Earnings Call: H2 2021

May 17, 2021

Hello, everyone. Good morning, and welcome to our analyst call following our full year results announcement. So just before we jump into questions, and I'm sure you have many, let me quickly share a quick summary of what we think are the key takeaways from our disclosure. So first of all, we delivered on our guidance for fiscal 2021. We delivered 600 About 600 build to suit, which is really demonstrating our ability to scale up our operations and also underpins the value of our industrial approach of building our towers and scaling up our production capabilities. Our tenancy ratio is at 1.4x, which means we exceeded our tenancy ratio guidance of 1.38x. We added 1800 About 1800 new tenancies across our footprint, of which about 1300 are non Vodafone and about 660 are Non committed, which is the category that we described as those that were beyond the BTS and network consolidation programs and those that we had to acquire over and above the committed constructions and tenancies that we had. And that's of course of strategic importance to us because it underpins the logic of an independent tower company going out to market the strength of our grid. We our revenue, EBITDA and recurring free cash flow are in line with guidance. And indeed, we have seen sustained commercial momentum with Framework agreements that we continue to sign in several markets in our footprint to build an adequate commercial framework, which supports our ongoing activity of doing business with many operators, both MNOs and non MNOs. And I would say our operational efficiency initiatives are showing very promising results. We're working on them hard. We're putting a lot of energy and effort into them to make sure that they deliver the operating efficiencies that we've guided towards over time. So we are proposing a meaningful dividend payout as we've said in the previous phases of our interactions of €280,000,000 to our shareholders. Our revenue excluding pass through is for fiscal 2022 is targeted in the range of $995,000,000 to $10,000,000 so 1.10 for fiscal 2022. We're guiding an EBITDA margin which will be broadly stable. That's what we've said at the Capital Markets Day Q3 results that indeed our cost savings initiatives would have limited impact in fiscal 2022 as we ramp them up. And that's very much what we are seeing for fiscal 2022. And then in terms of Recurring free cash flow, we are guiding a range of €390,000,000 to €400,000,000 And this is in line indeed with our medium term targets that we feel very comfortable with. So just to remind you of those, we said we'd move towards a 10 The ratio of above 1.5x that our revenue excluding pass through would be on a mid single digit CACR that our EBITDA margin would ramp up towards the high 50s percentage margin, that recurring free cash flow We'll have a mid to high single digit CAGR. We've guided a payout ratio of 60% of recurring free cash flow. And finally, an initial leverage of ForEx with flexibility to exceed for growth investments as required and of course, the opportunity to issue equity if that were an opportunity if there were an opportunity of scale that would be worth pursuing in that case. So that's really what I wanted to say. And with that said, I'd like now to open the floor for your questions. Thank you very much. And I'm joined by Thomas Ryston, whom you know well, and we'll be sharing the questions together. Thank you very much, Vivek. Our first question comes from Simon Cowles from Barclays. Simon, please go ahead. Your line is now open. Good morning, guys. Thanks for taking the question. On the non committed tenancy, so it looks like things are going very well in 2021. You highlighted that you've done about 660. So that's a third of the medium term guidance on my numbers. So things are progressing quite well. Just wondering how you're seeing the sort of the setup on the medium And guidance given the success you've had, how you might think about the potential upside to that guidance and when you might be able to update us on that? Thank you. Now look at this point we're really working customer by customer. What we're living through is a shift from They ask and we see if we can deliver which was the I would say the model in an operator setup for towers. 2, we bring down the catalog. So what we're seeing is the initial benefit of that. That's what we model. That's what we set out to do anyway, which was to shift from reactive to proactive and we are seeing this progression. Now it's going to depend a lot on their rollout plans as well. So we're At this point, this is the guidance that we're stating, but it's true that it's working. That indeed as you highlighted, we're getting good commercial benefits. That said, we've also got a build to suit program, which in all cases will not be multi tenancies. So there's a bit of the two sides of it that impact that number, which is the division of the number of tendencies by the number of sites. So we're holding the guidance as it is, but feeling good about it. That's And of course, we won't stop at 1.5. We'll keep going afterwards, but we're staying there. We're staying the course. Our next question comes from Georgios from Citi. Georgios, please go ahead. Your line is now open. Good morning, guys, and thank you for taking my question. I was wondering if you can give us a bit of clarity around expansion CapEx for this year. If there are any indications you can provide also around the mix between build to suit and acquisition of ground leases or other kind of investments that we are planning during 2022? Thank you. Maybe Thomas, could I point you to those two points in terms of what we are given in terms of the constitution of our CapEx for the year maybe? Yes, absolutely. So What I can tell you in that context is basically that there's obviously the bid to suit program as our largest investment Program 7,100 sites that we actually rolling out over the medium term. Important to note in that context that For the 1st 2 years, this program is ramping up towards a run rate CapEx investment. And then you will have obviously the other run rate Investment until fiscal year 20 27 when this will actually be over where we then will have achieved the EBITDA contribution on On an ongoing basis of €113,000,000 So there's a ramp up that you need to expect over the 