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 2021 results conference call.

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

And without further ado, over to you, Tobias.

Well, good afternoon, and thank you so much for your time today. Let me please go straight to the main highlights of the period.

Our organic growth generation continues to be strong with new PoPs on existing sites and our build-to-suit programs generating a 6.5% growth. Please note that the main driver behind this strong growth in the period has been the significant contribution from our build-to-suit programs with more than 500 new sites transferred this quarter.

We are also making tangible progress on our efficiencies plan, and we are on track to meet our target shared with you at the beginning of the year. Also on the organic front, we are expanding our presence in the transport segment, and a new example is the project to provide mobile coverage in lines 16 and 17 of the Paris Metro system.

The period provides again a strong set of numbers, with revenues increasing 53% compared to last year. Our adjusted EBITDA, 59%, and our recurring leveraged free cash flow, 52%.

We would also like to highlight the defensive profile of our revenues against interest rates potentially rising. With the majority of our contract inflation linked, we see as a natural hedge.

And a quick comment on rising energies price. As you can see in more detail in our presentation, the vast majority of our electricity costs are protected against rising price, thanks to our pass-through mechanism and our price hedging strategies.

Moving to ESG. We are making steady progress on the initiatives set out in our new ESG master plan.

A couple of examples are our recent upgrade by MSCI to A from BBB on our FTSE4Good rating improvement, which consolidates our position among the top 5 companies in the mobile sector subsector. We are also implementing creative solutions such as a Zero Emissions Rural Site with combined innovation and sustainability to connect rural areas while minimizing the environmental impact.

Moving to our capital structure strategy to fund our growth. We keep all doors open and we are constantly assessing a wide array of options to maintain our financial flexibility and to decide what is the best option at any given moment.

As a reminder, we have recently issued around €1.8 billion in new bonds, taking advantage of a very favorable rate environment, increasing our debt maturity and maintaining our cost of debt. Integration is crucial for the success of our growth strategy.

In this sense, we are very happy with the progress made on our closing processes with some deals closed earlier than expected. All our integration projects are also progressing in line with our initial expectations.

Let me please share with you a quick comment on the FCA's recent decision by which the French regulator authorizes the Hivory deal subject to the disposal of circa 3,200 rooftops to be completed over a maximum period of 30 months following the signing of the divestment agreement. We acknowledge this decision.

We thank the FCA, their cooperation during this process. And we also confirm that we are already working on new opportunities related to the deployment of new core assets to invest the proceeds of this divestment with a view that both CapEx and adjusted EBITDA would remain unaffected on a consolidated run rate basis.

We will try and provide more details on this as soon as we can. And finally, we are reiterating both our 2021 guidance and our medium-term guidance with all metrics on track.

If we go to Slide 3, we are showing here, for illustrative purposes, the generation profile of our adjusted EBITDA and recurring leveraged free cash flow during 2021. As you can see, these magnitudes have been increasing every quarter as we have generated organic growth, made progress on our build-to-suit and efficiencies plan and seen the contribution from new deals as they closed.

Our 2021 guidance implies an expected adjusted EBITDA growth of 65% and a recurring leveraged free cash flow growth of close than 60% compared to 2020. Very quickly on the following slide, you can see the status of our ongoing integration processes and all of them are progressing as planned.

Compared to the information we provided the previous quarter, you can see that we have now closed the Hivory deal in France, while we are still working as planned on our last pending closing, Hutchison in U.K. If we go to Slide 5, just a quick review of our current footprint and financial targets.

When all of our deals are closed and our build-to-suit programs complete, Cellnex will further strengthen its position in Europe as the main independent telecom infrastructure operator, managing a portfolio of around 130,000 sites, with presence in 12 markets, boosting our financials and becoming the industrial partner of choice for our clients. And a quick reminder of our medium-term guidance, which we are reiterating, it implies an annual growth of more than 20% in our key financial metrics since 2020 and a well-diversified expected EBITDA in 2025 of between €3.3 billion and €3.5 billion.

And if we go to Slide 6, just a few words on our last connectivity project within the transport segment. As you know, we have been awarded the connectivity project for lines 16 and 17 of the new metro transport network in Paris.

We will be responsible for the design, installation and operation of the system through a neutral host model. This is our third connectivity project won in a short period of time after ProRail in the Netherlands and the London-Brighton line in the U.K.

