Good morning, everyone. My name is Juan Gaitán, Director of Investor Relations at Cellnex, 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, Tobías Martínez, our CFO, José Manuel Aisa, and our Deputy CEO, Àlex Mestre, who will lead today's session. Throughout our prepared remarks, we will refer to the results presentation we have shared with you this morning, then we'll open the line for your questions. Without further ado, I will now hand over to Tobías Martínez. Please go ahead.
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 six years since our IPO. 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 we have been implementing in the past. 5G 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 a strong financial performance, with revenues increasing 40% compared to the last year. Our adjusted EBITDA 45%, and our recurrent levered free cash flow 40%, with our backlog reaching EUR 110 billion when all our deals are closed. Just a few words on our rights issue that we have recently concluded. It's been one of the largest offering in Europe, and also globally in the last years. 99.5% of rights holders have subscribed. Thank you very much. Thank you so much to our investors for your continued support and trust in this team. We are actively working on our EUR 9 billion pipeline of opportunities, which we are expecting to execute in the coming 18 months. 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 of available options to continue financing our growth, including equity partners at local level. 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. We are also making progress on our new ESG Master Plan. If we move to Slide 3 , we are showing here, for illustrative purposes, the expected profile of both adjusted EBITDA and recurrent levered 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 recurrent levered 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 guarantee a sustainable long-term growth, Cellnex has defined and implemented a global governance model with the following characteristics: Responsibilities clearly distributed between group and countries. 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 which allow the tracking of KPIs. Supervisory and decision-making roles at all levels. If we go to Slide 5 , just a quick review of our current footprint and financial metrics. When all our deals are closed, and our Build-to-Suit programs complete, Cellnex will further strengthen its position in Europe 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 of more than 20% in our key financial metric from 2020. A very well-diversified expected EBITDA in 2025 of between EUR 3.3 billion and EUR 3.5 billion.
On Slide 6 , we are showing our updated shareholding structure after our capital increase. We can only be grateful again for the continued support from investors, and for sharing the long-term view of this management team. With this, I will now hand over to our CFO, José Manuel Aisa, who will provide you a few more details.
Thank you, Tobias. Moving to Slide 8, providing a few more details on the period. Revenues have increased 40% to EUR 506 million in the quarter. Our recurrent levered free cash flow has increased 40% to EUR 180 million. Our total PoPs have increased 65%, including the contribution from organic growth and M&A. If we focus on organic growth only, that is excluding any change of perimeter, PoPs have increased around 5.5% compared to last 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. Our margin has increased to 76% from 74%.
If we look at the figures in the table, you can see that this adjusted EBITDA growth is mainly explained by the contribution from telecom infrastructure services, organic growth, Build-to-Suit, and recent acquisitions, and by the efficient management of our cost base. Payment of leases have increased due to a larger site portfolio. Maintenance CapEx is expected to converge towards our guidance during the year, and interest paid reflects the terms of our debt structure and our available liquidity. On the following Slide 10 , which explains our recurring level free cash flow generation, you can see the contributions organic growth from our different drivers. Colocation and associated services, Build-to-Suit, escalators, and efficiencies. These elements combined generate EUR 24 million in the period, at 20% growth compared to Q1 last year in the period.
If we also take the additional contribution from our recent deals, and the rest of cash elements below adjusted EBITDA, Cellnex has generated a strong recurrent levered 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 played a key role in our operations, and we have been extremely successful extracting efficiencies out of our portfolio in the past. We just want to provide additional visibility on our new plan, so you can track our progress. We have renegotiated more than 700 ground lease contracts in the period, generated EUR 4 million of annualized efficiencies, and we are on track to meet our efficiencies and synergies target in 2025. Moving to our balance sheet.
Movements compared to December last year are mainly explained by our M&A activity in the period. Increase in total assets as a result of our M&A activity, 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. A quick word on our goodwill. As you know, we undertake a prudent purchase price allocation process in the context of our M&A activity that prioritize the allocation to fixed assets. The goodwill you see in our balance sheet only mirrors a deferred tax liability that arise from the higher fair value of assets acquired compared to their original tax base. Therefore, this never is not associated with a consideration paid in the context of any M&A deal.