1st 2 years from this one. That's the first thing Probably that will help you, IT, in getting some more understanding of how CapEx, growth CapEx in particular, IT ramps up. Secondly, a similar pattern Of ramp up is to be expected for the NOK 200,000,000 over the medium term of investment into ground lease buyout. So 1st 2 years ramping up and then I see you are a bit more at a run rate thereafter then as well. So then there's about €40,000,000 to €60,000,000 on an annual basis of Other CapEx investment, other growth investment, in fact, which is related to upgrading towers, some IT systems that give equity benefits as And some other growth related CapEx, too. And then lastly, there's about NOK 100,000,000 Over the 1st 3 years or even lease spread of nonrecurring CapEx, which then is Actually, these IT system investments, some of the processes, tools, design, actually that you can actually expect over the 1st 3 years to be There as well. And that is the overall envelope of our CapEx investment other than Maintenance CapEx, which we expect to be in the 3% range of revenue over time as well and pretty stable Thank you. Our next question comes from Andrew Lee from Goldman Sachs. Andrew, your line is now open. If you could unmute yourself, please. Hi, guys. Thanks for taking the question. So I just wanted to follow-up on Simon's questions On the new tenancies. So this is probably nitpicking at this stage because you've done a great job through the year so far. And we don't have full disclosure. But it look firstly, it looks a bit like the German new tenancies were a little light. And so But that might not be the case. Just wondered if we get a bit of color from you on the demand from the uncommitted new tenancy side in Germany. And then just in terms of your waiting and seeing on the new tenancy outlook, there was a Slight slowdown in terms of run rate of uncommitted utilities in the Q4 versus the average of the year as a whole. Is this a case of you delivered well on the low hanging fruit at the start of the year? Or do you or should we expect commercial momentum to build? Just how can we think about that given your reaffirmed rather than raised midterm guidance? Thank you. Yes, Andrew, thanks for the question. I'd say, first of all, this is if anything not a quarterly type of industry to be very honest in terms of tenancies. When you look at the cycle, the sales cycle or let's say commercial cycle is about in a way, it's very tied in also to the investment plans of operators. And many of them have a tradition of running annual budgets. So they've got a rollout plan. They decided when they decide their budget. They put it out there. They look for sites. And then, of course, over time it evens out a bit. It's not that it's that lumpy that It's a March to December race, but there is a bit of that, the final fine tuning of a CapEx budget of an operator about what's the proportion of new coverage versus capacity versus other investments does tend to get fine tuned around. And many of our customers have Q1 type of our Jan to December companies. So there is always a bit of a rhythm that gets in terms of feeding into new tenancies that happen. So that's probably what you would see for part in this. So I wouldn't over read quarter over quarter type of numbers because it's The rollout is driven by delivery times. So that's the main point. So it's not a low hanging fruit versus demand. In terms of spread, I'm not sure we give much more breakdown of the new tenancies by countries, But Thomas help me out if I'm speaking wrong. But It's fairly homogeneous across the business is what I've seen. I mean, there's no shift in trend that I've that we've caught as a team in terms of the split between countries. That's what flagging it, I would say, at this level. Thomas, thank you. Obviously, I mean, in terms of tenancy ratios, we provide you with some detail there on our segmented basis. And Yes, we have improved in Germany at T2 1.21x. Spain has had a pretty significant increase to 1 point 7, obviously, there's a lot of this active sharing element included in that as well. And then we had Greece with a healthy growth up to 1 point 65 from the 1.61x. And then in the other territories, 0.01x of the growth equity there as well. So it's indeed, as Vivek has been saying, across the board, we have been continuing to grow. And there's not a particular area where there's So some acceleration in there, obviously, with the exception of the active sharing point in Spain that you have seen in our numbers there as well. And then as Vivek has been pointing out, very well on track for our to achieve our medium term guidance to pass actually 1.5x. And we're very confident, and that's why we reiterate that guidance that we would achieve these targets. Thanks. Thank you. Our next question comes from Akhil Dhatani from JPMorgan. Akhil, please go ahead. Your line is open. Hi, good morning. Thanks for taking the questions. I just have a couple, please. The first one is just on inflation escalators. Inflation expectations across the market are starting to go up, which I'm sure you've seen. So just keen to get a reminder of how regularly your escalators are indexed, How they work? And just to remind us of the parameters around that. So that's the first one. The second one is if we look at your Difference between your EBITDA AL and your IFRS 16 EBITDA. In Q4, that stepped up. So it's been about $76,000,000 a quarter, the 1st 3 quarters of the year. This quarter is $80,000,000 So just any sort of explanation of what's going on. Is that a ground beef shift or impact or something like that. So any sort of color there? And then the third one was just going back to questions from before, just around the Equity free cash flow bridge down so the recurring levered free cash flow bridge down to your total cash flow. I guess, Thomas, you kindly ran us through the CapEx elements that we're likely to see. But I just wondered if there's any other particular elements around working Capital or other that we should be thinking about that are relevant when we think about the total cash flow below the guidance basis? I think I might just pass the back to my friend, Thomas, on inflation. I need a reminder and the cash flow I didn't say. Yes. Exactly. So I mean in terms of inflation escalator, I think the ranges are Clear, I mean, the