And we think there is a scope in Europe to continue providing seamless connectivity, value-added services, dedicated security communication networks and integrated management system for the transport segment using a neutral host approach. And with this, I will now hand over to our CFO, Jose Manuel Aisa, who will provide a few more details of the period.

Thank you, Tobias. Moving to Slide 8 and providing a few more details in the period.

Revenues have increased 55% to €1,760 million. Our recurring free cash flow has increased by 52%.

Total PoPs have increased 70%, and we include the contribution from organic growth and M&A. And if we focus on organic growth only, our PoPs have increased around 6.5% compared to last year as a result of increased co-location and an acceleration of our build-to-suit program.

Moving now to the performance in Slide 9 of our main financial metrics. On top of the figures just discussed, our adjusted EBITDA has increased 59% compared to last year, and our margin has significantly expanded.

This adjusted EBITDA growth is mainly explained by the contribution from telecom infrastructure services, organic growth, build to suit, recent acquisitions and by the efficient management of our cost base. Payment of leases increase as our portfolio size increases.

Maintenance CapEx is expected to converge towards our guidance, and interest paid reflects the terms of our debt structure. The following slide, Slide 10, explain our recurring leveraged free cash flow generation in the period.

And you can see the contribution to organic growth from our different drivers, co-location and associated services, build-to-suit escalators and efficiencies. These elements combined generated €86 million in the period, a 20% growth compared to last year.

And if we also take the additional contribution from M&A and the rest of cash items below adjusted EBITDA, Cellnex has generated again a strong recurring leveraged free cash flow growth of 52% compared to last year. Moving to Slide 11, just a quick update of our lease efficiencies plan.

Please note that site management has always played a key role in our operations, and we have demonstrated a strong record crystallizing efficiencies out of our portfolio of sites. Year-to-date, we have renegotiated more than 2,200 ground lease contracts, generated €10 million of annualized efficiencies in this year, and we are on track to meet our 2025 target.

Moving to our balance sheet. Movements compared to last year are mainly explained by our M&A and capital structure activity in the period.

The increase in total assets has sustained a corresponding increase in equity and liabilities as a result of our last right issue and the issuance of debt instruments in the period. And just to remind that we take a prudent approach with regards to purchase price allocations in the context of our M&A activity, which prioritize allocation to fixed assets.

So the goodwill you see in our balance sheet does not correspond to any cash-out. And finally, a quick update on our capital structure and liquidity position.

We have around €14 billion of available liquidity, including €5 billion of undrawn credit lines, a strong backlog of contracted revenues at around €110 billion, an average debt maturity of 7 years at a highly competitive cost of around 1.5%. No significant refinancing is expected before 2024.

88% of our debt is fixed, and our corporate debt has no covenant, no pledge, no guarantee. And with this, let's open the line for your questions.

I guess the first one is on the French remedies. Is there any other reason why the competition authorities have any concerns other than just having a high market share in urban areas?

And then linked to that, should we assume that there's any read across to the U.K.? And I would assume that the U.K.

is completely different, given their views on C2 Cornerstone, whatever you want to call it, but it'd be interesting to hear your views on that. And then I guess a bigger picture sort of related to all of this is, should we now sort of expect your strategy in markets where you've already done 2 acquisitions, should that -- should we think that, that would now focus more on active equipment given what we've seen happen in France?

Or is it still you want to go for passive or active wherever there are opportunities? Just trying to understand how the strategy is now going to evolve given what we've seen from the regulators in France and potentially might see elsewhere.

Simon, I will start and please, my colleagues, any comment you might have. On the first question, the answer is no.

So the only constraint -- the only limitation that we had in the context of this assessment was simply the result in market share in the highly dense areas. So basically, this remedies agreement that we have reached is just a solution to this specific constraint.

There is nothing else. On the second question, these are completely unrelated processes.

So you know that we have a vast experience dealing with antitrust authorities across Europe. We are present in 12 countries.

I would say that we are comfortable with the understanding of the different antitrust authorities of our business model. So again, in France, there was a specific issue that we needed to solve.

Thanks to this agreement. In the CMA process in the U.K., it's following its path.

You know that everything is going on track. But again, we see those as complete separate processes.

Yes. So this is Alex Mestre.

So just to add a couple of topics that clearly make the 2 transactions different. So in the case of the France, we are talking about having 3 anchors and that clearly makes a difference.

