Cellnex Telecom, S.A.

Good afternoon, everyone. My name is Juan Gaitan, Director of Investor Relations at Cellnex and I would like to thank you all for joining us today for our Q3, 2020, results conference call.

As always, I'm joined by our CEO, Tobias Martinez; our CFO, José Manuel Aisa and our Business Deputy CEO Alex Mestre, who will lead today's session. Throughout our prepared remarks, we will refer to our results presentation and then we will open the line for your questions.

As you might have seen today, Cellnex confirms that it is in advanced conversations with Hutchison to explore scenarios of a strategic collaboration between both companies, including the potential acquisition of certain infrastructure. Unfortunately, we are not in a position to provide additional information and the potential terms, as no agreement has been reached so far.

And we will make a further announcement as and when appropriate. And without further ado, I will now hand over to Tobias Martinez.

Please, Tobias.

Well, thank you very much Juan and good afternoon, everyone, and thank you so much for your time today. I would like to start sharing with you the main highlights of the period, which has been marked by strong results in the quarter, our successful capital increase and the initial delivery of our deal pipeline.

As you can see, we are continually delivering on organic growth, posting again a very solid quarter. I would like to highlight the resilience of our business model and our ability to generate organic growth and make progress on our build-to-suit programs under challenging circumstances.

A strong financial performance, with revenues increasing 53%, compared to the last year and our adjusted EBITDA reaching up to 68% and our record leverage fee cash flow up to 70%. Integration is critical for our growth strategy.

That's why we have the right people, the processes and the expertise to ensure smooth integrations and to keep pace with our growth speed. We are confirming our momentum, ability to execute by announcing our first deal after our recent capital increase.

And we expect to provide more visibility on the new projects very soon. Thanks to the intense work we have done from a capital structure perspective, we have today plenty of financial flexibility.

And finally, we are reiterating our guidance, which, as you know, includes the contribution from both Arqiva Towers and NOS in Portugal. Moving to next slide.

Let me please recall the main highlights of our recent transaction in Poland. This agreement represents one more step in the context of our long-term strategy alliance with Iliad.

We are acquiring a 60% stake in Play’s national network of circa 7,000 sites and we will be deploying up to 5,000 new sites over the next 10 years. We are also expecting an associated adjusted EBITDA contribution of around €220 million on a run rate basis.

We believe that the monetization of telecom assets can be an interesting angle for MNOs in the context of their own M&A activity. And we see attractive underlying trends in the Polish market.

First of all, a strong economy, tangible densification needs and the potential for subsequent steps in the country. If we move to slide number four, just a quick update on how our growth strategy translates into geographical presence and financial metrics.

When all of our deals are closed and our build-to-suit programs complete, Cellnex will further strength its position in Europe as the main independent telecom infrastructure operator, managing a portfolio of around 73,000 sites, boosting our financials and significantly improving our business profile. Our portfolio of sites will be around 10 times bigger than the -- at the moment of our IPO.

Around 90% of our revenues will be generated by telecom services. And the vast majority of our EBITDA will be generated outside of Spain.

And with this, I will now hand over to our CFO, José Manuel Aisa, who will provide more details of the period.

Thank you, Tobias. If we move to slide seven, we are showing here our operational performance in the quarter.

As mentioned, we have consistently generated organic growth across all of our geographies. Total PoPs have increased around 70%, including the contribution from organic growth and also our recent acquisitions.

If we focus on organic growth only, PoPs have increased around 5% compared to last year, as a result of the continued densification process we are seeing across Europe. And finally, DAS NOS grew at around 20% organically.

And we continue to make progress on our efforts to provide a wider array of services to our clients, and to build a stronger 5G capabilities. On slide 8, you can see the commercial opportunities we are assessing in order to secure future organic growth.

In summary, Iliad continues to generate organic growth in Italy and France, and we believe there is a scope to further expand the successful industrial partnership, as we have just shown in Poland. We are seeing demand for our services, not only in established markets, but also in more recent markets.

Current build-to-suit programs progressed as expected in all our markets, and we are constantly assessing the potential for further diversification solutions for our clients. We continue to execute in the area of indoor coverage and high capacity mobile solutions as a neutral host across Europe, with attractive opportunities being assessed for football stadiums, transport networks and shopping centers.

We're also expanding our 5G capabilities beyond our core business by analyzing opportunities in tower adjacent areas such as fiber-to-the-tower, outdoor small cells, mobile edge computing and private networks. Always with towers at the core of our strategy and only proceeding as a natural extension of our relationship with anchor tenants and with the same expected tower economics.

Moving to slide 9. You can see here the building blocks of our recurring leveraged free cash flow in the period.

The positive impact on our organic growth is significantly reinforced by the contribution from our recent deals. This is partly offset by cash elements below our adjusted EBITDA being the payment of leases linked to new portfolios, the main contributor.