Is just an accountancy element according to IFRS rules. Finally, in Slide 13, a quick update on our capital structure and liquidity position. We have around EUR 23 billion of available liquidity, including EUR 11 billion of undrawn credit lines. Our net debt after our recent capital increase is close to zero. A strong backlog of contracted revenues at around EUR 110 billion. An average debt maturity of seven 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 a comfortable position today and maintain our financial flexibility as we assess a wide array of available options to continue financing our organic and inorganic growth.
With this, let's please open the line for your questions.
Thank you very much. Ladies and gentlemen, the Q&A session starts now. Thank you. The first question comes from Akhil Dattani from JPMorgan Chase. Please go ahead.
Yeah. Hi, good morning. Thanks for taking the questions. I've got two, please, if I may. The first is 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&A that's running through the numbers, it's quite hard to isolate that. When we think about the organic growth going forward, maybe if you could give us a bit of color on the sorts of embedded organic growth you think is in your 2025 guidance, that would be helpful as well.
Secondly, on M&A, you mentioned, you feel that the M&A that you're looking to, the EUR 9 billion of M&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&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. When we think about the mix of deals going forward, you've obviously had some very large transactions in the last six 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 EUR 10 billion size?
Are we talking about a much more bolt-on type M&A strategy for the coming year or so? Thanks a lot.
Thank you. Thank you, Akhil Dattani. On the first question, as you know, on the Slide 10 of the presentation, we are providing a recurrent free cash flow bridge that explains the difference between Q1 2021 and Q1 2020. You can see that we are generating EUR 24 million of incremental recurrent free cash flow coming from a basket that we call organic growth. Basically, that is Build-to-Suit, escalators, inflation, efficiencies, because that has an impact that it generates a saving on our ground leases, new locations and associated revenues. Basically, these EUR 24 million translates into a 20% growth compared to last year. Including, of course, the Build-to-Suit and excluding any M&A activity or change of perimeter. Okay.
I think that this is the element, no? When asking for 2025 guidance, if you consider this percentage of growth more or less, and if you quarter- by- quarter, you consider that we can grow this up to 20% as we are presenting to you. If you recall in a full year, it was 17% of our recurrent free cash flow in this case. This EUR 24 million, if projected, will drive you to the 2025 target on top of what we do have as an M&A activity. We feel very comfortable, Akhil Dattani.
On M&A, José Manuel, you want to comment?
On M&A, again, this is, you know that we have been, as you were suggesting at the very beginning, we have been very active, extremely active in the M&A front during the last few months. I think that now we are presenting to you what small M&A activity, but very interesting one. I think 5G is kicking in. 5G is going to have an impact on the M&A going on. We would like to take our time in order to take our next steps. I do think that the remaining EUR 9 billion, we will use this in nine or 18 period time. No? We are on track. I think we are on good track, but still, we need longer to think, to assess, and to deliver on time. Okay.
In other words, maybe to complement, we cannot extrapolate our M&A activity in the Q1 for the rest of the quarters of this year, Akhil. I think this is. Sometimes happens when it happens, but we are not foreseeing such a trend of activity on the M&A in the next coming months.
Great. Thanks.
Thank you. The next question comes from Roshan Ranjit from Deutsche Bank. Please go ahead.
Great. Good morning. Thank you for the questions. It's two for me, please. You've given some very 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 or EM limits, and therefore having to be a bit more innovative around how you can host some of the other tenants? Tied to that, can you please give an update on the situation in Italy?
There's been increasing newsflow 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. 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, Roshan. This is Àlex Mestre. On the first question, I think probably you are referring to Slide number 18, and also probably maybe Slide 19. What here we are trying to illustrate is not an issue in relation that we had having constraints on the spaces on the rooftops, for instance, in the case of the picture. It's more what we are intending to illustrate is the capacity that alongside with our clients and, in that case also there is one vendor involved, but there are other vendors working in order to have our contribution on a faster rollout of 5G, having combined antennas, which are multi-band passive.
