity in the area of transport network systems to provide the connectivity. So we are also very active here. And then moving beyond, I would say, our traditional activity.
We also think that makes sense for a neutral host to provide ancillary services around Nat Tower and to extend our relationship with our current anchor client. We are already providing fiber backhauling for Bouygues Telecom In France, we are also starting to explore the possibility to move into mobile edge computing. Those are areas where more CapEx will be required maybe makes sense for again a neutral operator to provide this CapEx, this service instead of the mobile operator And then more recently, even why not to consider the possibility to enter into the active infrastructure area. So we see this as an ecosystem. We see this as a trend that will require mobile operators to think about their future CapEx needs in a different way.
Conversely, more than happy to try and partner with our clients beyond macrotavos, beyond what you see today.
The next question comes from Fernando Corteiro from Banco Santander. Please go ahead.
Hello, good morning. Thanks for taking my two questions. And the The first one is related and I'll tell you is a follow-up on your recent answer, Jojo. You said after almost 2 months since you announced the deal with Ciprowe, I would like to understand, I would understand you have seen more commercial traction on the Almantec tower co proposal to MNOs. And in that sense, what has been your learnings and also the market learning from your conversation with clients On this new model that has started with the Sifro deal.
And second, the second question is also on Poland. In that sense, it's quite a specific one in the terms that finally, it seems that the player position has involved A larger amount of sites than initially expected. I just would like to know if there are channel, let's say, in order to come from play or what is the reason for this higher amount of sites coming from product radio. Thank you.
Thank you, Fernando. I will start with the second one and I will leave Alex to Basically what we are doing with CAT transactions is just to rebalance. I mean the economics of the project are exactly the same. So you should be stating the same consideration including upfront and build to suit CapEx and of course the same run rate EBITDA. So We are not seeing the run rate multiple deals.
Simply what we were doing is that as of the closing, we are transferring more sites into the Afro consolidation. So more sites being acquired in exchange for a higher consideration and then we are reducing the component of the vehicle. Associates. The overall magnitude of the project are exactly the same. It is simply that we are as of the closing integrating and paying for more sites than initially expected.
And also, yes, another just to complement. If you do these things, if you see these things, it's because there are tax hangers that are beneficial for us. So from a pure economical perspective, the priority is exactly the same. However, if you go in details into the tax policy tax law. This treatment can be more beneficial for us.
So there are several elements when you see the changes that are more linked to the tax and to the tax treatment and to the speed of the Viltus II program.
And Fernando, in relation to the augmented tobacco, so just to put the things in perspective, We cannot even talk to the potential first client in Poland that will be playing for For the Aumenta Taborco, because we have not yet closed the Polcontel Cifrobit transaction. We are in the middle of the antitrust process, so we cannot step in and have any discussion meanwhile. So the idea. We would not have engaged with the idea unless we would not see any rationale behind that. The concept is socialized, which is normal after the disclosure of the news and It is true that it has created some attraction around it through our potential partners as well So the rest of players of the ecosystem.
So in a sense that is confirming that Potentially, there is a path to go in this direction. Now we need to see the different use cases that Several potential rent sharing agreements among the different MENOS per country are different, are geographically based or maybe based on other elements. So we are starting to have the full design ad hoc per country, per client and trying to figure out how this could be moved forward.
Okay. Many thanks.
Thank you. The next Question comes from Luigi Minera from HSBC. Please go ahead.
Yes. Good morning. Thanks for taking my two questions. The first one is a follow-up on the emission limit regulation. Question.
And I was wondering if you can give us an indication of what's the upside in terms of tenancy ratio growth If Italy and Switzerland were to harmonize their measurements to the European Union recommendations? And the second question is on Portugal, whether you are seeing any indication of new business coming from the new entrant? Thank you.