Taking all these effects together, Cellnex has generated a strong recurring levered free cash flow growth of 70% year-on-year. Moving to slide number 10.

Our revenues have increased 53%, our adjusted EBITDA, 68% and our recurring levered free cash flow, 70%, with our adjusted EBITDA margin significantly increasing to 74% from 68%, boosted by operating leverage of our business and our change of perimeter, which has been very effective in terms of EBITDA margin. 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, including build to suit and recent acquisitions, and also by efficient management of our OpEx base.

Moving to slide 11. You can see in the balance sheet, the movements compared to December 2019.

These movements are mainly explained by our M&A activity in the quarter. Increase in total assets as a result of our deals and the corresponding decrease in cash, more than offset by our recent capital increase and debt issuance.

Compared to December, our net debt mostly reflects our capital structure activity during the year. We have today a strong liquidity position that allow us to face our committed investments and also continue pursuing the opportunities in our busy pipeline.

And following up on this, you can see on 11, 12, the details of our capital structure and our available liquidity position as of September. Our debt has an average maturity of around six years, a cost around 1.5% and no refinancing is required before July 2022.

Today, we have a strong position of available liquidity at around €8 billion, fully available and committed with no hedge, no pledge, no guarantee, no covenant. We will also reach a backlog of €53 billion, when we close all our transactions.

And our debt has no covenants. This combination, allow us to maintain our financial flexibility in this challenging environment, and provide us with a wide array of options in order to continue financing our growth.

And with this, we remain now at your disposal to answer your questions. So let's please open the line.

The BTS models, if I look at that from memory, it looks like the one on the left with the higher upfront consideration is the model that you use with…

Sorry, very sorry, Simon this is Juan. The line was cut for some seconds.

So if you would please repeat from…

Can you hear me now?

Yes, yes. Now, yes.

Okay, great. Yeah, I was just looking at slide 5 and the BTS models.

I think from memory on the left-hand side where you have a higher upfront consideration, is what you used with wind train Italy, whereas, on the right-hand side with a lower upfront consideration, is what you used with say Bouygues or Iliad in France? Now clearly the one on the left implies like a higher EV/EBITDA multiple if you're using initial numbers.

But I'm just wondering, obviously, that should -- either one should have the same returns or the same IRRs, but are there any pros and cons from your side on either model? And is that the right thinking?

Simon, hello, how are you? This is José Manuel.

Listen both of them as we are clearly explaining in this slide have the same returns, have very similar impacts on our cash flow -- record free cash flow, sorry. So they are from a pure financial perspective, the extremes of our business model, let's call it M&A model, or the needs of our clients.

What we wanted to illustrate here it's something, which is a little bit different maybe but go hidden with your question, which is the following. For us it doesn't matter being on the left or being on the right.

For us what it does matter is that the run rate EBITDA in the long-term is the same. Look Cellnex is focused on contractualizing the EBITDA growth in the future.

And this is what we are really -- what is really interesting for us in terms of value generation. How you contractualize this EBITDA, it is more upfront and less build to suit or less further initiatives or it is less upfront and more build to suit and further initiatives is exactly the same.

This is just a way to show that we do contracts from scratch, from zero, in which Cellnex tried to meet the requirements of our clients, first of all from an industrial perspective but also from a financial perspective. We tried to reach win-win agreements in every single scenario.

And this is the value-added of Cellnex to be able to combine strong industrial capabilities, but also let's say a very clear from the scratch financial profile.

That’s very clear. Thanks so much guys.

Yeah, hi, good afternoon. Thanks for taking the questions.

I've got two please. One is just a general update on M&A in the context of the announcement today.

I guess when you announced the €4 billion rights issue, you outlined an €11 billion probability if you weighted M&A pipeline. I just wondered if you could help us understand how much of that €11 billion was accounted for by the two deals you've effectively announced, I guess the Hutch one and the Play deal, because obviously cumulatively they're €12 billion.

And if you would give us some sense as to how we think about the pipeline of other deals you're still looking at now and how significant those are? So any, sort of, color there would be very useful.

And then the second question is that listening to the Hutchison call this morning, they seem to be implying that the €10 billion ticket would be largely upfront. I don't know if you can comment or not.

But irrespective of that, it looks like that transaction would take your leverage to around six times pro forma and would largely consume the capital that you had for the pipeline you were looking at. So I just wondered if you could talk us through how you think about future financing of deals.

Do you see the need and the desire to come back to the market soon, or are other ways you're thinking about deal funding? Thanks a lot.

Hello, Andrew, happy also to take the question. Akhil, sorry.

Hello, Akhil. Listen Akhil you know very well the company for a long time.

And you know also that the prospectus that we write down in the month of July presented to you Akhil very clear pipeline of up to €11 billion. So this is a public info we can share.