ceiling and the floor. Basically, the MSA had obviously, general, the 2% Cap and 0% floor built in Germany with being actually one of the exceptions And where you have to mirror this, the plus 2 actually mirrors into minus 2 there for legal reasons. And then there's a few other exceptions where it's actually plus 3% and 0%. But overall, I think If you step back from this and you think about the, hopefully, short term inflation spike that people actually are fearing, I think the industry overall really characterizes as an inflation hedge, and so do we. We have built in inflation linkage into all of our contracts, and you've seen us just not I mean, like the air contract, The hedge contract in Ireland, just to mention 2 examples in that context of really building in more of that inflation linkage over time. So that's a very healthy component of our growth that actually hedges us from inflation risks from that perspective. Look on the cost side then as well. There, it's very well within our capability to manage inflation. Maintenance, we can obviously whilst we are expecting in the short term some cost increases at renewals, overall, It's in our control to renegotiate contracts actually in the way that we need them to be. And then energy is actually a pass through. So inflation linkage for us is not a risk. And then last but not least, lease costs. We have a number of programs out there like the ground lease buyout program that help us to manage actually any cost increases going forward. And likewise, we are renegotiating leases anyway even outside of the GLVO program. And looking at the past, That has enabled us already to manage actually inflationary pressure from a lease cost point of view. And we are very confident that we can actually do that going forward as well. Then looking at us as a company as a whole, Well, we have a great grid with investment grade customers on them. We do have ourselves actually an investment grade rating. Nonetheless, we have seen actually us being able to issue at Very competitive rates, bonds most recently, which now gives us a weighted average yield of 0.414 percent, so I think a really successful issuance of bonds, which will help us going forward there as well. So overall, in summary, I believe actually that from an inflation point of view, we're actually well positioned to deal with it. So that's on this. And in terms of EBITDA after leases, well, and for the last quarter, I think what It's to be recognized there is that we have achieved our guidance in that context, bang in the middle of the guidance for fiscal year 2021. Really healthy revenue growth, by the way, and very good cash flow growth as well at the top end of the range, just mentioning that as well once again, Underpinning actually the successful realization of what we've actually set out to do. So from that perspective, I think an EBITDA point of view, there's no real surprises actually incorporated in that. The one thing, Akhil, that you mentioned in terms of cash flow, to Put a bit more color onto that as well. It's probably that we've had a Benefit on net debt of about NOK 100,000,000 overall, and that came from working capital Change is actually in the context of us stabilizing our balance sheet in the last quarter. So all of the work that we have actually undertaken there to normalize this. And In fact, I think it's fair to say that we've outperformed against some of our expectations in that context. So namely, that means this CHF 100,000,000 benefit, CHF 70,000,000 of this came from operating working capital, And we expect to retain this. So that's very good news that actually this is something that we retain as a benefit. And then CHF 30,000,000 came from non operating working capital, I. E, capital creditors, I. E, the gross CapEx spend. That might reverse, but then I'll take you back to what I just said a moment ago in terms of the ramp up of CapEx. Just keep that in mind, obviously, as well with ramping up CapEx that has an impact in The working capital situation there as well. So overall, we are very happy that we can now Say that we expect to retain this operating working capital benefit, that we maintain a net Operating working capital balance of between 6% to 8%. And that we can reconfirm That from a guidance point of view, the operating working capital outflow will be somewhere In the single digit euro millions outflow. So that's actually reconfirming what we've said before, but with that benefit that I see I'm pointing out. Our next question comes from David Wright from Bank of America Merrill Lynch. David, your line is open. Please go ahead. Thank you very much for taking the call today. A couple of questions from me. If I could maybe just push a little more, And I suspect this is for Thomas. On the cost inflation, inflation, as I'm sure you remember during The IPO has become a huge debate in the market, and we can very, I think, accurately forecast your top line, but it is the cost Line where we're struggling a little more. Is there any granularity you can give on what percentage of the ground leases Are inflation linked or have some kind of ladder, inflation ladder Just so that we can run the sensitivities in response to the inflation debate. And then just also on the margin side, You did, I think, at the Q3 results guide towards a more stable margin outlook. I seem to remember reading at the time, and I'm not sure if this is something you confirmed, that Vantage was looking to replace Fairly wide ranging Huawei maintenance contract across the towers, I believe, in Germany. And I was just wondering is that the kind of near term cost, maybe a little bit of cost inflation moving away from Huawei, as you start to look to maintain the towers elsewhere, is that maybe the slight little stumbling block to the margin Growth this year and then we can expect a cleaner progression? Those are two questions from me. Thank you. Thomas, would you? I think yes, you actually take us. Yes. In terms of cost inflation linkage of our ground leases, I think, I mean, while there's some linkage, I mean, let me go as far as that. I mean, obviously, some of them are linked in detail inflation. But I wouldn't actually go too much in that direction because obviously, we are in the process of Quite a few negotiations with landlords and us having actually facing a situation in