In the case of the U.K., at the moment, we closed the transactions. As we expect, we will have our first anchor.

So that clearly makes a huge difference. There is another difference.

In France, the authority, because this has been the way that we deem convenient also with the seller, has cleared the transaction on Phase 1. Whereas in the U.K., we are on Phase 2.

On Phase 2, you have always a much deeper assessment of the situation. And probably another element, which is quite important, is that on this first analysis done on Phase 1 by the French authority, the -- our market relevance is as such because Totem is not yet existing and is not considered as part of the market.

So as you can imagine, when having 3 anchors in dense areas, which is basically with Bouygues for instance, with whom we've been working quite a lot, that makes that percentage high. That was part of the rules of engagement on that deal, and we accept it as it is.

And it's normal. It's a clear path.

And by all means, this is -- I'm trying to answer, Simon, the last part. This is by all means not defining a ceiling on the rest of the countries and having to move from our core assets that is the main part of our investment.

In fact, the proceeds that we are intending to recover from that sale, which, by the way, we are having a long time to deploy that divestment, are going to be invested in core assets.

Maybe to briefly complement on your last question. I guess that there are still opportunities -- other opportunities in the markets where we already have 2 anchor tenants.

Actually, France is one example, where we're averaging 3. So we are not starting at 2.

And then beyond that, it's a matter of continuing generating organic growth, making progress on our build-to-suit programs, assessing the possibility of achieving efficiencies, operating synergies. But so you know that we are being quite active in the area of tower-adjacent assets.

So to add layers of revenues and contracts and additional services to the existing cooperation that we already have with our anchor tenants. And within that basket, active equipment could be a possibility that, as you know, we are actively assessing.

Could I just ask one follow-up? And I don't know if you would be able to answer this, but why was your neutrality not enough to allow you to have a more dominant market position in France in high-density areas, given you'll let anyone on your site?

Well, this is a question to be asked to the authority. Of course, our neutral host profile is the strong argumentation that we've been defending.

However, the reality is the reality that the major player of the market, being that Orange, is not considered as part of the market, then it's logical that our market share is high. But again, it's fine.

It's part of the scenario that we were envisaging since the very beginning.

A couple of questions for myself as well, please. If we can start on France and the remedies again, if I may.

I guess just to tackle the question from a slightly different stance. I guess what I was trying to understand is, what are the specific market share limits or caps or restrictions that the French authorities were considering when they were looking at urban areas?

And I guess what I'm trying to understand is when we look at other markets like, for example, Poland and Portugal, where your total pro forma market share of the towers industry is higher than what it would be in France, was there less of an urban concentration issue in those markets? Or is it simply that the regulatory authorities in those countries didn't look at it in the same way they do in France?

So that's my first question. The second one, I guess, is linked to the last answer you just gave with regards to Orange not being considered -- and Totem, I mean, sorry, specifically, not being considered in the way that the authorities are looking at the industry.

And I guess you flagged a similar issue with the CMA in the U.K. where Cornerstone is also not being considered.

Can you maybe also understand why the regulatory authorities in these countries are not including these telco and towers when they're equally renting sites to third parties? So what is the difference?

Why do they differentiate in that way and not consider those players? That's the second one.

And the third one is just linking to some comments you made in the introductory comments around interest rates and inflation. Obviously, I understand your comments around inflation protection that you have in your contracts.

I just wondered if you could remind us, though, of what you've assumed within your 2025 guidance because where we are today in the sort of inflation volatility we're seeing is probably quite different from what you said in your guidance. So maybe if you can just help us understand what you embedded just so we can better understand that if inflation were to stay high for longer, whether that would or would not cause a deviation to your guidance.

Thank you so much, Akhil. Maybe we will start with the third one, Jose Manuel?

Akhil, when we run 2025 guidance, we run different scenarios in terms of macroeconomics and we run -- we gave to you something that is achievable in different scenarios. We gave you a range and this range is have, I think, quite a good range in order of difference.

And I think that, that will be one of the elements that could take us to one part of the range or to the other. But when we present long term, we plan to run the model not only under one scenario.

It's multiple scenarios, especially regarding macroeconomics and taking into account when we did this exercise, that it was true that inflation was not there. But macroeconomics GDP, it was less.

How long this inflation is going to last? If you look at right now, the different European -- well, your sources, everyone has quite a good spread of opinion.