If you look at the central picture, which is the bottom part of the antenna, plus the active 3.5 GHz antenna on the top. That's quite helpful because we are doing an intervention in order to deploy 5G, which is also helping to put some order into the landscape of the rooftop. you know. 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 5G. We are also having a better, say, a structured rooftop on the antennas. The next slide in Page 19, if you were also referring to that.
This is another example of the things that we are developing alongside the vendor ecosystem in order to have also a sort of street works kind of systems which are shareable. In many cases, this is one of the elements that the initial designs are lacking the capacity of the equipments to be shared. Since this is our leitmotif, isn't it? We are also trying to influence on the development. That's the rationale for illustrating those pictures here. You were asking also in relation to Italy on the radiated emissions. That's true. 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. We are, let's say, working on this. The good element is that it really seems that we are going towards that directions, you know, 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 emitted radiations. The last part of your question was referring to the Next Generation funds. We are precisely these weeks on the process of every government submitting to the EU, the different initiatives. We are quite involved in many of them.
There are a bit of all kinds of different alignments and consortiums being created. In some cases, we are leading it. In other cases, we are supporting our clients' initiatives. In other cases, we are just behind our clients. Well, 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. How important is having good connectivity and so on, and this is where we have put most of our focus, you know, on providing good coverage everywhere.
Great. No, that's helpful. Thank you. If I could just add, is it fair to say that any benefits from the EU fund will only kick in from, I guess, FY 2022? I.e., there's nothing in your guidance from benefiting.
No.
From the EU fund this year?
No, our guidance does not include any benefit from this possibility.
Great. Thank you.
Thank you.
Thank you. The next question comes from Simon Coles from Barclays. Please go ahead.
Morning, guys. Thanks for taking the question. I know the focus is still on macro towers, but this quarter you had 40% growth in DAS and small cells. I am just wondering how you're seeing the demand develop there. You've obviously signed a couple of agreements on railways in the Netherlands and the U.K. Is that the opportunity in the shorter term? Then I guess longer term, I was just wondering if you could 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 entry are slightly lower, and some of your peers have preferred supplier agreements with their majority shareholders. It seems like a slightly different environment versus the macro towers. I am just wondering how you see that going.
Maybe just to add to that, how big an opportunity do you think it could be in Europe? Thank you.
Well, thank you, Simon, for the question. In relation to the DAS and the small cell, honestly, we have not changed our view. You know, we've been quite prudent since the very beginning on the small cell deployment. What we are seeing is, let's say some sort of traction more in indoor coverage, which is one of the elements that are collateral to a small cells. A small cells is initially, let's say, understood as something which is outdoor, where DAS systems and in-indoor coverage is one of the areas where we are, let's say, putting some effort because, yes, there is a need there.
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, no? When we would be talking about much higher frequencies like 26 GHz and this kind of elements, that might be different. We are not yet there. Our effort is very much on the, well, deploying small cells where we have this capacity. As you know, thanks to the Arqiva deal, we have capacity to have access to the London urban furniture.
Yes, there is some developments there, but just with the MNOs where are maybe lacking a bit of frequencies. Clearly it's a good example on how correlated is the access to the spectrum versus the need of a small cells, no. 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. We don't see that as the potential barrier for us having access to this market when actually may develop in the future.
That's very clear. Thank you.
Thank you. The 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 PoPs growth this quarter is it was a bit more skewed towards co-location with the BTS, and it does feel like BTS will naturally ramp up. Do you think you can sustain kind of 3-ish% co-location growth over the next 12, 18 months? Number one. Secondly, Tobías, you're always very deliberate. In your opening remarks, you highlighted that all options are open regarding M&A. 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 not owning 100% of them? The clarification was on the 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. I will leave that to be José Manuel to comment on the second. Maybe there was a third. Apologies for that. We might be requiring for you to repeat that. Apologies. On the first one, the answer is yes. Roughly, I mean, the very big figures, we have provided a 5.5% organic PoP growth. The simple composition of that is roughly 3.5% coming from pure co-location and additional maybe 2% coming from retrofit. 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 specification needs that we are seeing across Europe. The remaining 2% is just a result.
Of the progress that we are making on our Build-to-Suit programs. We are not expecting any change in trends in the coming quarters. The second question?