which over 85% Of our landlords, our single site landlords, that leaves us with a pretty good negotiation position of such contracts. And that obviously then means as well that you have a wide range of contracts. If you have 85% of your landlords with single sites, That's really a broad range of that. So that shows us well in the past. If you look at our inflation Linkage and the growth actually of costs from a lease point of view there, This hasn't actually increased that significantly. So combine that with really pushing renegotiations because of the ground lease buyout, which, By the way, just gives us as well more certainty of having active sites that you don't have to renegotiate a retirement in For renewal purposes, so it gives more security back to our customers. And it opens up other criterias in the contract as well like, I mean sharing might in those few cases where it's actually not possible today, actually enabled by that as well. So there's financial benefits and strategic benefits. So inflation linkage of lease contracts is something that we actually have very much within our capability of managing and negotiating This is even outside of the GLP 0 program. In terms of the Stable margin, that's indeed what we have been talking about already at the Q3. We're expecting the margin to be broadly stable year on year. Some of the maintenance contracts is indeed one of the reasons why this is the case. So Let me complete that picture. So it's maintenance costs on the one hand where we have a few renewals coming up, and we have assumed That those renewals are actually leading to some cost pressure. One of the vendors is obviously that we actually have Huawei as a vendor, but we will see, obviously, how we replace that. That's far too early to say at this point in time. Now other cost pressures that we are expecting in this context are as well, Obviously, there's a volume impact simply from leases as well with new tenancies and more towers actually to be built. But then there's as well some more ramp up in terms of the organization and being prepared to ramp up our initiatives even further. So if you think about this, we are expecting some professional support as well to ramp up The GLVO program as an example. So that leads then to some cost pressure in the 1st year with The initiatives that we've been talking about, whether that's maintenance cost initiatives, remote monitoring of sites or actually for the ground lease buyout Programme and the negotiation of leases. This is not coming in a linear fashion. This is actually, obviously, growing over time. And as a consequence, this is actually balancing out for the 1st year. That's what is behind the guidance that we have been basically reconfirming to say that we are, For fiscal year 'twenty two, expecting it to broadly stay in the margin. Maybe just to add a little bit of color to Thomas' question, I think we've got to realize this is the 1st full year post IPO of the company and We have a number of operating programs that require some resourcing, some work. They're all there to help us improve the, Let's say the operating leverage of the company, the and take us towards the high 50s medium term guidance for EBITDA, but we and we're driving them very fast. But it's fair to say that many of these actions by the time you do a maintenance contract renegotiation and land the numbers, By the time you do a ground lease buyout, which does where you stop paying the rent only once you finished once you have the deed for the house for the land in hand, Those do those will not drive a full year impact, which they do take some time to land into the numbers, which is why this year we're guiding broadly flat for the EBITDA margin, EBITDA margin. And but these are the actions we're taking that ensure that we put in place all those programs. And they're quite large scale programs, right, because it's a lot of towers, it's big contracts that we need to negotiate that we're putting in place. I guess it's more that given this There's so much sort of change within this year and obviously in the past year with the IPO. I'm just trying to get a sense of Whether again like the full year 2023 might only be sort of some margin progression and then we start to see the kind of acceleration Over time, is it could we imagine a little bit more of a curved sort of margin outlook rather than any kind of straight line from 'twenty three onwards? Well, it will obviously accelerate throughout the period. So we have said and we reconfirm that, that this is That we're expecting the margin to obviously grow to the high 50s over time and that in fact, That this is a nonlinear expansion of the program. So if you think again about the BTS program phasing, about the Ground lease buyout program phasing, we're accelerating this over the 1st 2 years. However, the 1st 3 years are ramp up phases And then there's the run rate impact over time. Nevertheless, margins will obviously improve from here onwards. Very clear, gentlemen. Thank you. Thank you very much, David. Our next question comes from Emmet Kelly at Morgan Stanley. Emmet, your line is open. Please go ahead. Good morning, everybody, and thank you for taking my question. So my question please is on the build To suit programs specifically in Germany. So if I look at your build to suit program for the group, that's 7,100 sites, 5,500 of those are in Germany. And the tenancy ratio on the white spot sites is Obviously, set in stone is going to be 3 tenants per site. Can you maybe just say a little bit about the outlook for the tenancy ratio in the other 3.5 And how we should think about that over time? And what do you think the key drivers are for the tenancy ratio going up over time? Is that driven by the price you will offer new tenants? Is it driven by the location, the availability of adjacent services? So just how we should think about modeling those 3,500 sites, we'd say in a 5 or 10 year view? Thank you. It's I mean, we I don't think we break we're not at the point where we break down tenancy ratios excluding white So I won't give you a numerical answer, but certainly to your question is the right one. Location wise, there's still I think the first argument is location. And there indeed what we've started to do is to As soon as we've decided on a location where we're going to do a build to suit, we