So all in all, to make it brief, I think everything is factored into the 2025 outlook we gave to you.

Coming back to the -- maybe to the first question on the why potentially, maybe other situation is...

Well, first of all, and I think this is important to headline. We are extremely respectful on any authority decisions on that.

And in that sense, we cannot do anything else than just follow because it's part of the game. But the question is interesting.

So first of all, you may have 2 jurisdictions, which is either member stage jurisdiction or European level jurisdiction. And you file depending of certain parameters, either on the local jurisdiction or the European jurisdiction.

When you go to the local jurisdiction, interestingly, the way that the market is assessed is different from country to country but also may be different in the same country from file to file, and we experience that as well. So sometimes, the authority is looking overlap of towers.

Sometimes, it's looking other type of potential elements that could lessen the competition. So every file is a case, and I would not be now in a position, I think, neither -- no one in our company to say from that percentage onwards, we have an issue because percentage of what and how this is measured, in France, they decided to separate rural than these areas.

Well, it's a one way to do it. So methodologies not necessarily have to be the same everywhere, and this is what we are seeing since we've been facing several competition approvals on the last transactions.

And then on your second question on why this control tower companies are not considered as part of the market. Well, it's precisely for that reason that being the shareholder, the client, there is -- well, the potential thinking that those companies will not be as eager as sellers would be in trying to capture the market.

And they will be more focused on just serving the interest of the shareholder. Well, actually, the way that those companies have been expressing themselves, their intentions, are not exactly like that.

So when we listen, Totem will listen an equity story, not very far from Cellnex. So there is interest on capturing growth.

And when we listen to CTIL, it's not very dissimilar. So well, there is not much more that we can say other than respect the decisions coming out from the authorities, even though our opinion probably is different.

And going back to France, well, that transaction, remember, is again 3 anchors. We would like to have 3 anchors in other jurisdictions, north of 25,000 sites, plus build-to-suits, a lot of them yet to be deployed in rural areas.

So in that sense, I think we are in an interesting position to roll out our business in France.

I had three questions. First question was just on the public transport contracts you signed.

Obviously, relatively small in the scheme of things. And this may be a tough question, but I wonder if you could just help us try and size the opportunity that you have in Western Europe in terms of what's the total market size that you think is available and give us an indication as well of the competition you face in trying to win those contracts.

And then second question was just on, again, on inflation. You've obviously shown us that Cellnex has an I-love-inflation badge.

But obviously, a lot of your customers don't, and we've had some more negative commentary around inflation from operators over the last few days. So the question is, are you noticing any change in behavior in willingness to speed up your build-to-suit programs to get them off balance sheet or go after fiber-to-the-tower programs and contracts with you, so that operators can get those costs off their balance sheets and those inflation risks off their balance sheet?

Thank you, Andrew. I will try, and Alex, if you will help me.

On the first question, it's difficult to provide a figure at this stage. I mean we are finding a quite interesting opportunity.

We are finding interest from authorities managing transport networks in terms of improving the quality experience. And I guess that is the reason why we are finding these opportunities.

These entities managing these transport networks, metro systems, now they have an incentive to provide more connectivity. They have an incentive to actually to make the customer happier.

And they are growing more and more interested in selling this type of auction processes to provide this connectivity and we are participating in these processes. We have been successful in 3 of them.

And I guess that going forward, every channel we learn that there is a new opportunity where the neutral host model makes sense, we will continue participating. But I guess, at this stage, it's a bit early to quantify the opportunity for transport systems in Europe.

On the second question, if we understand...

Yes. So if the question is if the economic situation on high inflation, potential inflation rates in the future is changing tactically the interest of the MNOs of -- or deploying build-to-suit more rapidly and I think we have not...

And fiber-to-the-tower, yes, exactly.

Exactly. We have not perceived that.

So normally, on the way we see our clients are planifying their network rollouts are quite well planified with an horizon which has to be followed by all the chain supply of elements, which is from several years. And so far, we have not received any change on any rollout planning due to any economical macro environment.

I have a couple of questions on my side. The first is related to the numbers you released and the second in the strategy.

So one of the numbers, I congratulate you because, basically, it's another steady growth on organic levered free cash flow. I looked into the main drivers, and I can see that the call on the BTS are keeping a good momentum.

And all the doubt is coming from efficiency and synergies. Then I looked on Slide 11, and you provided an update of the lease optimization strategy.