So probably It's Louisy too early to yet factorize anything. As we mentioned before, we cannot factorize Anything on the midterm guidance in relation to potential change of the emissions? Since it's not yet clear how this may be changing, Probably too early to anticipate any impact on that. Secondly, in Portugal, yes, So the auction is still ongoing. It has yet to provide final picture on who would be actually, let's say, having the predominant role potential new entrant.
And well, as you can imagine, The different candidates and players have been in contact logically and we've been part of the qualification towards the so hopefully that will happen and that will be uninteresting point.
Yes. I think on Portugal, actually, the spectrum to the new entrant has been awarded already, but I get from your answer that there is no, therefore, indication of new business coming. But thank you very much.
Questions. Thank you, Luigi.
Thank you. Your next Question comes from Nick Delfos from Redburn. Please go ahead.
Yes, thanks so much.
I'm just trying to understand a
bit better the drivers of PoP growth. So obviously, 5 gs does have high frequencies, but also increasing use of massive MIMO. Most of the things we see are coverage driven. So could you just give a little bit of an overview of how you see the drivers of POP growth at the moment between coverage and capacity. Is it mainly coverage driven still?
Has it changed at all in the last 3 months. And the second question is around rooftop up leasing. This has been a big subject obviously for American Tower in Germany and Vantage. Anything you can say about how that's Going for you, for example, in France and how difficult or easy it is to lease up rooftops. Thanks very much.
Yes. So in relation to the POP growth, which is not the only organic growth element To be considered, but when we talk precisely about pulp growth, certainly there are 2 elements. 1 is coming out from the physics, which is related to the higher spectrum that is already impacting the 3.5 gigahertz. So when you thinking on massive MIMO antennas don't require more points of presence. And the other one is in relation to the bandwidth needs that requires also an additional densification.
So it's post traffic, Which is linked to the consumption and the physics, Which are linked to the frequencies and those are the 2 main levels of POP growth. And on and collatery and on the top of that, There are other elements like as we mentioned before, indoor coverage and everything that is not counted as spot, but is also, let's say, it's having exactly the same sort of drives. So the second question Turn to the rooftops, and we are quite well experienced on that because when we did the first transaction precisely 6 years ago in Italy. By then, wind was proposing in the portfolio quite a lot of And one of the questions that we were asking ourselves is, well, what was the potential co tenancy projections around that. And after 6 years, I think we have clearly demonstrated that the rooftop, It is also a co tenancy sort of asset Because initially that was wonder.
We've experienced, let's say, the dynamics In Italy, well, it has been, let's say, a good driver of growth. The rooftops, The dynamics are not identical in every country. This is also true, but the experience that we're having in Italy clearly And in Spain as well, up to certain point, but will actually is helping us in order to have the right landlords contracts in order to facilitate that in the future. And the example that we were mentioning Q4 on the Page 18. It's part of the elements that we believe are important also in relation to the land loss to have not forest of antenna on the top of your house, but have something which is more friendly in terms of visual impact as well.
Can I just follow-up on two things? So are you saying that the POP growth is almost all Densification and technology related. It's not really coverage related and the coverage I suppose is more in the build suit. Is that a fair way of thinking about it?
Well, not exactly. So because Not all the MNOs are having exactly the sites at the same place. So coverage also leads to POP. So 2 pop upgrades. So I think it's a combination of both.
We cannot only think that the build to suit, for instance, is required for coverage Because there is a problem of lacking frequencies. So you may need a pill to suit Because traffic as well. Because the
So it's so hard and fast rule, okay. Yes.
Exactly.
And you mentioned in terms of rooftops, Italy and to the extent Spain are good countries. Are there bad countries in terms of the contracts that exist?
Well, normally, when you are inheriting a contract from an MNO That was done several years ago. That contract was not even envisaging the possibility of having several tenants. And this is happening in some cases. The beauty is that, for instance, in our case in France, the rooftops that we are incorporating in our portfolio are many of them coming from build to suit operations where all those elements which are always win to win with the landlords are already taken into consideration.