Regarding no Sam and you for us.
No, no, no.
Maybe, yes.
Go ahead. Go ahead. No, no, no. My view is just to maybe to recall that we keep open all of the option ability in order to co-invest with someone at local level. 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.
Well, it's 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 in the project. I don't know if Manuel do you want to say?
No, that's actually it. No. That's all.
Sorry, Sam, maybe, we are not sure there was a third question. Oh, yes.
Apologies. It was on the EMF rules in Italy. I just wondered if your efficiency targets included any assumptions on those rules changing. 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 rules did change?
Well, in principle, we have not taken any consideration of that flexibility going forward into the efficiency plan.
Super clear. Thanks, Juan. Thank you very much.
Thank you, Sam.
Thank you. The next question comes from Jakob 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 what Sam was just asking around the funding. You outline on Slide 20, a range of alternative available funding approaches to M&A. I was just wondering, I mean, is this sort of what, how you more intend to fund future M&A rather than going down the rights issue route in the future? Is that how we should be reading it? 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 a 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 EUR 78 million of EBITDA on EUR 85 million of revenues. Something like a sort of 92% EBITDA margin for the French business. I just wonder 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. Maybe it's just a sort of cost allocation. Just interested on how sustainable is that very high margin that you reported for your French business. Thank you.
Thank you, Jakob. I will maybe start with the more operating question. I will leave José Manuel Aisa to elaborate on the first one. The density shares, I guess that there are some slight differences compared to other markets, you know, 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 the electricity supplier. We are not involved in that link of the value chain. That increases the margin. Also, the separate high margin that also is greatly associated with the contracted revenues that we are receiving from anchor tenants. I would say that those are those mostly explain this margin.
Maybe a bit accelerated for the 5G rollout. I mean, all of the telecom operators are accelerating the 5G rollout, but it's not, it's not relevant. It's not a relevant percentage. The vast majority is about pure, let me say, traditional kind of service.
No, yeah, regarding the first point, this slide, we in fact, is not the first time we share with you. This is just pure option ability. Does not mean anything about our capital, anything but our capital structure is full of flexibility, okay. Nothing else. We do think, and I do think as a CFO, that Cellnex has built not only a very strong-A balance sheet, but also has been able to build different financial instruments that allow us to increase our firepower in different ways. 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, for instance, no? 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 pledge, no guarantee, no covenant. I tend to feel, maybe it's a personal point, that many times I am not able to explain well that Cellnex is not only about net debt to EBITDA, but also about other qualitative elements that some stakeholders like credit lines or bondholders appreciate. Maybe what I would like to share with all the market again is that Cellnex has 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 Ierodiakonou from Citi. Please go ahead.
Yes, good morning, thank you for taking my questions. I have two questions and one quick follow-up, please. My first question is around the growth in collocations we are seeing in Italy. I was wondering if you can give us a bit of color between the mix of the growth really at Fixed Wireless Access, maybe any cancellations you are seeing from the twin incumbents, just to get a bit of an idea of what's driving the growth there. My second question is on your agreement with Hutch. 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?
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. My follow-up is on the EU Recovery Fund. 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 I can start with the third one. Short answer is, mostly spend 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. In the quarter, no activity, no commercial activity translated into PoPs from Fixed Wireless Access, 100% MNOs. Out of this, as you can imagine, the vast majority is coming from Iliad. On the second question, I can maybe leave 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 would be a change of control event. We are protected against that. Just to provide you one example, we have already seen that in Italy with Wind and Hutch merging in the past with no impact on our current cash flows. Also we are not expecting any impact on our future renewals because again, the all or nothing clause applies. It's a binary decision. I don't know, Àlex, if you want to comment anything else.
Of course, always would be the option of the nothing, huh? If there is merge, but that has to be totally assessed. The beauty, let's say, or the consequence of this all or nothing is precisely exactly that, no? Whatever happens before that, as Juanjo said, and as we have proved in the past, is not going to impact the cash flows with our anchor.
Please.
Thank you. The next question comes from Ottavio Adorisio from Société Générale. Please go ahead.