It looks like you increased a number of the targets. I'm talking about the site action for year-end.

You go to 2,800 from 2,400 last quarter. You also look to have increased the annual efficiencies for full year '22 and '23.

However, you have maintained a target of €90 million to €110 million by 2025. So the question is the fact that you increased the medium targets, is the fact that it's just fast execution?

Or you're just taken a cautioned approach and you expect to increase further before you upgrade your long-term target? The second one is on strategy.

Now since covering Cellnex from 2015 and the IPO, the last 6 months has been one of the quietest time in terms of deal making. I guess, time has been spent more on integration of the past deals.

And of course, all the questions we've seen so far on the call on the antitrust processes for the deal that have not completed. My question is a bit more on the other strategy you announced earlier this year, the enlarged TowerCo, that was announced with the acquisition of the TowerCos from Polkomtel.

I was wondering if you can provide a bit of an update there because, I guess, you were pretty vocal on the fact that this will open a new market to you guys. So I guess over the last 6 to 9 months, you've been active looking for or talking to operators.

So my question is how many operators have been willing to sell active equipment to you or to anyone else or to turn active sharing agreements into client supply relationships? And on the Polkomtel deal per se, now the deal has completed.

I think, it was completed in July. I was wondering if you can provide a bit of color how it's going to work in terms of the risk for future CapEx cycles.

So revenues on the contract will be adjusted upwards if in any time Cellnex is to upgrade the equipment starting from the 5G, or that risk now remain with Cellnex?

Thank you so much, Ottavio. I will take the first one.

Please just remember that our target is just quite recent. So we provided that at the beginning of this year.

It is true that we are very happy with the progress. But we start -- until 2025, we still have some years before we reach the end of that time period.

So if during this time frame, we realize that maybe that target is unreasonable because of the progress that we are making, we are more than happy to revisit that figure. But we are still at the beginning.

It is that we are comfortable, but I think it's maybe too early to anticipate any change on that target. Second part, Alex, if you...

Yes, happy to take it, yes. So for the last, last part of the question, the CapEx cycles are confirmed.

So after, let's say, already being hands-on on the asset, we are confirming what we were expecting. So any CapEx will come alongside with an additional revenue.

In relation on how ready we are to start deploying that massively, I would refer you to Page #4 where you have the level of integration. And when you look at Polkomtel, which is the third column from the right, you see that on taking control, we are just declaring a 17% and on full integration plan, because we have deployed our industrial model, only 3%.

So we need to -- and this means that our systems are ready to handle the whole new level of operations that we are supposed to handle. We are here delivering carriers, not delivering a space in a mass.

So as you can imagine, that is having an impact on, for instance, invoicing. So before we going massively to the rest of our potential prospects on trying to transact this type of new activity, we are, as you can imagine, prudent, which is not preventing for us as we already mentioned in the past to entertain discussions.

Well, it's calling us. That's interesting.

Why don't you explain me and how is it working? So this is the type of interactions now we are having.

And as you can imagine, the sales cycle for this type of activity, it's a long one because you are facing previous rent-sharing agreements that maybe the operators were already having. How this has to be tackled?

Vendor swaps because there are certain vendors that have to be replaced. There is a set of elements of complexity that we love them because we feel that we are the right partner for this type of industrial complex elements.

But it's going to take time as we have already indicated at the very beginning.

But can I -- just a very quick one. When you launched into Europe, you basically tapped in a very long tradition of passive outsourcing or passive infrastructure.

Outsourcing of active infrastructure, it's not just in Europe but globally, it's not something that we've seen. So what makes you confident -- because active sharing, the operators still have ownership share with someone else.

I want to make confident that operators can move from active sharing to a client-supplier relationship. There is anything to give a bit of visibility to us that underpin that confidence that actually, the enlarged TowerCo has got any legs in the strategy?

Well, if you look historically, what is actually starting to happen now with the active is not very different from what happened with the passive 15 years ago. So at the beginning, everyone was having their own active, their own passive.

After they started to share the passive among MNOs, okay, at the moment they share passive, they question themselves, well -- and this is what we were questioning them when we were trying to develop that market in Europe, where is the competitive advantage if you are already sharing the passive? Sell the asset, okay?

And well, this has actually crystallized and is happening all over in Europe. And look at the active.

How many rent-sharing agreements there are? And not only in rural, also in dense areas?