The next question comes from Giovanni Montalte from UBS. Please go ahead.
Thank you. Good morning. So just a follow-up. Going back to Slide 10, there is a bucket of €69,000,000 You say mainly lithis, I guess this is including all the OpEx growth. Can you confirm this is all, let's say, non organic?
I mean, for the way you present the slide is the way we should read it?
Yes, that's the case, Giovanni. Exactly. That's lastly mostly to change of the inventory, yes.
So if I want to look at today cash flow, let's say, conversion of the new perimeter would be 98 minuteus 69. So it looks kind of low, the contribution from cash conversion of the changing perimeter. Is there any maybe additional comments that you can share with us To clarify better this trend. Thank you.
No, yes, because once here you have a time issue. For instance, the coupons, We pay once a year a coupon. And then you pay once a year the Even the lease. Yes, yes. Even the list, there are some countries where for example the annual lease is paid in Q1.
Okay. So it's mostly it's not representative of the exactly of the cash conversion offered by the change of perimeter within the timing issue. This is the point. So when assessing that, you should consider the timing issue which between elements below EBITDA and above EBITDA have different pattern of behavior. Our growth EBITDA is very recurrent because it follows contracts at the start from closing onwards.
Below EBITDA, it depends on when we pay exactly the different elements. I would not look at Sure. I would not give an answer to your question with Q1 results, but with the full year. That will be the right moment. Regarding full year 2020
No, no, I'm making so sorry.
No, no. And yes, in full year 2020, you have also for last year what happened. So that can be a good proxy. Sorry.
No, no, I imagine so. That's why I was asking to try and better understand the dynamics. And sorry, one very last follow-up. You were confirming that in your 2021 outlook, you are not including contribution from the recovery fund. I guess this is the same for the 2025 outlook Or you have thought you're doing something there.
No, that's also the case for the 2020 to 25 outlook, yes. Products. We treat that as an option and not embedded in our figures.
Okay, very clear. Thank you very much.
Thank you. The next question comes from Andrew Lee from Goldman Sachs. Please go ahead.
Yes. Afternoon, everyone. Just A couple from me. Firstly, just to follow-up on Sam's question earlier on the quality or the makeup of the points of presence growth. We saw a tick up in the 10 season existing towers as a proportion of total PoPs growth.
You were mentioning you don't see a meaningful change from here. What could you just give us a bit more insight? Like could we start to see You generating more of your points of presence growth going forward from existing towers as you benefit from scale in market scale. Second question, probably yes or no. Are you seeing any greater level of competition as you negotiate M and A At the moment, given we've seen MT come out with its funding process for Telxius and partly is setup with CDPQs to provide a platform for more deals going forward.
And then thirdly, just any are we any closer to seeing any more fiber to site deals like the one you did with Bouygues? Thank you.
Thank you, Andrew. I would maybe start with the first one. Now I would say that my previous answer was mostly related to the coming quarters, mostly 2021. And I guess that with the information that we're having from our clients' plans. I guess that we are comfortable seeing similar trends.
That was my only comment. Can this accelerate, maybe faster organic growth can be expected in more recent markets. Could be the case, but I guess that first we need more information. So that's why we prefer to keep the outlook for the rest of the year with trends similar to what you are seeing today. Now maybe coming back to the 3rd question, Alex, on potential more fiber projects.
Yes. Well, this is, as we always mentioned, a lateral type of asset, which has to be rational for us to look at it. So Either it's because it's connecting, which was the case of WIG, the towers with the central offices that we were also having impact on this type of assets. So a rationale has to be there. What we are not intending to is to deploy our investment in fiber to the home And I think this is something that we've reiterated already in the past and continues being as such.
So if there is fiber investment should be linked to the infrastructure, the basic infrastructure around the mobile towers.
It was your second question on competition. I don't know, Jose Manuel, if you want to go. I think that regarding American Tower, American Tower clearly stated that in order to pay Telxur, they need to raise money and they have done it Fine. Nothing to say. I do not think that this is this increase or reduced competition.
