Hello, welcome back. We are now unfortunately coming to the last presentation of our Austrian Select Conference. Last but not least, EuroTeleSites will present itself. For those of you who haven't heard of the company before, it's a leading independent tower company which operates around 14,000 telecom towers in Austria and five Central and Eastern European countries. Basically, they're leasing the towers to telecom operators who then can put their own equipment onto the towers. The presentation will be held by Moritz Palmi, who is Head of Investor Relations. Same format as all the other presentations, 20 minutes presentation, 10 minutes Q&A, and you can post your questions in the chat and we will address them once Moritz is done with his presentation. Let's get started. Moritz, go ahead.
Many thanks for the kind words. Once again, hello from my side. I'm quite sure most of you already used your telephone today, maybe for checking any share prices or maybe also for checking the share price of EuroTeleSites. That's exactly the reason why mostly everyone were already in touch with EuroTeleSites, because we are providing, as you can see on the picture, the passive infrastructure of the telecommunication infrastructure. Today my target is to introduce you to EuroTeleSites that you understand how we earn money and especially how we can earn more money. If I do a good job, then you will go out tomorrow and see more radio towers, especially greenfield sites and the one which are located on the top of the buildings, so we call them rooftop towers. Why should that be the case?
If we look to Europe, we see roughly 500,000 mobile towers across the countries, which is, I would say, quite a lot. Maybe to let you know two more things about the company itself. We were founded in 2023 as a spin-off from the Telekom Austria Group, and we are listed at the Vienna Stock Exchange, in the prime market. As we heard in the beginning, we are responsible for roughly 13,800 telecommunications towers, and we are leasing them to mobile network operators and everyone else who has any need for putting their equipment on our towers. Let's go into the presentation and start already with the most important things. Why should you take a look at EuroTeleSites and putting them on our watchlist?
As you heard, we are a leading mobile infrastructure host, so right now we recently published our Q1 results and we are getting close to 14,000 prime locations, as we are calling them in Austria and the five CEE countries. I always say that we are, let's say, in the infrastructure or mobile business. What does that mean? It's a very robust branch and, driven by the fact that our revenues are inflation-linked, we see very visible cash flows. It's given the fact that our revenues are indexed on a yearly basis, you can see a constant uplift, but also very visible in terms of going to the future. If you look at your behavior yourself, you will see that you will use your mobile more and more. What does that mean? You can also see that in terms of the data volume.
If we look, for instance, to the latest reports which we are looking at the moment, we see that the data volume is still increasing, let's say, 20% every year. Are we at the end of the development? No, not yet. Because if you look, for instance, to the active usage of 5G devices for the current reports, you see that roughly 20% of the mobile devices are currently locked in 5G. You can see there is still something to come, and from that perspective, it's important to further increase also the infrastructure. What's very important and that's also a very nice point, speaking about EuroTeleSites we have a very high profitability. We are seeing an EBITDA margin of 58% if we are looking to the full year 2025 results.
Maybe just to give you a hint here why we are focusing on the EBIT after lease margin. That's the reason, because we have the landlord leases. When you think about the radio tower that's located on the land space and we do not own the land, but we are leasing them. Since that is leased, we have to activate them according to IFRS 16. If you want to get a real understanding about the profitability, the best thing is that you look at the EBIT after lease for EuroTeleSites. It's not only because I am telling you that EuroTeleSites is a very attractive investment and you should put us on your watchlist. It's also given by Moody's and Fitch, who give us an investment-grade rating.
Also when you look to the analyst of Erste Bank who is covering us, she's seeing an upside in terms of the share price. What I brought here on the left and on the right, that is actually the core asset of EuroTeleSites. On the left-hand side, you see the greenfield site, and on the right side, you see the rooftop site. What's very important here to understand, if we look to the left side, there is enough space for having, for instance, a second tenant. Because if you look to the top of the radio tower, then you can see there is one antenna at the moment in place. If there is the interest for putting a second tenant we can also put there a second tenant, of course.
At the moment as we heard in the beginning we are focusing on mobile network operators, because that is, let's say, the focus of the company. What belongs to us, you can see here the steel mast. The steel mast is the passive infrastructure as we call it, and this space we are leasing out to the operators. Our clear target is to increase the utilization of EuroTeleSites, because you can imagine, if we put a second tenant on there, the cost almost stays flat. That, let's say, is the sweet spot for EuroTeleSites. If we change to the right on the picture, you see the rooftop radio tower and there, it's getting a little bit more difficult to put a second tenant on it. Why? Because there is simply the problem of having enough space.