offer it to the other operators, very different scenario to what was done in the past. So that and these sites happen to be sites that typically were undercover, right? I mean, if in 2021 Vodafone Germany needs a site somewhere, it means well, there was a network need out there, right? There's been ample time to roll out and we are in 5 gs period. So the 5 gs rollout is also coming up and that requires more capacity. So they're obviously in the right places for network rollout both of big and new of let's say established and new entrants. So I think that's so making them available as a first step. It indeed is a good pointer. And let me tell you, if there's a search ring where We say we're going to build a tower. Operators who have not spent money there yet are definitely going to take it out there take it out of their list because it's much quicker, simpler and more efficient to go to an existing site to a site built by a tower company. And that's a dynamic that is I've not seen an exception to that. I've never seen a case in the last Year end a bit that I'm working in this business where someone has said, yes, no, we'll build it ourselves even though you're going there. That doesn't happen. So I'd say that's a good pointer. Those locations are indeed attractive and They answer a specific network coverage or it could be just that there's too much equipment in an area and you do need to help networks and so on or densify networks and de densify infrastructure from an equipment point of view and you have that attraction. Pricing wise, we are on framework agreements. They tend to be pretty standardized, which is one of the beauties of this industry is that It removes it's not a side by side negotiation or seldom is because it's really It's an ongoing process and it's a large value. There's a large value to what we offer. So keeping it simple, taking a leaving it for the technical teams to say I'd like a spot here and not having to worry about the commercials at each and every step is I think an attractive one. It's worth mentioning 57% of our sites are in urban areas, which have no direct alternatives. So The tenancies that come in also come in through the fact that there are additional rollout requirements. So beyond the BTS, There is also the densification of each operator's range requirements. Thank you very much. Thank you, Alain. Our next question comes from Nick Delphus from Redburn. Nick, your line is open. Please go ahead. Thanks very much Just two questions from me, please. First of all, are there any benefits in your view merging with a company that Stands your geographical footprints. I mean, what are you thinking about scale overall? And the second question is Within Germany, obviously, there's a lot of interest in the potential for the 4th player. Do you think that kind of contract will be Ismail or will it be all with 1 tower company? Thanks very much. Thanks Nick for the two questions. On the first one scale, There is some benefit of scale. Look, there is and we see it every day because that's what we do when we're not in front of you guys. We work with the teams and we see across the panel the improvements that we can bring from best practice sharing, from standardizing. If I look at our procurement for towers, I mean the scale of 82,000 towers does get you something and we see it. The ability to commit volumes for rollout partners for simple things, EMF measurements, having that that's just a core skill. You need to apply it on every in every location when you're putting in tenancies if that's a requirement of that market. Well, having so Is it huge in terms of being a platform? I'd be presumptuous in saying that it weighs that much on the economics of what is after all first and foremost a capital heavy type of business model, right? But it's there. It's there in terms of speed, it's there in terms of methods, it's there in terms of IT and I think that's important as well. The fact that we've been Pretty stubborn in having one single IT stack, Tims, across our footprint is already driving benefits. We're standardizing processes. So when one country says actually by doing by running this software, calculating this space this way, You save one day on your site visit. Well, that one day on production over 10 countries, that's something. And that's something that When you're a standalone tower company with a few 100 towers in 1 single country, you don't necessarily capture all those innovations. So there is some level of economy of scale from procurement, Economy of expertise from the fact that you share practices and there's an economy of, I would say, scope, which comes from the common IT that you do once and use in multiple countries. So I think there's definitely some benefit there, which is why we are Interested in looking at other geographies at the right price, but consistent with our business model. We've got number 1 or number 2 positions with strong anchor tenants, which means that we add to, let's say, the resilient revenue and profitability coming from 1 tenant, the opportunity to grow. And the opportunity to grow comes from having a broad grid, not a narrow grid. So that's what so we're quite focused on keeping. If we expand, we'd like to expand with operations that are consistent with the ones we already have. So that's where we see the scale argument. And then you launch an optimal You do a deal with Sigfox in Germany. Well, obviously, now we know how to do to work with Sigfox. If we have other activities of the same nature, we're going to be smarter, quicker and more efficient at both caustic and then delivering them, which is I think something valuable as well. On Germany and the new entrant, they've made recent disclosures of their quarter. They did not provide more color on their exact calendar. They said they'd come back in the coming period. We're obviously engaging with them. We feel our grid is very attractive to them. We have a lot of sites that are relevant to Eins and Eins, of course, if you take Germany. And we're in discussion with the new entrants across Europe in general because there is when you have the grid that's been built over 50 to 25 years, it's got that it's got those locations. Our urban sites in particular, 57 percent urban, no direct competition within 150 meters. That's obviously very interesting for rollout for the