We do think that we continue working as we have always been, being an industrial partner for our client in the new context of the 5 gs, team. I do think we have a very unique competitive advantage. And second, we are a neutral operator that also help us in front of vertically integrated tower cost. So we are where we there, where we were before.
Okay. Thank you.
Thank you. The next question comes from Emmet Kelly from Morgan Stanley. Please go ahead.
Yes. Good morning, everybody. Thank you for taking my questions. Two quick ones. Firstly, it feels like we're entering A more inflationary environment, first with rising labor costs and secondly, there's also natural resource prices are going up including steel.
Can you maybe just talk a little bit about how you manage these costs in the coming couple of years, both for OpEx And if there's actually an impact from rising steel prices on BTS CapEx? And then the second question is kind of linked to the question that was asked earlier. If you look at Poland, you're buying 7,000 sites off each of Play and Polcomtel. So 7,000 is the starting point in both portfolios. The BTS with Qualcomm Telus is 1,500.
And then the PLAY BTS program is really huge, up to 5,000 sites. Can you maybe say like what's driving the difference between those two BTS programs. Is this densification or is it a weaker starting point for one of the networks? Just any commentary on that as well because the site increase is very, very notable.
Thank you.
Thank you, Amit. Alex, you want to start with the 1st one?
Let's start with the last one. Yes, sure. Well, in relation to the build to suits, It is correct that amounts being agreed are different. There are 2 different strategies. We also believe that the starting point probably in terms of coverage, One of the players is more eager to develop coverage.
But do not forget that those are the committed quantities that we can go above those quantities In the event that this 1.5 with Pocomtell, for instance, is a way to go beyond that. Having said that, and this is part of what we've been, let's say, emphasizing lately is that having 2 anchors will bring opportunities to create value on the table and this value has to be, let's say, properly shared among the stakeholders. But for sure, there will be a lot of opportunities in Poland. And if you consider that on the top of that, we have even the active infra layer will create very, very interesting discussions. At the moment, we may have them in order to Really make a solid and efficient network for our 2 anchors there.
Regarding your first question, Emmet, and the impact of inflation on our OpEx and B2C programs, if I have followed you well. In terms of the B2C programs, Aneles, you can correct me. The majority of them has a fixed price. So there is
no Not impacted by inflation.
The vast majority, maybe not 100%, but I will say to you that the vast majority. Call. And second, regarding the older items of OpEx, if we recall since 6 years ago, We have been at the very beginning with higher inflation. I remember that 2015, 2016 had an inflation of 2%, For instance, in Spain and Italy, at that time, we were able to control our OpEx perfectly well. So No big changes.
If the OpEx were to be, I don't know, 5%, which I don't think is the case, maybe I would start with worrying, but I'm afraid that one of the good things that Accelnex mitigates Is that we grow also by steps. So we do not grow linearly perfectly well. We grow By integration of companies and also by growth of the corporation and this takes time step by step not in a linear way. So I do think right now we do have scale economies of scale also.
Great. Thank you very much. And let's ask just a quick follow-up as well. The question I'm getting a lot at the moment is just regarding any potential updates on the kind of regulatory processes in France, Italy or U. K.
Can you make some preliminary comments on that or is that something you kind of comment on?
Maybe the real update is, as you might have seen in the news is that in some in a couple of countries, there is the confirmation that we are entering into a stage 2 of the regulatory process. That's actually our base case. So when we provided timings of expected closings, we were anticipating That we were entering into Stage 2. So other than this confirmation, no changes compared to our initial scenario. So everything going as planned.
Great. Thank you.
Thank you so much.
Thank you. Ladies and gentlemen, we have reached the end of the Q and A session. Dear speakers, the floor is yours.
No, just again, thank you so much for your time, and we just hope that you have a fantastic weekend. Thank you. Take care.