If we go to the next, that's again, let's say, a simple graphic where you can see which things belongs to us and which things belongs to the mobile network operator. Everything what is in blue belongs to EuroTeleSites, and everything what is in red belongs to Telekom Austria or the other mobile network operators. What's very important here maybe to think about is you can see the radio antenna that still belongs to the mobile network operator. We really have only the passive infrastructure, as we call it. Maybe let's jump directly into the footprint where we are operating. You can see here the six countries where we are providing our services. Where does these countries come from?
Since we are a spinoff from Telekom Austria Group, we are operating in the same countries as Telekom Austria Group, except from Belarus, because that was legally not possible in the beginning when the spinoff was done. I think what's very important also here to mention is we have the same shareholder structure, or a very similar shareholder structure, if we look also to our anchor tenant, Telekom Austria Group. We have the two main shareholders, which is América Móvil and ÖBAG, the Österreichische Beteiligungs AG. From that perspective, you can see we have similar interests and we have a very good way of working together. What's also very interesting here to see, we operate the group with roughly 200 employees. I would say we are very efficiently structured.
Still, if we will increase the number of sites and also tenants, we can manage to increase our bases without needing more employees here. Again, what you can see here is the number of sites. That is our real assets. If we look to the balance sheet, the assets have more than EUR 1 billion value on the active side. Of course, as I mentioned in the beginning, the data volume is still increasing. For that reason, it's still important that we further increase our sites or, let's say, invest in our infrastructure with building new sites. If we look, let's say, to the figures in the last year, we added 183 new towers, given the case that data volume is increasing and the 5G obligations are not done yet.
What is even more important, if you look to the second part, number of tenants, we could increase the number by 338. Why is the number bigger than the number of sites? That's very important to understand, because we managed to onboard third-party tenants. In our definition, a third-party tenant is someone external and not A1. That's again very important because with that, we can increase the tenancy ratio or customer ratio on our towers, because that's initially what I said, increasing utilization. On the right side, you see that the tenancy ratio as of December 31st, and that underpins, again, what I said earlier, we are clearly focusing on the greenfield towers when it comes to increasing the tenancy ratio. Again here, why that's the case, because we simply have more space there in comparison to a rooftop where that's still a little bit more complicated.
Maybe let's think a little bit about the business model. How do we work with our anchor tenant and what's behind it? Usually when you have such a big contract, because right now we are earning, let's say, 92%-93% of the total revenues with Telekom Austria Group, it's very important to have a clear assumption how to work with each other. We have here the master service agreement, and what that means, I will tell you a little bit more in detail. From our perspective, the most important thing is, of course, we can pass through the inflation. So as of April 1st every year, we can pass through the local inflation of every country. What's important to understand here, it's not possible to pass through the full inflation, but 85% of the local inflation with a cap at 3%.
Duration-wise, the contract itself is infinite, but maybe some of you follow also the Italian market, where we saw, for instance, the case with INWIT. It would be possible to terminate the contract, for instance, after eight years. What's important here, and also in terms of the risk perspective, if A1 would like to cancel the contract, it's all or nothing clause. That would mean they must give back all their sites. As we heard at the beginning, is that really something what could happen? Of course, it could happen, but I must say it's very unlikely because telecommunication is something that will stay for ages, if you ask myself, and the things we are doing on our mobile phone is getting more and more, and not less. Mandatory upgrades. What else is given in the master service agreement are the mandatory upgrades.
Let's say roughly half of the sites in our footprint need an upgrade. What is an upgrade? We want to put the standard configuration for A1 on every roof, on every tower. For that perspective, for some cases, it's important to strengthen, let's say, just the tower and put in another steel construction there that the tower could weigh the new standard configuration, which is most of the time, a 5G antenna with some other radio frequencies as well. What's also very important is rollout of new sites. At the beginning of the company's life, the intention was to build roughly 200 new sites per year for the first five years.
If, let's say we are looking only to 2026 right now, we see even a higher construction program which is the case that we got more offers from Telekom Austria Group in Austria, and that's the reason why we expect to build roughly 400 new sites over the whole group. Of course, right now I spoke most of the time of the Telekom Austria Group, of our anchor tenant. We are always open for a third-party business, so it's our clear intention to also build radio towers for third-party business. Maybe to give you a little bit more color on why we are focusing on MNOs, so mobile network operators, simply said, it's about the weight. The more weight or the more wind load you are putting on our infrastructure, the more you need to pay.