initial phases of rollouts when you're starting to reach the high population areas. That said, on your question, it's Better for them to answer. They are still I know working through the various dimensions of their ambitious network program in terms of technology, in terms of towers, in terms of provider. So we do that. I'll leave it to them. And certainly, I don't think Mr. Dongmermuth would be amused if I were to commit on his behalf. Okay. Thanks very much. Thank you, Nick. Our next question Comes from Luigi Minerva from HSBC. Luigi, please go ahead. Your line is now open. Good morning. Thanks for taking my questions. It's about your M and A strategy, please. I was wondering first if you can remind us what is your M and A framework. So when you assess opportunities, what are your targets In terms of IRR, recurrent free cash flow accretion, I mean, you already mentioned about new geographies, but perhaps if there is Preference between increasing scale in your current markets or new geographies. And then related to this is, I was wondering what is, in your view, in the next 12 months, the likelihood of a transformational deal Combining tower portfolios with the likes of Deutsche Telekom or Orange? Thank you. Okay. So let me try to give you a bit of color on the framework for our M and A. First of all, of course, we've In our balance sheet, 2 dimensions to that point. 1 of them is the potential leverage capacity that remaining investment grade we could bring to bear for meaningful transactions. The other part is, of course, equity opportunities that could bring that could be brought to bear for larger or let's say more complex types of setups. In terms of M and A, on footprint, It's pretty straightforward, right? I mean, you have a grid. You look at the if there are opportunities on footprint and we continue to Scout and our MDs in the various countries keep looking at opportunities that could arise. But we do already have a grid. So what we look at is sites that can either help us to optimize our grid or that could bring us additional tenancies with a good partnership with a Strong operator and we look at those items of course on an ongoing basis. That's And in a way that's an easy one. We don't disclose our hurdle rates. So apologies for that. I think Thomas would Tear me down if I tried. So no, he's just smiling. He's very he's got a lot of tolerance for me on this. But now we don't disclose our hurdle rates and you'll understand that when you're buying you don't really want to see what your walk away price is, right? So that's not the best way to go out there in the market. But Suffice it to say, we're of course very focused on delivering the right level of shareholder value for our customers. Then looking our footprint, In the broad sense, there's 190,000 towers still or 870 probably in the hands of operators across Europe, okay. That said, there are indeed 2 cases which are Deutsche Telekom on one hand and Orange which are evolving as we speak. I guess their strategy on Tower, Deutsche Telekom I think scheduled to make some I mean, it has a Capital Markets Day this week and Orange already has is beginning, I would say, to set up Totem with a very strong leader Nicolas Roy there who will be taking so they're bringing together France and Spain in the first phase, I think, or in the current phase at least. That's what they've disclosed so far. And I think they're ramping up. Will There's I mean, for there to be discussions, yes, I think the journey needs to unfold. I'm not at liberty to make any comments on any specific discussions in there's no deal on the table, but we've heard them being open. There is a bit of scale benefit as we discussed in the previous question. And we certainly feel our expertise is well placed to do more in more geographies now that we set up in 10 countries, aged directly and then in within Cornerstone. And we have that wealth of expertise. I think we're relevant to look at expansion. But now I'm not a betting man. So within 1 year, Hard to tell that's it takes 2 to tango, right? But it's a fact that there have been lots of transactions in the past couple of years. So I guess there is a pace that's going on. There are a number of operators across Europe who are having those conversations about what do we do with our towers and what's the structure that we'd like to evolve into, both monetization, partnering, etcetera. So I think there will be action in the coming months. But all the way up to deal conclusion is a bit more of a than what I can forecast. Okay. Thank you, Vivek. Appreciate it. Thank you very much, Luigi. Our next question comes from Usman Ghazi from Berenberg. Usman, your line is open. Please go ahead. Hi. Thank you for the opportunity. I've got 2 and maybe 3 questions. Let's see how we get on. I mean, so in the press release, It's interesting that the press release specifically highlights Portugal and the Czech Republic as Potentially relevant opportunities for growth coming forward rather than, I guess, Germany and Spain. So I just wanted to understand, I mean, Portugal and Czech Republic are probably off the radar for us as analysts. So what is the Relevance of highlighting goes to market specifically in the press release today as future growth opportunities. The second question was just regarding the telecom law that is supposedly been finalized in Germany. Do you see anything there that could I mean that growth in Germany proves to be better than what you had expected at the time of the IPO. And then the third question was a bit more kind of, I guess, Strategic, I mean, there is some talk in the tower sector on whether tower companies should Buy the RAN equipment and lease that out to MNOs, particularly as we move to Open RAN. Now in Germany, Drillisch has said that they will be moving to an Open RAN architecture. So I mean could that be an opportunity for you to maybe extend the value chain Broader than just providing co locations? Thank you. Okay. Very good questions. No, I think and not to be cute, we talked so much about Germany and Spain that we also want To say that our footprint is attractive throughout, I think that was if I recall well that was the reason we said we're seeing some with opportunities in Portugal. Portugal new entrant coming in, so that's positive. Czech Republic, which I think initially was