You know, that also we have invested in Poland and it is clear that our investment in Poland is around with the build-to-suit program €2.3 billion, €2.5 billion -- up to €2.3 billion, €2.5 billion. And obviously this is consuming already from our pipeline.

Also in the prospectus, we clearly have stated that the company was facing at several transformational deals. We define those transformational deals clearly in the prospectus.

We highlighted that these deals were more than 15,000 sites. We highlighted that what they did have an impact on Cellnex.

So when we at that time said to you, that our guideline was imminent, it was true. So apart from that, we cannot -- as we have been very clear in the relevant fact today, we cannot go beyond.

But what I can tell you is that Cellnex is not going to change the methodology. We raised the equity and we do have the pipeline and when we have consumed our fire power and it's as simple as that.

You were suggesting some net debt to EBITDA, that's fine. But for me and for us, I think the trigger is the pipeline that we can present to you accretive opportunities.

And finally in your question, was you were suggesting about the two models of Cellnex has in order to face M&A deals more upfront or more deferred consideration doesn't matter. At the end of the day as clearly explained in the prospectus are within the €11 billion.

For us, what is very important is the backlog, the visibility of the revenues. And you can see that as Cellnex has been able to grow, we have diversified our clients, we have improved our business risk profile and therefore, we have been able to obtain for the same credit quality from the same corporate rating more capacity to go and do that.

This is a methodology we have always used. This is a methodology we explained to you when we raised our €4 billion capital increase and this is what we are presenting to you every single quarter.

Great. Thank you so much.

Good afternoon, everyone. I had three questions I think.

One is a follow-up to Akhil's. And as you said you've kind of demonstrated that you'll raise cash when there's pipeline to do it.

You've told us also quite frequently, there's a number of negotiations or things you're working on. And in the past, you've sometimes raised equity in advance and sometimes raised equity alongside a deal.

So just wondered if you could give us any insights into next time whether you'd wait for a deal, or you'd look to raise equity ahead of that? Second question, a lot of questions you've got.

When you raise the equity over the summer was -- how much competition do you see when you're looking for these deals. So I wondered if you could just comment on the degree of competition you've faced when you're negotiating the play deal and when negotiating the Hutch deal?

And then if it's okay, I was just going to ask a quick third question. There is a €300 million EBITDA number out there for historical number for Hutch towers.

I think there are problems with that number in terms of apples-to-apples comparison with previous deals and in terms of what you're actually going to be getting with your deal but I wonder, if there's any comments you can make either for us to just ignore that number, or any color around what exactly do you think the EBITDA you'll be getting with the deal? Thank you.

Thank you, Andrew. We will start maybe with your second question on competition.

Maybe Tobias you can take that one.

Yes. Hi, Andrew.

Well in terms of competition I think, it's worth to underline that if you look at play or Hutch, this is I think the consolidation or the crystallization if I may say of a long-term relationship with our customers. So I think this is a strong proof of the partnership agreement we have with our customers.

If you look at the very beginning of Cellnex story, Hutch was our first international customer in Italy. So we had since the very beginning a very good relationship, very trustable partnership agreement means that we know each other very well.

So we are leveraging on this relationship. And this is the same with Iliad.

Iliad is one of our also best customers as well with a huge portfolio, we are running a huge portfolio of assets. So we are partners also as well of Iliad.

This is not just about a supplier. I mean, I think this is the common for me, element that this is differentiation in terms of competition.

I mean at the end of the day, it's not a public tender. It's not a public competition process.

It's a question of customer loyalty, it's a partnership agreement and we are building our relationship and our -- we are developing our footprint in Europe and our industrial partnership with our customers. This is the most important thing that we are not just competing for multiples we are not just competing for rest assure, we are not just competing for selling leaseback transactions.

This is about customer relationship. This is about partnership agreement.

And I think both play and Hutch are well a very good, I think proof of this strategy and relationship of Cellnex.

Thank you Tobias. Coming back to first question and third question on the sequence related to top capital increase.

Well here again this has not changed both questions as the methodology answer. Cellnex as you are saying is, able to do capital increase with harmony attached or a capital decrease with a pipeline attached.

At the end of the day in both circumstances we do it because we do know that the M&A has already happened or is going to happen in the short term. So only in the moment we have high visibility.

And for us this is a concept to have high visibility because you have already -- you are about to sign or you will sign in the next few months. This M&A and allow me to spend to you takes time.

We have a pipeline that is built up with a lot of time. We're building up the relationship, building out industrial credentials.

It's not something that appears for one day and disappears the other. And therefore, we tend to have very good opportunities and exclusive opportunities and global opportunities.

Yes. And maybe the environment José Manuel, if I may when we were assessing our pipeline in July, June we were seeing or projecting unfortunately a second wave of COVID.

But also U.S. elections, so let me say a lot of turmoil around the world.