Hi. Good morning, gentlemen. couple of question on my side as well. The first is related to your cost savings, and the second in formula, the renewal for your contracts. In the cost savings, you provided guidance for 2021, 2022, and you also spelled out the two drivers, the lease optimization and the exploitation of the network cost synergies. I guess that in the quarter, most of the savings, they still come from optimization of the leases. I was wondering, for your targets you have for 2022 of EUR 25 million-EUR 30 million, how much will be from network cost synergies, and how much will be from lease optimization?
It's possible if you can give an update of your EUR 90 million-EUR 100 million 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 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 on many of the contracts at MSA and MLA, and for the MLA, you have to check the willingness of the clients to move. I believe still a work in progress, that guidance.
If you cannot provide, let's see any sort of numbers, if you can see if the EUR 90 million-EUR 100 million, it's a base case scenario, or it's a conservative, or there could be upsides to that, given the how negotiation are going and the integration plans you're currently implementing. Now we come to the second question, is related to tower renewal. In your intro, you basically said that you're celebrating today the 6 years since the IPO. A lot of time has passed by. A lot of emphasis on new contracts and new acquisition. 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 Babel in Telefónica in Spain. That was in 2012.
It was for only 8- 10 years. Then was the Volt one in 2013. I believe that over the next one or two years, you do starting some renewal. A lot of things have changed in terms of how you do contract. I believe that stage was mostly MLA, now MSA. Of course, there was no BTS at the stage. You do have now Augmented TowerCo strategy. I was just wondering if you can start spending a bit more, give us a bit of 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 change from the MLA to an MSA. Thank you.
Yes. Thank you, Ottavio Adorisio. This is Àlex Mestre. Yeah, you have good memory. The first contract that will expire is the Babel contract with Telefónica, and this is on 2022. The next ones are also Telefónica, you know, and that was properly disclosed at the right moment. Well, those are good times, as you well suggested, to maybe reconsider what could be a change from the initial status quo, you know. Of course, we are not, well, never we expect until the last minute to have a discussion around these type of topics. We engage discussions much earlier. Part of the elements that we've been developing since we first signed those contracts could be on the table.
The most important thing that will be preserved is what we, let's say, indicated at the very beginning, that those contracts that potentially will renewed with a band of pricing, which is ±5%, as we already disclosed previously. Nothing different than that is going to be on the table, and if there is something different, will be for the benefit of the company.
Coming back to your first question, Ottavio. We are not expecting MLA to crystallize any 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. Efficiencies and maybe an additional 25% coming from this. Mostly due to site optimization. That's why at this stage, we believe that that's our base case. Obviously, as we over these quarters, years, we have more information, happy to revisit that figure.
Thank you.
Thank you, Ottavio.
Thank you. The next question comes from Fabio Pavan from Mediobanca. Please go ahead.
Yes, hello. Good morning, and congratulations for the results. Very quick one on my side. was wondering if you may elaborate a little bit more on the 5G opportunities that you think may arise in the near future. Also, was wondering if you share the view that the Recovery and Resilience Plan may speed up finally investment on 5G for what concern Europe in general.
Thank you, Fabio.
I don't want to.
Well, I will start. I will take this one if you want to complement. I would say that for us, clearly 5G is, it's an opportunity, you know, that we are hoping to see translated in a number of fronts, you know. 5G, we believe that, well, depending on the final frequencies to be used in the actual deployment of 5G, if we see higher frequencies being used, that will be translated into smaller cells. There will be a loss of coverage to be compensated with more sites.
Hopefully we will be seeing more densification. A densification that can be translated into more collocation, so new tenants on 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, you know. Maybe more tenancy rate increase, but also more Build-to-Suit. We believe that while maybe at this stage we are cautious about the small cell opportunity, so out of coverage based on the small cells, maybe we see more demand from clients when we see a final rollout of 5G. You know, some macro sites will need to be complemented with small cells. That is an area where we want to play a role.