By the way, 5G is massively shared. So at the moment that you are sharing something that potentially could be as competitive as having 5G, you can question exactly -- you can pose the same question as we were making a few years ago on the passive.

If you are sharing it, where is the competitive advantage? And this is when the next wave, we believe, may be triggered.

So not becoming a competitive advantage because you are already sharing the active by means of rent sharing. So on the top of that, there is a technological evolution that may be also helping for all this to happen, which is Open RAN.

When you think of how the radio access network equipment may be evolving, which is equipment which is actually installed in our sites, this is going to be a commodity. As of today, you are having an equipment from one vendor or the other vendor, and they are not compatible.

What Open RAN is going to allow is actually to make those equipments commodities, and therefore, lowering the barriers for mutualizing all of them. So we foresee a trend in this direction.

Is this going to be as big as the passive? No.

And I think when we announced the deal, we compare a little bit the CapEx being devoted for the active equipment versus the CapEx that we devote for the acquisition of a passive infrastructure. So there is not an order of magnitude on CapEx, but easily 5x difference on how much is the equipment cost versus how much we pay for a tower.

So that is going to give you a clear idea that never this is going to be as big as the passive has been.

The first one is on an interview that Tobias, you gave a couple of weeks ago mentioning 200,000 sites as the kind of a medium-term ambition for Cellnex. And I think that's necessarily implies entering new markets for you, I would guess.

So I just wanted to check whether you think, well, that's what you implied. And also, it is about new markets?

What characteristics are you looking for in these new markets? And perhaps, as we are talking about progress, can I just mention Germany here just to get an update on that one?

The second question is on -- just a bit the following up from your Open RAN discussion, and thanks, that's very helpful. I see in your slides that you basically say that given that antennas and radio transmitters will still have to be placed on towers, there is no change to your business model.

But I presume that with Open RAN, those antennas and transmitters will also be lighter and smaller. So will that represent a threat to your ability to keep rents where they are?

And finally, just a read across question because we are seeing in Asia, particularly in China, the chip shortage is leading to a slowdown in 5G base stations deployment. And I'm wondering if you are seeing any evidence of that also in Europe and in your markets.

Thank you, Luigi. I think that we will start in the best order.

Maybe on the third one, maybe the answer is no. We are not seeing a similar performance here in Europe.

I guess that Europe is following its own path. Interesting question, the second one.

We actually have the contrary view. I mean we think that with 5G, many more massive MIMO antennas will need to be deployed, and they are actually larger and heavier.

So maybe that is also a way this incremental space in weighting it will offset any lower requirement in terms of shelter usage. So that's -- we will [indiscernible] if anything, actually active antennas, larger and heavier will be deployed.

And Tobias, on the next one...

Yes. No.

When we were talking about the potential addressable market in Europe, always, we are considering a large understanding of Europe, of course. You know that we are in 12 countries.

And obviously, we are foreseeing 200,000 sites in the countries where we are not today, but also including the potential acquisitions in the countries where we are today. As you very well know, for us, the first priority is to consolidate our market presence in every country.

This is always our main priority and remains the main priority. Second one, even though we are always looking at new opportunities in new markets, we are not in a rush.

We -- this is not our premise to be the largest company in Europe running a number of sites. This is not.

So we do not have any objective related with the number of sites. We do prefer to talk about country by country.

And therefore, qualitative wise, it's much, much profitable for our shareholders. And that's it.

I mean when we talk about 200,000 sites, just to remain that I was including the 5G requirements in terms of densification, sometimes we have to remind also that such a number of sites includes, let me say, new urban telecom infrastructure, which is not just about macro cells. And therefore, maybe we are foreseeing such kind of 500,000 sites on 2025 onwards because it's when we are considering full 5G development.

Okay. And on Germany, nothing new?

Nothing new.

Just two questions for me. Just first thing, back on France.

I just wondered if you could give us a bit more color on how the divestment process will work. And the good news is there's probably at least 4 people who might be interested, but how will it work?

Does SFR have any veto? Will you run a competitive auction for the site?

I don't know if you can give us any detail. And then the second question is on renegotiation of contracts.

I think next year, we all know you have the old Telefónica sites start coming up for renewal. I think it's the Babel project that's about 1,000 sites first.

So just a few kind of sub-questions, sorry, which is first, were these more urban or more rural sites? And how would you characterize the pricing just so we can kind of get a bit of an idea around the renewal risk?