It was our understanding in June, July and then we decided to proceed because at the end of the day the pipeline was there the opportunities the customer relationship was there. So maybe you never know when you will be in a situation to crystallize, to execute the pipeline.

Well so maybe the success rate execution on M&A is quite high. So I think Cellnex is also demonstrating that when we are focusing in one opportunity well at least we are doing all the best.

And maybe this is the reason why we anticipate this capital increase not just looking at the pipeline. This is my additional comment Andrew.

It's about also context. So context matters in, the currencies contact.

It's true. And also your last question was about some figures of some projects that we cannot comment.

But what I can tell you is that, Cellnex builds up all the deals from scratch from 0. So we -- I'm afraid that every single deal that we have presented to you for instance the last one, well this contract was -- didn't exist.

The carve-out in fact is somehow -- is doing or will be done in the next few months. So this does not exist.

We have to agree with the counterparty and we have to understand the needs of the counterparty. And as a consequence there is an EBITDA.

So this is how we work. We do not have a crystal ball.

That is really helpful. Thanks very much.

Great. Thanks for the questions.

Two for me and one quick follow-up. When you announced the deals, can I just get the element of ground lease renegotiation that goes into the kind of upfront calculation of the multiple?

Because I know as part of your ongoing cost efficiencies, you're constantly negotiating with the land owners. But in the kind of upfront year one and full run rate type multiple, it's possible to get a sense of how much of that efficiency is baked in if any upfront please?

Secondly, if I think back to your CMD back in 2017 you had this quite a deeper map Tier 1, Tier 2 I think you even went to Tier 3 geographies. We've now started to move on to -- from the Tier 2 geographies.

Is it possible to get an update? Have any new geographies moves on?

Have we moved a bit further east in the map across Europe? And quickly just a follow-up on the previous question regarding build to suits.

Did you say José Manuel that, you would not be interested in stand-alone build-to-suit projects if they were offered? It will have to be in conjunction with some upfront towers?

Thank you.

I will maybe start with your first question. I mean during the valuation process, we treat leases as any other cash element.

So, as the revenues that we will be generating from the anchor tenant for tenant incremental fees to be generated from third parties, as we increased the neutrality over time, in some cases there is a staff base and an existing platform. And of course, there is an important cash element, which are the ground leases to a loss.

Our expectations on how this initial payment will evolve, that has an impact on the price that we can offer to our seller. But again, I mean we don't really apply different methodology associated with several leases, because we treat that as any other cash item in the valuation process.

The second -- yeah, Tobias?

Well, I will take second and third. Geographies, geographies remain the same priority.

I mean no changes at all. So, Poland has been and is, for us, maybe the most attractive one in the east of Europe.

This is the reason why we were assessing since maybe 2.5 years this country in order to understand the economics of the macroeconomics, the evolution of the country itself. But also to understand the fourth operators in the country, which is very important to understand the market positioning, the structure of the assets, the market share of everyone.

So, no -- again not just a one single step forward. So understanding and to be really is the opportunity -- the right opportunity for Cellnex then suddenly appears.

And it was the case and it has been the case. We are not changing our priorities, but maybe it's worth to say that, Poland is our first choice in East of Europe.

A third about build-to-suit standalone, let me explain you that build-to-suit a standalone in the vast majority of the opportunities is not there. It's not there.

So we are not pursuing, generally speaking, build-to-suit projects in a standalone. And the other way around, if you look at our build-to-suit portfolio of projects are attached maybe 95%, 98% to the M&A transactions.

But, if one of the existing anchor tenants want to -- they want to launch an additional build-to-suit program on top of the existing then is when we are assessing a build-to-suit on a standalone basis. That is when one of our anchor tenants is tending to launch an additional or a complementary build-to-suit program.

But we are not proactively looking at or pursuing opportunities based on build-to-suit programs.

That's very helpful. If I just quickly follow-up on that.

Where are we on the potential integration of the two build-to-suit projects in France, please?

Well, generally speaking, I have to say that we are performing very well this 2020, even though in the middle of the crisis. Maybe the last, last minute, it's about of the topic is in the hands of Franco.

But I can tell you that in my dashboard, I do not have any red signal on flag on this indicator.

Just to provide you some more accurate figures. Only in the three months of Q3, we have deployed close to 100 new sites for Bouygues and around 80 new sites for Iliad.

So in the context of, I would say, quite a challenging environment we have been quite successful deploying our commitments.

Absolutely, absolutely. It's performing very well.

Let's see what happened in the future, if the evolution becomes worse and worse. But up-to-date, we are very, very happy.

That does continue. Thanks very much.

Thank you. First question was on Portugal.

We've finally seen the Vodafone and NOS sharing agreement, which has been a long time coming. And indeed, while they were negotiating it, you managed to buy two-third of the towers in the market.