We are seeing today demand for indoor coverage based on DAS. 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. We are also very active here. Moving beyond, I would say, our traditional activity, we also think that makes sense for a neutral host to provide and share these services around a tower, you know, and to extend our relationship with a current anchor client. We are already providing fiber backhaul 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 a neutral operator to provide this CapEx, this service, instead of the mobile operator. More recently, even why not to consider the possibility to enter into the active infrastructure area, you know? 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. Obviously, more than happy to try and partner with our clients beyond macro towers, you know, beyond what you see today.
Fantastic. Thank you.
Thank you, Fabio.
Thank you. The next question comes from Fernando Cordero from Banco Santander. Please go ahead.
Hello. Good morning, and thanks for taking my two questions. The first one is related and actually it is a follow-up on your recent answer, Juanjo. If, after almost two months since you announced the deal with Cyfrowy, I would like to understand a little bit, you have seen more commercial traction on the Augmented TowerCo proposal to MNOs. 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 Cyfrowy deal? The second question is also on Poland. In that sense, it's a quite a specific one in the terms that finally it seems that the Play acquisition has involved a larger amount of sites than initially expected.
I just would like to know if there are additional, let's say, inorganic deals to come from Play or what is the reason for this higher amount of sites coming from the, from the, from the Play deal? Thank you.
Thank you, Fernando. I will start with the second one, and I will leave Alex to elaborate on the first one. Basically, what we are doing with that transaction is just to rebalance. I mean, the economics of the project are exactly the same. You should be expecting the same consideration, including upfront and the Build-to-Suit CapEx, and of course, the same run rate EBITDA. We are not changing the run rate multiple still. Simply what we are doing is that as of the closing, we are transferring more sites into the upfront consideration, more sites being acquired in exchange for a higher consideration, and then we are reducing the component of the Build-to-Suit.
It's just the overall magnitudes 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.
Also just another to complement. If you do these things, if you see these things, it's because there are tax angles that are beneficial for us. From a pure economical perspective, the project is exactly the same. However, if you go in details into the tax, Polish tax law, this treatment can be more beneficial for us. There are several elements when you see these changes that are more linked to the tax and to the tax treatment and to the speed of the Build-to-Suit program.
Fernando, in relation to the Augmented TowerCo, you know, just to put the things in perspective, we cannot even talk to the potential first client in Poland that will be Play, you know, for the Augmented TowerCo, because we have not yet closed the Polkomtel-Cyfrowy transaction. We are in the middle of the antitrust process, we cannot step in and have any discussion, meanwhile, you know. 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. It is true that it has created some attraction around it, through our potential partners as well also the rest of players of the ecosystem.
In a sense, that is confirming that potentially there is a path to go in this direction. We need to see the different use cases that are several. The potential rent sharing agreements among the different MNOs per country are different, are geographically based or are maybe based on other elements. We are starting to have the full design either per country, per client, and trying to figure out how this could be moved forward.
Okay.
Okay.
Many thanks.
Thank you. The next question comes from Luigi Minerva from HSBC. Please go ahead.
Yes, good morning. Thanks for taking my two questions. The first one is a follow-up on the EMF regulation. 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. The second question is on Portugal, whether you are seeing any indication of new business coming from the new entrant. Thank you.
Probably it's Luigi, too early to yet factorize anything. As we mentioned before, we cannot factorize anything on the on the middle guidance in relation to potential change of the emissions. Since it's not yet clear how this may be changing, probably it's too early to anticipate any impact on that. Secondly, in Portugal, yes, the auction is still ongoing. It has yet to provide a final picture on who would be actually, let's say, having the predominant role as a potential new entrant. Well, as you can imagine, the different candidates and players have been in contact, logically, we've been part of the qualification towards the opportunity.
Well, hopefully, that will happen, and that will be an interesting point.
Yeah, thanks. I think on Portugal, actually the spectrum to the new entrant has been awarded already, I get from your answer that there is no, therefore, indication of new business coming. You know. Thank you very much.
Thank you, Luigi.
Thank you. The next question comes from Nick Delfas from Redburn. Please go ahead.
Yeah, thanks so much. I'm just trying to understand a bit better the drivers of PoP growth. Obviously, 5G does have higher frequencies, but also increasing use of massive MIMO. Most of the things we see are coverage driven. Could you just give a little bit of a 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 three months? 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.