And then secondly, Telefónica presumably are somewhat intensive i.e. could play hardball on the first renewal, given there's a few more renewals afterwards.

Have you thought about being a bit more proactive in trying to package up all of the sites over the next 3 or 4 years that come up for renewal into some sort of new master service agreement with them just to derisk that renegotiation process?

Thank you, Sam. I will take the first one, and I will leave the difficult one for Alex.

The -- on the first one, no, SFR has no veto. And also, let me clarify that this divestment is not directly associated with the portfolio that we are acquiring from SFR.

I mean the decision takes into consideration our presence in highly dense areas. And I would say that we have the flexibility to use part of our new portfolio, which are the sites that are the most appropriate or convenient to dispose of.

There's that flexibility. Second question?

And we have time.

Exactly, exactly. So basically, according to the regulatory filing, as you know, since the moment that we signed the final agreement for disposal, after that, we have 30 months to fulfill this requirement.

So we have flexibility in terms of timing. Thank you, Alex.

And also in terms of the sites that might be eligible for this disposal. And on the second question?

So on the renewals of Telefónica, it is true. We are facing this renegotiation as a normal course of business.

As you may recall, this portfolio, let's say, is complementary with other sites that Telefónica has sold recently to another competitor. So there is no overlap on any of those sites and just continuing on the current situation.

It is yet to be confirmed, but this is the way we are facing that renewal. We do not expect any surprises at all on that thing.

What is the precise timing of when do you start talking to them? Is there a set date or something just so we can kind of get the date in our minds?

Yes. We never stop talking to them.

Just one question on RLFCF. If I look at your slide, it looks as though there's about 11% growth, excluding BTS.

That's Slide 10. I just wanted to know if there's much impact from ground lease buyouts in that growth.

So could you give us some kind of an idea of how many ground leases have been taken out through buyouts? And then the other question was a quick one on cost inflation.

What are you expecting for your own labor cost inflation in your outsourced labor?

Nick, I might need you to repeat the first question because I'm not sure that -- are you referring to Slide 10? Correct?

Yes. So on Slide 10, you've got 20% growth in organic RLFCF.

If I take out the BTS, it's still 11%. The question is have ground lease buyouts contributed to that 11% growth?

And if so, how much?

Okay. No -- and you are talking about the acquisition of land, I think.

This is your question?

Yes. So the costs would effectively disappear from the cash flow in the near term, I would imagine.

No. In fact, when we talk about the acquisition of land, it can be our land, which is your case.

We could be talking about acquisition of land from third parties. So your question is referring the acquisition of land from in which our sites are there.

This is set up. This is defined within this €86 million.

You know that we have invested €38 million until today in the first 9 months. As we are suggesting here, our payback is more or less a tier of 10%.

So if you consider that we do this €38 million step by step throughout the year and you can see that our payback of 10 years or 10%, to make it very simple, the €38 million divided by -- that can give you a figure which is next to €2 million, okay? But be careful.

This €2 million is for the 2 kinds of acquisition of land, one can be to acquire our own land, which is what you are suggesting. It can be acquisition of land of third parties.

Then, it should be our revenue. But all in all, this is within the €86 million, both kind of acquisitions within €86 million, okay?

And the second question was pressure on employees. Looking in general and correct me if I'm wrong, I think that Cellnex does have 2 kind of employees, those that follow and follow the bargaining agreement and those that do not follow the bargaining agreement.

So in -- I think that the bargaining agreement was set up with some elements that tend to be linked to inflation in that case. And those who are not under bargaining agreement, so it's more a case-by-case basis, and it depends.

So again, the answer to this question is a little bit more as simple as saying, we will follow your -- the inflation. Please be aware of something.

This company has changed significantly, and this is again in Slide 10, the change of perimeter significantly. Obviously, labor is going to grow.

For instance, in Poland, we have more people than before. This -- the change in this item of employees will be driven by change of perimeter, not by inflation.

So the main driver is the perimeter. Inflation is important, but it's not a key driver at all.

I would say to you, it tends to be not significant.

I have two questions related to the leverage position. The first one is around the net debt evolution in the last 6 months.

I think on the after-lease view that you provide on a pro forma basis, it's up around €800 million, and I think -- sorry, under IFRS 16, it's up around €100 million. On an after-lease perspective, in the last 6 months, it's up more than €1 billion.