I'm assuming the answer to the question is that your revenue is contractualized, so there's no risk, but that sharing agreement is going to have some site rationalization and some RAN sharing. So it'd be useful to know what revenue impact the Vodafone-NOS agreement has on you?

And second question is on Italy. It follows a similar question, as I asked I think on the last call around the U.K., in a hypothetical situation where you are buying more towers in Italy.

Given some of the lead indicators, we had around the INWIT, Vodafone antitrust review what are you expecting could be an issue or no issue at all in Italy in the event you buy some more towers there? And then my third question was on France.

American Tower has been buying a decent number of towers off the radar from Orange. I wanted to know if you offered those towers?

Thank you.

Thank you so much, Giles. Maybe the first one on the RAN sharing in Portugal.

Yeah, Alex, if you want to comment?

Yes, absolutely. Thank you, Giles.

As you well mentioned that deal on RAN sharing between Vodafone and NOS was already in the market for quite a long time. So, we were in a position to take that into consideration, and it was fully factorized.

As we have mentioned, in other occasions we like our clients sharing infrastructure, where there is active passive, because this is very much in line of what our multi is so mutualizing infrastructure. So that's a good sign on the operators willing to cooperate among themselves, and having a third-party always helps it.

And this is more or less what is our job about. So as you can imagine on the way we have factorized this potential RAN sharing agreement at the moment, we sign with NOS installation of securing that in the event that RAN sharing would potentially happen in the future, we would be getting a portion of those revenues in the typical classes that RAN sharing are customary in Europe.

On the other way around, that also was triggering the number of sites that we would be potentially acquiring. And everything was fully factorized, because in the event of RAN sharing, this is an optimization that is done by the operators prior to selling the tower.

So, we took both elements into consideration, so we think is very good news that finally NOS and Vodafone read that agreement in Portugal.

Second question was around –

And Alex, just on Portugal – sorry, just on Portugal the 5G clients of NOS and Vodafone on 5G aren't finalized yet and there's no official RAN sharing there. Is there an opportunity – is there an incremental revenue opportunity there in the event that each party built its own RAN, it's probably unlikely but just have you had the 5G conversation?

Well, with the anchors normally, the way we define the usage of the asset, it is in a reserve capacity area. So, normally, we are not charging our clients – anchor clients based – unless, they go beyond certain limits based on the number of antennas, number of frequencies or anything like that.

There is a part of the site that is devoted to their interest and this is how normally we deal with the anchor clients. There is an element of antenna integration on the 5G world.

So when 5G started at 3.5 gigahertz, those and this is still the main way of deploying 3.5 is separated antennas. But we are starting to see that vendors are embedding 3.5 down to 700 into the single antenna.

So then this is not actually much bigger than the space being occupied by two sets of antennas or three sets of antenna, which is actually less. So for the anchors, we would not foreseeing an increment because additional 5G being deployed at least as of now.

So the question on Italy, and the antitrust environment in the event of increasing our market share in Italy. Well, I guess that we've seen a quite clear example of the open commission allowing the creation of the largest tower in Italy.

So, I mean, without anticipating any outcome I guess that the whole environment is quite favorable. So, any other potential player in Italy increasing its market share.

So I guess that, we like what we see. Third question is American Tower and Orange.

Well, maybe limited level of details that we can provide. We look at many opportunities across Europe.

And when we are successful it's either because some contracts offer maybe they met our standards, or of course, we remain – we need to remain at the same player. So also in the occasions, where we cannot use our M&A criteria, we cannot be successful according those assets.

Tobias mentioned before build to suit stand-alone projects are a bit more difficult, if we talk about the French deal between Orange and American Tower was purely stand-alone and we deem not convenient for us that project.

Thank you.

Hey, good afternoon, guys. Two questions and one very short follow-up.

Just on France PoP growth looked pretty good this quarter and maybe it's probably your best organic growth opportunity at the moment. I wonder, if you could just remind us, what you are targeting in terms of tenancy ratio in the French business in the medium-term, or what do you think is achievable?

And then secondly, on minority. It's obviously in Poland and France you have these minority stakes that the MNO still owns.

Can you just remind us on the structure for the buyouts? Do you hold call options or they put options for a third-party?

And how is the fair value determined on those deals? And the last clarification was just, I think, you mentioned in the IPO at the white is prospectus that you were looking at several i.e.

more than one transformational deal. So I just wanted to confirm that -- within your pipeline there were more than one deal with more than 15,000 pipes.

Thanks very much.

Thank you so much, Sam. Maybe we can start the first on organic growth in France.

Sure. So, yes, actually we are well-positioned in France having two anchors, two platforms and two growing platforms, which is quite important because we may have some, sort of, levers in order to help our clients to mutualize meanwhile they deploy and generate efficiencies around that.

The reality is that the French market is very, very active. There is a lot of pressure and there is a great effort on our partners on deploying 5G rapidly besides, let's say, vendors swaps and so on, and it's very vivid in that respect when deploying 5G.