Yeah. In relation to the PoP growth, which is not the only organic growth element to be considered, but when we talk precisely about PoP growth, certainly there are two elements, no? One is coming out from the physics, which is related to the higher spectrum that is already impacting the 3.5 GHz. When you are thinking on massive MIMO antennas, those require more Points of Presence. The other one is in relation to the bandwidth needs that requires also an additional densification. It's both traffic, which is linked to the consumption, and the physics, which are linked to the frequencies. Those are the two main levels of PoP growth.
Collaterally, and on the top of that, there are other elements like, as we mentioned before, indoor coverage and everything that is not counted as PoP, but is also, let's say, having exactly the same sort of drivers, no? The second question in relation to the rooftops, no? We are quite well experienced on that because when we did the first transaction precisely six years ago in Italy, by then Wind was proposing in the portfolio quite a lot of rooftops, no? One of the questions that we were asking ourselves is whether, well, what was the potential co-tenancy projections around that, no?
After six years, I think we have clearly demonstrated that the rooftop, it is also a co-tenancy sort of asset, no? Because initially that was wondered. We've experienced, let's say, the dynamics in Italy well, and 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. The experience that we're having in Italy, clearly, and in Spain as well, up to a certain point. Actually, it's helping us in order to have the right landlords contracts in order to facilitate that in the future, no?
The example that we were mentioning before on the Page 18 is part of the elements that we believe are important also in relation to the landlords to have not a forest of antennas on the top of your house, but have something which is more friendly in terms of visual impact as well, no?
Could I just follow up on two things? Are you saying that the PoPs growth is almost all densification and technology related? It's not really coverage related, and the coverage, I suppose, is more in the Build-to-Suit. Is that a fair way of thinking about it?
Well, not exactly. Because not all the MNOs are having exactly the site at the same place, so coverage also leads to PoP. To PoP upgrades, no? 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. You may need a Build-to-Suit because traffic as well.
Okay. There's no hard and fast rule. Okay. Yeah.
Exactly.
You mentioned in terms of rooftops, Italy and to an 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, no? 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.
Okay. Thanks very much.
Thank you. The next question comes from Giovanni Montalti from UBS. Please go ahead.
Thank you. Good morning. Just a follow-up. Going back to Slide 10, there is a bucket of EUR 69 million. You say mainly leases. 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, this is the way we should read it. Thank you.
Yes. That's the case, Giovanni. Exactly. That's largely, mostly to change of perimeter. Yeah.
If I wanna look at the cash flow, let's say, conversion of the new perimeter would be 98 minus 69. It looks kind of low, the contribution from the cash conversion of the change in perimeter. Is there any maybe additional comments that you can share with us?
Yeah.
To clarify better this trend? Thank you.
No. Yes, because, one here you have a time issue. For instance, the coupons, no? We pay once a year a coupon, and then, or you pay once a year the.
Even the lease.
The lease.
Even the lease. There are some.
So-
There are some countries where, for example, the annual lease is paid in Q1.
Yes.
Okay. So it's mostly, it's not representative of the-
Exactly.
Of the cash conversion offered by the change of perimeters. We think it's a timing issue.
This is the point. When assessing that, you should consider the timing issue which between elements below EBITDA and above EBITDA have different pattern of behavior. Above 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 give an answer to your question with Q1 results, but with the full year. That will be the right moment.
No, no, I imagine so. Sorry.
No, no. 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, you know, to try and better understand the dynamics. Sorry, one very last follow-up. You were confirming that in your 2021 outlook, you are not including the contribution from the Recovery Fund. I guess this is the same for the 2025 outlook or you have factor in something there?
No, that's also the case for the 2025 outlook. Yeah.
Okay.
We treat that as an option and not embedded in our figures. Okay. Very clear. Thank you very much.
Good morning.
Thank you. The next question comes from Andrew Lee from Goldman Sachs. Please go ahead.
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 sort of take up in the tenancies on existing towers as a proportion of total PoPs growth. You were mentioning you don't see a meaningful change from here. 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&A at the moment, given we've seen, yeah, AMT come out with its new funding process for Telxius and partly that's set up with CDPQ to provide a platform for more deals going forward. Thirdly, just any, are we any closer to seeing any more fiber to the site deals like the one you did with WIG? Thank you.