seen as a bit flattish From a revenue point of view, tenancy point of view, we're seeing some good traction and we're optimistic on it. So I think we wanted to give I think the whole intent was to mention these. Also the frequency auction happening there. So They were a bit in a frozen zone for some time and they're coming out of the frozen zone. And now that the market So it's opening to new rollout that there's clarity in the market, there's things happening. So I think that's what you've got. So even if it's below your radar, just to let you know, The footprint is attractive. There's stuff to do in every country. That's I think what in terms of commercial. Of course, Portugal still ongoing, But it will end one day and at that point it will at that point we will see the market structure falling in place I guess and there will be opportunities. So that's on Portugal, Czech Republic and the link to the options. On Telecom Law in Germany, Number of I'd say you've got to the German legal setup is also very regional. We're working at every level in Germany to make sure what that we make it easier to roll out sites. That's the main thing. There's a I'd say there are 2 If I were to give a mood music on this, two directions. One of them, the government is indeed Very vocal on the need for more digital 4 gs and 5 gs rollout across Germany and I think that's good wind in the sales. On the other hand, very positive dialogue with regional authorities where we all meet quite closely with them to make sure that We were able to make it easier to roll out, faster to roll out because the speed of roll out in Germany is something that We constantly obsess about and I think that's important because that's the biggest market for us and being effective there is relevant. So I'd say all rather pointing favorably, but also that's still long lead time items. You're talking about sites that require to be built, to be powered, to be and the MNOs to come on them. So I'd say Not to the point of updating any of the trends, but certainly I would say good supportive situation for the ambitions that we put out there. Last thing to open, Ryan, you would have noted in the release as well that we did join Oran and TIP ourselves. And but I would parse the answer into 2 parts. 1, why is it relevant for us? 2, In which way could we play, right? So why is it relevant? Because indeed with Open RAN you have different types of architectures, Front haul fiber front haul with antennas only, the RRUs pushback, which means that in essence O RAN will impact the way sites are built. And that's why we said, hey, we need to understand this. We need to understand because It might mean that even from a structural we're part of that chain, right? So we build sites that host equipment. If equipments are going to morph in terms of space, wind load, where you need to put the equipment, whether you can put it outside or whether you move it inside, whether you should put more transmission, we need to understand that stuff, right, because that's the way we'd be relevant in our business. And indeed try to make it easier for operators to roll out ORAN Open RAN, sorry, across footprint. On the other hand, on the investment into Active, I'd say it's It could seem logical, but there are nuances versus the tower co model. The CapEx cycle is very much not the same, right? I mean We keep thinking when we launch a new technology like 4 gs or 3 gs or 5 gs that it's there forever, but the reality is the next one is on the It's already in the labs, right? So understanding the CapEx profile, the profitability of that also Slightly different maintenance model. So I think it's worth walking into these steps with eyes wide open, which is what we want to do by Studying it better by being part of this consortia and understanding where the technology is evolving, we feel we have a role to play, supporting operators and making ourselves more relevant. In terms of how to deploy capital, what we need to own, what we need to rent out is an economics question or modeling question that's probably a bit deeper. In terms of and I'd say overall, I think in terms of the business there's how the operators business is evolving, But there's also all the other areas that are developing the Atmo activities and so on, other than mobile operator, Very good dynamic. If you look at Spain and so once again, not to just to reflect on the is there a downside on Spain that we're Hiding by talking about Czech and Portugal, the answer is no. We see a lot of new applications, public safety networks, Other, let's say, IoT solutions and so on that are promising in Spain, we're seeing very good commercial activity there as well. So We are reassured on the commercial activity. It's broad based, not it's not just on the side. Thank you. Thank you, Usman. Our next question comes from James Ratzer at New Street. James, your line is open. Please go ahead. Yes. Good morning, Vivek. Good morning, Thomas. Thank you very much for the call. So Two questions, please. First one was just on the U. K. Market. Would you be, Did in buying out the other 50% stake in CTIL if that came up for sale? And can you give us a progress update please on how the legislation is going for ground lease reductions With the ECC, I believe that's kind of being bogged down in a few legal challenges. And then the other question I had was just a modeling one, but The bridge between EBITDA and recurring free cash flow, it looks like your tax payments Came in lower than expected. I mean, do you think the cash tax guidance can now run at lower than the 26% that I think you've previously So yes, I'll take Ciel maybe for the first part and then pass it on to Thomas, for the other 2, I'm not sure if my video got cut off because I see that on the backup. But if that's the case, I mean, I don't know if the team needs me to do something. Okay. Hello, Vivek. At the moment, we are covering your image. So please go ahead. Okay. Thanks. So in terms of C Tail, we've said this earlier. I mean, I would be disingenuous if I were to say we were not naturally interested by the other 50% of SeaTales. So if that were to occur, we'd be part of that conversation. But obviously not I mean it takes 2 to tango once again on this So we'd have the other we'd have to have our partners being interested in that approach. But we're of course