The possibility we have is out there. Those are -- especially the last transaction is still recent and we are on the first phases of deploying the build to suits with Iliad, you know.

So that's the type of projects we like because there is a high level of industrial component, high level of technical communications with our clients and we believe we can play a role on trying to match the interest of our clients there and generate efficiencies that could be rebounding and creating value for all of us.

José Manuel you want to comment on minority stakes.

Yes. No, your question was about minority stakes with partners in these cases, MNOs.

You know that we have always had MNOs as partners in different subsidiaries. I recall the first one being a win in our initial -- in our towers of Italy, you know.

At that time, we did have 10% stake in Galata Towers. And also as we speak now Salt has 10% -- in Switzerland, Salt Towers and Iliad has 30% in France, 40% in Poland.

But this is because them -- MNOs who are initially the servers, but also and most importantly, our clients want to stay for an initial period of time on the Board of Directors understanding how we work. And it's as natural as that.

Obviously, there must be an exit because this is a win-win. Everything that we do with telco is from scratch and therefore, we try to couple, we try to match, we try to meet their requirements from an industrial perspective, but also financial perspective.

So for us is good then maybe we only acquire 50% upfront and we can pay 40% a little bit later. So it depends on the needs on the needs of both parties.

The exit has to be regarding fair market value. I mean, obviously, we are not going to pay less that fair market value at that moment.

You have a good example with Deutsche Telekom Capital Partners in Cellnex, Switzerland. This is public info.

It's exactly the same methodology or very similar. Maybe it's not copy-paste, but it's very similar.

In the long-term and this is something that Cellnex has clearly stated in the prospectus, we would like to buy out all our minority partners. They are not long-term investors.

They are long-term clients. So they want to stay there as a client not as a co-shareholder.

And eventually, we will buy out all of them because this is a natural structure. Also there was a third question?

If you can compare that -- if we are assessing more than transformational deal.

Well this – yes, you were asking about the €11 million pipeline, we were very clear that was a weighted probability, you know. And then in a weighted probability, the answer to your question is yes, some of them with higher probability others with less probability.

We were very clear at the moment of the road show of our last capital increase that we did think that wellness with this equity money had to devote a part to do a transformational deals with – well, maybe in our current geographies, but other geographies. Also maybe with current clients in new countries, with current clients in current countries, we explain all this, you know.

So yes, yes, yes there might be several of them yes.

Fantastic. Thank you, guys.

Hi, good afternoon. Thanks for taking the questions.

I've got three fairly quick questions. Firstly, on the potential Hutch deal, I don't know if you can comment on this but some of the assets are shared or not fully owned.

I don't know if you can comment whether buying in some of those other shareholders, the stakes in some of these assets is part of the current pipeline or deal that's potentially on the table? And secondly, could you maybe comment a little bit on what your thinking is around the potential for more competition for assets from tower companies that are controlled by operators.

Is that something that you see becoming sort of more of a source of competition for assets? And then just thirdly, if you could maybe give a little bit more color around what was behind the BTS step-up that we saw in the quarter.

I think you mentioned €180 million BTS in France, which I think is about twice what you did last quarter. So just to help us understand why there was such a big acceleration.

Thank you.

Thank you, Jakob. Maybe starting with the third one, just to clarify it was 180 sites in France, so around 100 Bouygues Telecom; 80 sites Iliad.

There was also one metropolitan center that we deployed it also in the context of Towerco [ph] and also for Bouygues Telecom. Well basically it's – I mean it is also difficult to project a quite stable quarterly performance.

So in some cases you will see for us this is just three months. So some quarters maybe you see a slow progress.

Maybe another quarter an acceleration. But what is important for us is just to maybe to meet our annual targets with mobile operators other producing on the quarterly performance.

But there is in Q3 we have seen an acceleration of our build-to-suit deployment. On the first question, first of all the answer will be quite short.

At this stage we cannot really comment. Hopefully, we will be in a position to provide more detail on.

Second question competition for assets coming from MNO No captive power costs. We would assign a lot of probability to be honest with that.

I guess that this type of initiatives have pursued different target for mobile operators will into monetize these assets. Typically, what we are seeing is that they are not in a position to give up the control.

So they are just willing to monetize a portion. And if that is the case, the resulting entity is still controlled by that mobile operator.

So in terms of high dependency, I was about to say limited actually no mutuality. And also that new entity is still controlled by the mobile operator.

So I guess that's mainly that that's our call.

Yes. No.

If you talk about M&A – the competition, the level of competition with proprietary tower cost is zero. Doesn't exist being very transparent with you.

If the competition level is about the organic growth, this is a different story country by country but it's very low.

So one thing I remind Jakob that, if they wanted firstly to compete against us you know that we are – we engage in active discussions with mobile operators. So that means our mobile operator actually we'll be trying to acquire assets from a competitor.