Thank you, Andrew. I will maybe start with the first one. I would say that my previous answer was mostly related to the coming quarters, no? Mostly 2020, 2021. I guess that with the information that we are 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 into the more recent markets. Could be the case, I guess that first we need more information. That's why we prefer to keep the outlook for the rest of the year with trends similar to what you are seeing today.
In now, maybe coming back to the third question, Àlex, on potential more fiber projects.
Yes. Well, this is, as we always mention, a lateral, a lateral type of asset. Which has to be rational for us to look at it. Either it's because it's connecting, which was the case of WIG, the towers with the central offices that we were also having an impact on this type of assets. A rationale has to be there. What we are not intending to, is to deploy our investment in fiber to the home. I think this is something that we've reiterated already in the past and continues being as such. If there is a fiber investment, should be linked to the infrastructure, the basic infrastructure around the mobile towers.
There was, your second question on competition. I don't know, José Manuel, if you want to.
I think that regarding American Tower. American Tower clearly stated that in order to pay Telxius, they need to raise money, and they have done it. fine. nothing to say. I do not think that this is this increase or reduce competition. We do think that we continue working as we have always been, no? Being an industrial partner for our client in the new context of the 5G, which I do think we have a very unique competitive advantage. And second, we are a neutral operator, no? That also help us in front of vertically integrated towercos. we are where we where we were 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, 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? The second question is kind of linked with a question that was asked earlier. If we look at Poland, you're buying 7,000 sites off each of Play and Polkomtel. 7,000 is the starting point in both portfolios.
The BTS with Polkomtel is just 1,500, the Play BTS program is really huge. It's up to 5,000 sites. Can you maybe say, like what's driving the difference between those two BTS programs? Is it densification or is it a weaker starting point for one of the networks? Just any commentary on that as well, because the size increase is very, very notable. Thank you.
Thank you, Emmet. Àlex, you want to start with this one?
Let's start with the last one. Yes, sure. Well, in relation to the Build-to-Suit, it is correct that amounts being agreed are different. There are two different strategies. We also believe that the starting point, probably in terms of coverage, one of the players is more eager to develop coverage.
Do not forget that those are the committed quantities that we can go above those quantities in the event that this 1.5 with Polkomtel, for instance, is a way to go beyond that. Having said that, this is part of what we've been, let's say, emphasizing lately, is that having two anchors will bring opportunities to create value on the table. This value has to be, let's say, properly shared among the stakeholders. For sure, there will be a lot of opportunities in Poland. 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 two anchors there, you know?
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, Àlex, you can correct me, the majority of them has a fixed price.
Not impacted by inflation.
The vast majority. Maybe no 100%, but I would say to you that the vast majority.
Absolutely.
Second, regarding the other items of OpEx, if we recall since six years ago, we have been at the very beginning with higher inflation, you know. I remember that 2015, 2016, we had an inflation of 2%, for instance, in Spain and Italy, you know. At that time, we were able to control our OpEx perfectly well. 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 worrying, you know. No, I'm afraid that one of the good things that has Cellnex can mitigate is that we grow also by steps. We do not grow linearly perfectly well. We grow by integration of companies and also by growth of the corporation.
This takes time, step by step, not in a linear way. I do think right now we do have a scale, economies of scale also, yeah.
Great. Thank you very much. Can I just ask just a quick follow-up as well? A 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 cannot comment on?
Maybe the update is, as you might have seen in the news, is that in a couple of countries, there is the confirmation that we are entering into a stage two of the regulatory process. That's actually our base case. When we provided timings of expected closings, we were anticipating that we were entering into stage two. Other than this confirmation, no changes compared to our initial scenario. Everything going as planned.
Great. Okay. Thank you.
Thank you so much.
Thank you. Ladies and gentlemen, we have reached the end of the Q&A session. Dear speakers, the floor is yours.
Now just, again, thank you so much for your time, and we just hope that you have a fantastic weekend. Thank you. Take care.