If you think, let's say, for instance, on a weather sensor, that is very small, and given the case that it's smaller than a radio antenna, of course, you need to pay even less, which is the reason why we are focusing, let's say, on the radio equipment. Looking a little bit into the future, what is our target growth-wise? Full year 2025, the revenues came in at EUR 280 million, and we see a CAGR from 4%-5% over the midterm. We have here, let's say, two very important pillars. One is the anchor tenant, and the second pillar is the third-party tenants. For the anchor tenant, as we already heard, but let's repeat it quickly, we have the yearly indexation, new sites, and of course, let's say, sometimes additional modifications we may execute for them on existing locations.
Again, here, the third-party tenants, if we, let's say, we build a new tower for the anchor tenant, we also try to even get immediately a third-party tenant, and if that's not the case, then we are in close contact with every MNOs within our footprint, to onboard third-party tenants on the existing locations. Coming very quickly to the financials, not going too much into the detail. I think what is very interesting here is to focus maybe on the second part, which is CapEx. What you can see here, we had roughly EUR 53 million CapEx last year. So our target here is to spend around 20% of the CapEx, what we are reinvesting in our infrastructure. We have here, let's say, three very important pillars. One thing is we covered already, that's the mandatory upgrades for having the 5G standard configuration for A1.
The second part is that we are building new sites, what is of course, very important from our perspective, because with that, we can generate new revenues. The third part is what you could imagine, maintenance, what we must do that the useful life of the towers will stay very high. What's also very important here to get a snapshot is the leverage. Maybe if you followed a little bit the spin-off in 2023, we got, let's say, roughly more than 13,000 sites. For the 13,000 sites, we had to pay EUR 1 billion of debt. Given that, we started with a very high leverage, and that's the reason why we are using, at the moment, the net income to clearly reduce the debt. If you compare the 2024 with 2025 figures, you can see we are on a good way to reduce our debt.
Let me see. I think we covered this, so let's jump on. I think we can skip that. Here we have, let's say the figure's a little bit more precise, what I told you earlier in terms of the CapEx. Again, here, CapEx to revenue ratio should be around 20% because that's our assumption what is a good value to invest at the moment for keeping the infrastructure alive and also to extend our infrastructure. At the moment, you can see that the mandatory upgrades have a very high proportion of the CapEx because that is needed under the master service agreement. What's also very good to see in 2025, the red block, rollout, increased significantly in comparison to 2024.
That, I must say, is a very good sign because with the rollout of new sites, as I mentioned earlier, we can generate new revenue. Good. Looking a little bit on the watch. Maybe let's take a look briefly on the share price. At the moment, the share price is roughly 460-470. We are at the market cap, let's say EUR 750 million-EUR 800 million. If you do the math, you come to a multiple of roughly 10x EBITDA for EuroTeleSites. I think what's very important here to see is if you look to other peers, you see that they have a multiple between 15x-16x. If you look to some recent selling businesses, that could be even higher.
Given that, of course, you must do your own calculation, but I think it's fair to say that there is some room for improvement when it comes to the share price of EuroTeleSites. Maybe as a final point, two things what is important. I mentioned that we have EUR 1 billion of debt, and we see here three instruments of financing debt. We have a EUR 500 million five year bond, which is fixed with 5.25%, which is running until July 2028. Then we have two private placements. The one is maturing Q4 2026, which is fixed roughly at 3%, and then we have one more private placement, which is variable, and that is due in July 2028. Given the high debt, and I indicated it already earlier, at the moment, we are using all the net income, what we have, for reducing our debt. Given that, it's not possible at the moment for distributing a dividend. Since our target is to reach, let's say, roughly 5x, I think we are getting closer to think about a new capital allocation policy. I think, let me look. Given the time, I will stop here and hand back to Mr. Naass.
Thank you so much, Moritz. Thanks for the insights. We do have a few questions, some of which you already answered or at least partially answered. If there's some redundancy, please be gentle with me. Nevertheless, let's start out before we talk too much, talking about the deleveraging, and you've said that you want to get into 5x leverage. What's the medium-term deleveraging ambition, and what would have to happen for capital allocation to broaden? Once again, that was the last slide but maybe you want to add to that a little bit.
Maybe let's repeat it. At the moment, if we look to the last year, we had a net income of EUR 33 million in 2025. It's the clear ambition to use all the free cash flow to reduce the debt, because at the moment, we have very high interest costs. As you saw earlier, we are paying roughly 5% for the bond. The best investment is for reducing the debt. Once we reached the 5x, then we will start thinking about the new capital allocation policy. Also for those of you who have access maybe to the Erste Group research, you can see that the analyst is already considering that we are distributing dividends. From our perspective, it's a little bit too early to be more precise here.