So I don't know.

It's very unlikely that the seller will be in a position to sell down 100% of the assets to one competitor. So this is the reason why we do believe that we are insisting.

We are again talking about the strength of our industrial business proposition. This is the reason why I think we have succeeded.

Thank you. That’s very helpful.

Yes, and good afternoon and thank you for taking the questions. I have a couple of questions, please.

And the first question is if you do end up buying the towers of CK Hutch, can you maybe talk a little bit about the scope of selling additional services to CK Hutch? So I'm thinking about maybe space be it on the Arqiva sites, the signal towers, et cetera or maybe fiber-to-the-antenna or edge computing services to them in the future?

And then second question, big picture question, one of the expected uses for the European Recovery Fund is digital and to close the digital device, which became a pretty big theme during the COVID crisis. I'm wondering what your thoughts are on this?

And if you're hearing any early news about any wireless projects that might be funded by the fund coming from the European Commission? Thank you.

Thank you. Alex if you want to…

Sure. Yes.

So in relation to the specific opportunity you mentioned, nothing can be disclosed, neither comment as you can imagine. But of course, yes.

So, the spirit on our site is trying to sell additional services always on what we call adjacent type of asset services like densification and that could be small cells and DAS systems or fiber-to-the-tower and so on. There is also a private networks element that we are starting to consider as one of those collateral services that we are providing as you have seen some recently on the news as well.

So, we will of course be fully devoted with every client in order to deploy additional services. So, in relation to the second question yes this fund which is now being settled which is almost €800 billion all over Europe interestingly, there is a big portion of those funds being allocated in countries where we do have activity of that.

So, what we are actively working is having discussions with the public administrations in order to identify which type of projects, of course, related to our activity which could be providing connectivity in rural areas which could be a combination of the networks on the rural areas and the coverage on transportation lines. For instance, there is also projects in relation to hospital coverage for indoor coverage.

So, there is a set of activities that we are already having discussions with the public administrations in several countries in order to see which would be the best type of projects that we could be proposing.

Great. Thank you very much.

Hello. Hi, thank you.

Before you were mentioning the disclosure you made in your prospectus about potential transformational deal that could also include let's say new shares to be issued to an MNO. Could you share with us some color or thoughts about how would you balance this type of structure with your neutrality?

Thank you.

Well, thank you for the question. It's clearly stated in the prospect of the transformational deal which is define transformational deal which at the time with more than 15,000 towers may have the delivery of equity as a part of the proceeds.

So, when we talk about equity, you are -- we can be talking about the equity that we are sharing in Poland so at the level of the target and we can be talking maybe at the level of Cellnex Telecom SA. So, everything is open in the prospectus.

However, what is not open and what is very clearly stated is that neutrality is paramount importance for Cellnex. And this is a key element of us.

So, any shareholding or any MNO partner we may have at any level of the group must have fully availability or must represent or must give Cellnex the total flexibility to manage every single client in any market. And this means having the stakes that are no more, we were talking 10% 20% 30%.

And this is what we are presenting. However, let me tell you that that these stakes at the level of the country can be maximum these levels if we were to talk about the level of Cellnex Telecom SA will be significantly less, okay?

Significantly less. We can -- at the level of the target maybe the--

Sorry -- less than 10% or less than 30%?

Is less than -- at the level of the targets. So, this is more or less what we can -- where we -- financial.

Sorry. Let me follow-up quickly just to make sure I understand correctly.

So, if the stakes where to be -- let's say new shares were to be issued from Cellnex company, you -- is it sensible to assume that this stake wouldn't be bigger than a 10% stake or a 15% stake or definitely there will be no board recommendation?

The consulting pure financial investment. Pure financial investment.

So, you would ensure your neutrality not allowing any influence of your governance? So, it makes sense to assume there would be no further presentation for the MNO or things like that I guess?

What I can tell you is that our neutrality must be preserved. There are different elements to get this neutrality completely preserved.

What we represented in the prospectus is that we were open to give this stake as long as it's financial and as long as preserves our neutrality. I wouldn't like to go more into detail because what is keys must be financial, okay, apart from that--.

Clear. Clear.

Sorry, if I may squeeze in one more very quickly. Looking at your BTS plan so far I think consensus is kind of assuming a pretty linear execution or let's say until 2027 now 2030 with Poland.

Is it a fair assumption, or is there any specific projects you would see more back-end loaded or more front-end loaded, I'm thinking for example of win in Italy it seems like it could be more back-end loaded compared to linear assumption. Can you help us with some granularity on this front?

Thank you.

Thank you, Giovanni. I think that Alex will go with [Indiscernible] relationship with our clients.

With the formation, we have today and right after we reach an agreement with a mobile operator. I mean ORMAT in many cases we signed 5- 8- 10-year development programs.