open. We'd be pretending not to be interested would not sound very truthful. Maybe a word on the quote, Thomas, since you've been very close to it and the progress on that. Would you like to elaborate? And then the tax rate, yes. So I mean the quote was actually a topic that we have seen To come in gradually in any case. So yes, there are some legal challenges, but obviously, the company is optimistic to work through these challenges. And then For the benefits of the cohort actually to come through in lease cost further lease cost optimization To be expected to come in over time there as well. So that's something that will lead to benefits and we are confident that those legal challenges will hopefully be dealt with so that it will be soon. In terms of EBITDA and free cash flow, you're right. We've actually seen some opportunity there in cash taxes to come through, In fact, that we have reflected now in our guidance overall, if you think about the Medium term guidance and what we have said there in terms of cash ratio, the 26%, we would still guide towards that 26%. But We would continue to see, obviously, working on cash efficiencies as we have actually been talking about in Q3 results. Nevertheless, it's a little bit too early to move away from the 26%. So we remain at that point at the 26% guidance Council of Texas. Thank you. And could you please confirm, do you have a right of first refusal on the other 50% in CTIL? No, nothing explicit from what we've communicated on those agreements. So I'm not at the cannot confirm that. Okay. Thank you. Thank you, James. Our next question comes from Jacob Bluestone at Credit Suisse. Jacob, please go ahead. Your line is open. Hi. Thanks for taking the question. I just had one question, please. I was wondering, can you give us a little bit of an update on what are you seeing in terms of sort of concrete plans starting to materialize In terms of the EU recovery fund that might impact your business, I think the deadline is sort of passed for Submitting proposals, but if there's anything you're starting to see from your side that you can share, that would be helpful. Thank you. Yes. It's a bit of a I mean, it is a rushed process, right? Governments are writing up their papers, taking them to Brussels, having the discussion on the plans. We're engaging in each and every country where we operate. We've got that as a structured plan, Too early to model. Some of the countries have indeed put some digital in there, some have some more than others in terms of the the teams of the recovery fund are green and digital, right? So there are some countries where it's more on other sectors and some of them have put money on infrastructure. In most of those cases, the conversations are around 2 dimensions, Accelerating coverage across transport lines or rural. On rural, we've got very strong engagement. So When countries will put in place subsidy programs to accelerate the rollout of rural sites, we stand ready to build out for them and help operators to come onboard our infrastructure. So there are some there are a number of countries where we are indeed already in the let's say, in the conversation with governments, but they're still not launched those. Each one of them will be a subsidy program with local laws or local, let's say regulations or protocols to disperse the funds. And so we'd be standing on the other side of that to make sure we capture that for rollouts. We've been front footed on this saying we can do more. We can put capital to work if you'd like to help us to reach areas with lower thresholds Then those were operators already go and to help you take operators to other places if they're but it needs to work for all three parties, right, for government, for operators and for ourselves. But I'd say it's playing out in the coming months, But each one of these programs will then require, I guess, organizing on the ground with the government. So I think it's not quite, Let's say easy to model at this stage yet in terms of the numbers. The numbers could be big, but They're not firmed up yet, I guess that's the way to put it for now. Thank you. If I can just ask a follow-up as well. Last week, Inwit Talked about how there's some scope for easing of EMF limits in Italy. Do you see that in any of your other markets? Or is that quite specific to Italy? Well, Italy was an outlier. I think a bit of Greece in some areas, we're still a bit closer to Italy. But Italy was certainly the outlier in Europe, so I would say it's more of a coming closer to the rest of the pack type of situation. Thank you. So that's stricter rule, sir. Yes, So I but that's certainly a favorable for Inuit because that would make their infrastructure more Shareable than it currently is, I guess. So that's a very that's a welcome development in the market, very specific duty. Thank you. Thank you, Jacob. That concludes the Q and A session. And I would now like to hand back to Vivek for any closing remarks. Yes. Thank you very much. And I'm sorry that the video link got lost. And it's not Looks like it's the interworking of all these platforms that connect to each other that seems to have taken me off grid. But I think I might be back. A few words simply to say, we are delivering on what we set out to do. We've interacted with you extensively over the IPO period and we talked to you about the operational areas we wanted to focus on. Commercial, landlord management and the standardization that leads to our industrial process of building towers. On all these three areas, we're making progress according to plan and we're putting in place the resources, the people, the expertise to make sure that we step these up. That's what will enable us to drive the operational efficiencies that will take our margin up over the medium term to the high 50s. And that's what the team the management team is focused on for this year. We've shared with you our guidance for 2022. We reconfirm our medium term guidance. And of course, we are very proud of having hit our fiscal 2021 numbers. So feeling that the momentum Coming out of the IPO period, there's been no slack. People are working flat out on getting all these programs ready. And I'd say there's a good momentum in the business. So really happy to be with you this morning and to share with you this set both of results and perspective.