Okay. Do you have a feel for when you're going to reach the 5x , or is that too inquisitive?
Well, as I mentioned, I think a couple of times, the business is quite visible, and also the revenue development, also cash flow, it's very predictable. I think it's quite obvious that we will reach the roughly 5x this year.
Great. We've talked about the positioning within your countries. One is going a little bit broader. How is your company positioned in the European tower company environment? What are the decisive differentiating factors compared to Vantage Towers, for example? I guess it's probably the access to Telekom Austria, which is something that you are tied in. Is that unique? Are you the only one who is working with them, or are they free enterprise, and they can give it going forward to whomever they want to, Telekom Austria, that is?
Yeah, very good question. Given the contract, let's say they are free to go with everyone because that's the same for us, because we can lease out our infrastructure also to Deutsche Telekom and to Hutchison if we stay in Austria, and that's the same for Telekom Austria Group. Of course, we have a very good working together, and that's the reason why we try to build every new tower for them. We also expect in the first place, they are getting in touch with us for building a new site. If that's not possible, they are free to speak with everyone. If we, let's say, if we focus on the peers, we always look to INWIT and also to Cellnex within the European landscape. Why? Because in our perspective, they are independent because they are listed at the stock exchange. It's, let's say, a little bit difficult to compare each other because everyone has a little bit of different operational footprint.
Great. You had this one slide which was illustrating growth and where it was coming from, meaning the third-party tenants, and then, of course, your, let's call them legacy, the anchor tenants, as you call them. Where do you see the most attractive growth markets for the third-party tenants, not the anchor tenants, regionally speaking or company-wise speaking? I think you said telco operators would be probably the preferred ones, but can you be a little bit more granular in that?
Yeah, sure. I think what is a very good example, if we look, for instance, to the Serbian market, so they had the 5G frequency auction last year, and it's already live there. From that perspective, I think that's a very good country that we hopefully see their third-party tenants also increasing, maybe also seeing a little bit a stronger increase. Broadly speaking, I think the CEE countries show a very good opportunity for increasing the third-party tenants. I think Austria is maybe not that big focus in terms of third-party tenants. Why is that the case? Because we already have three very good mobile networks in Austria.
Understood. Which non-traditional customer verticals do you think look most promising for you after the Point One Navigation partnership that you concluded?
Hard. It's a difficult question. Let's say we try to think about everything. We also saw some billboard advertisements, for instance, or if we look to the North Macedonian market, there is 4G. Maybe most likely there will be a new MNO market entrant. That's of course, let's say if we win the case that the one is working with us, that would be the best thing. Because, as I mentioned, the more equipment you are putting on the infrastructure, the better it is. At the moment the clear focus is, let's say, MNO business. Of course, looking a little bit in the future, you also must think about new business as well.
Great. The last question that I have is a little more specific. That's why I'm going to read it. How do you assess software-defined and virtualized networks? And is Open RAN an opportunity for higher site utilization or long-term risk to demand for greenfield infrastructure?
Well, let's say that is, of course, somehow a risk if we also think about active network sharing, because at the moment, we are speaking only about passive sharing. Active sharing would mean that two operators are sharing one antenna. That could have the consequence that they need fewer towers. At the moment, we do not see that, or if we see it's very heavily regulated. Open RAN, for instance, as we see it in Germany, if there is someone building a new network in terms of Open RAN, then that would be also favorable for EuroTeleSites because then hopefully we can provide them with some of our towers or even build new towers, and that would be a great opportunity for us, increasing the revenue.
Great. Super. Thank you. I don't see any additional question. As they say, let's quit while we're ahead. Unfortunately, this doesn't only hold true for your presentation, it also holds true for our event, the Austrian Select, which is coming to an end. Moritz, thanks so much for the insights that you've shared with us. Thanks to you all who participated in the event and came up with great questions and probably gained some insight on 11 very interesting companies in the Austrian market. As I said, we have recorded all those presentations, and you will find the individual presentations plus the presentation decks on Research Hub. Most of them are already uploaded, and EuroTeleSites will be added shortly.
We also send out quick questionnaires to you all, and we'd be very happy if you took just a few moments to fill it out so that we can mirror it back to the companies because they're very interested to see what the market is thinking about them. Thank you so much, everybody. Thanks again, Moritz. Have a great afternoon, and thanks for attending the Austrian Select Conference. Goodbye.