So maybe we'll have limited visibility on the specific needs of the client in terms of densification. So for modern purposes what we have suggesting is that linearly that makes perfect sense.

Maybe a hint would be as you normally realize, we are announcing fixed committed and then an up to volume in terms of build to suit. So I think the fixed committed is something that the clients have certain visibility and those would be short-term linearized I think would not be a bad assumption.

And for the up to probably it's possible that the client is not having the same level of certainty. So could be a little bit backloaded potentially.

Yes.

Thank you very much.

Thank you, Giovanni.

Hi, guys. Good afternoon.

Thanks for taking my question. So I had 2.

Firstly, I want to come back on your M&A. I mean, looking at the Hutchison deal and also the recent acquisition in Poland, I think this will increase your footprint quite significantly.

I think you will also enter now into potentially its volume markets, if we assume the Hutchinson deal is going to be announced at some point. So I was just wondering is there a point at which you think you will maybe need to take a break from M&A and really focus your attention on the integration of all these assets in order to make sure not to compromise sort of your day-to-day operations?

So that's the first question. And then secondly, I had a question on Poland.

As far as I understand, you have the potential to build up to 5,000 sites there. How confident should we be that these sites they are going to be delivered given I understand there's no rebinding commitment on play?

And also in Portland, could you just clarify what the unlevered IRR on the play deal is? Thank you very much.

Well thank you for your questions. The first one, listen this is not an infrastructure fund.

This is not a private equity company. This is an industrial company.

And any time, we do have a client of -- we have a new client, a new need of a client, we meet -- we try to meet that need. If this means M&A will mean M&A, but we do not have a fund that we'll have to invest it and therefore once we have used it up then we do another one.

It will depend on how the market is evolving and it is clearly that Cellnex opened up a new market 5 years ago and this market is in its infancy in Europe. We think there are many, many things to do.

And one of the things that we can do is through the instrument call M&A. But this is one of the tools.

At the end of the day, this is an industrial company. So you know also there are 4G, 5G who knows tomorrow is 6G.

This will change again the landscape of the infrastructure telecom and Cellnex is doing connectivity as we say no. So M&A well I don't know.

What we want is to give a service to our client.

Maybe to complement in this first question. So it's not just about M&A.

It's also about other type of infrastructure required by 5G. I mean, the adjacent assets are part of the 5G topology and we are seeing that they are becoming more and more relevant in order to set up the 5G networks.

Obviously, it seems that 5G auctions in some countries are a little bit late, they will come a little bit late. But generally speaking, I think there are a lot of opportunities even beyond of the M&A, even beyond of the M&A.

About integration? Well, integration, it's a very good question.

I mean, it's not just about M&A if I may say. So integration is the reactor of this celebration of the M&A.

In one way you have to deliver, and the other way you have to integrate people, assets, customers. So I like always to say that we are acquiring companies.

We are not acquiring assets. So it means that we are integrating companies, means people are touch different cultures, different IT systems, different methodologies, maybe different also procedures, I mean, processes.

This is the reason why integrations, we pay a lot of attention. We deserve a lot of resources, because this is a very important topic.

Maybe a very large integration in one country like U.K., maybe deserves 2.5, three years from now in order to get full integration on the systems, on the IT, on the procedures. I mean, it's a lot of hard work behind or beyond of the M&A transaction.

We have a specific team to do it in-house, because obviously, we have partners that are helping us on the human resources, on processes, organization, IT systems. But this is led by the COO, which is taking care of the integrations, and means people again processes IT.

That's it. But this is maybe the hiding part of the company, but it's absolutely, absolutely key.

It's key in order to deliver reliability in the next 20, 25 years from now. And this is key in order to integrate people, to identify their talent and then to reduce as well all the best practice everywhere.

So we are finding a very, very good best practice in the very small companies or even niche companies like it is it to come when we buy this company in Finland. And at the end of the day, it's about talent.

It's about people, but this is about individuals. It's not just about in generic just people.

It's about individuals. But very good question.

And very quickly on your second question Florian, short answer. I mean, the volume we are targeting exaggeration returns as any other transaction.

So, at least 10% equity IRR that's our criterion. And in terms of the 5% site increased our possibility, I don't know, Alex, do you want to comment?

Yes. I think the answer we gave previously probably is not so much in here.

So there is a minimum of 1,500 being committed and up to the 5,000. So clearly the first tranche is out there.

We -- besides the Polish market becoming more dynamic in terms of tower evolution. We expect also to see a sort of domino effect.

As always, we try to look at second and third stages when we enter into a country, and for sure things will be happening. So that's probably the most possible situation there.

Yeah. Okay.

Thank you very much.

Thank you so much. Again, we have now reached the end of this session.

Thank you so much for your time today. And for any remaining questions, we will be at your disposal.

The IR team will be at your disposal. Thanks very much.

Bye-bye.