So I just wanted to maybe get an idea of how we should expect this to evolve in the coming quarters, whether some of these outflows we are seeing beyond build-to-suit will remain in place or whether some of them may reverse? And my second question is around your priorities around capital structure as you continue to expand.

I think on an after-lease view, more or less, your net debt to EBITDA is around 7 to 7.5x, which is significantly higher than your competitors. As I mentioned earlier, it's still rising.

You have some minorities, and you've pledged to the market that you may do €9 billion of acquisitions without raising equity. I'm curious whether that is a firm plan or whether there are conditions under which you may decide to either not make the €9 billion acquisitions or use equity a bit earlier, so you do not exceed certain metrics.

Thank you very much, and thank you because it's interesting you're here talking about this now with you. Let me go step by step because you are raising many questions, and this is very important.

In terms of leverage position and you talk about net debt to EBITDA evolution and all these kind of things, let me recall you that when talking about credit quality, it's important not only to be focused on a ratio, which is important. But also, please take into account the business risk profile of Cellnex and also what rating agencies say about us.

All this information is not only for the equity holders, also for the bondholders. And therefore, everything that we have been doing this year, which is to meet the business plan and to meet the payments of the M&A and to meet the payments of the build-to-suit program, is public information.

We cannot change it. And we present this to rating agencies and rating agencies give us the current corporate rating.

So, so far so good. It is true that we can have a peak 1 year, then we will deliver the following, which is important here.

And I think that we must not miss the point is the backlog generates cash flow. So net EBITDA should be taken into account in 2021, in 2023, 2025.

So this is the key question. But please consider other elements, qualitative elements that also mitigate what can be perceived as a high number.

If you don't do so, you can maybe reach 2 points that somehow, we are not -- cannot be validated by our capital structure. Yes, yes, please.

Let's go to -- in order to answer, I need 2 slides. Let's go to Slide 13.

In Slide 13, you can see here the financial structure. And you know it as well is -- I mean we have a very competitive cost, which is 1.5%, is not hedged, is no pledges, no covenant.

If someone gives Cellnex all this capacity, all this profile of maturities in the future, it is because somehow do not fully agree with your question. Somehow, also perceive that Cellnex generates significant cash flow in the future in order to meet all the maturities.

This is a key point. So fine.

Net debt to EBITDA is important, yes, but what is really important is the cash flow generation of Cellnex in a commensurated way with the maturities and also with the structure of the debt. When you raised the question, you forget -- you are forgetting many credit factors.

And finally, in Slide 20, and I think that this is a for digital slide which is not new at all. And we have put it several times before, but we reimplement it.

We're telling you that Cellnex has always been able to define a key flexibility in the financing, key flexibility that give us capacity to postpone M&A payments to build-to-suit product and to meet the profitability of our build-to-suit program. With just what we pay for the build-to-suit does not make sense.

You have to understand that the build-to-suit for us is a way of funding this company. This has always been from the very beginning, Georgios, not from now.

And you have seen how Cellnex has been able to maintain this net debt EBITDA more or less in the previous year and invest on committed investment systems. So why do change what has been working so far?

If you take the processes that we have done in the past and you project in the future, you will find this €9 billion. If you only focus on the net debt to EBITDA in the short term, obviously, I understand your question.

Please look at Slide 20 and 13, and we can take it offline and to help you to understand the credit quality of Cellnex.

And if I could ask a follow-up on the cash flow. I understand your point about the build-to-suit programs that these are set and highlighted.

But obviously, there's expansion of coverage, which is your decision on how quickly you buy back your leases. And I understand how you're accretive.

But there's also a few other outflows we are seeing in accrued interest in nonrecurring items. And I'm just curious whether those outflows will reverse in the coming quarters?

Or there are structural reasons why it could remain in place?

That could be the case. That is also the reason why we are classifying this, discuss within nonrecurring items, because they are not recurring in nature.

I mean it is true that we are an acquisitive company. There are costs associated with the nature of what we do.

And if in the coming quarters, that speed of execution slows, at the same time, you should also be seeing that this nonrecurring cost are also different.

Especially, you will finance some duty. In fact, we'll have to pay some duty if we execute M&A.

So this is something that we expect to pay forever now. We will pay once.

But obviously, it's nonrecurring.

I had two questions. One, I noticed in Slide 10, you talked about how the Bouygues fiber-to-the-tower is starting to contribute.

So just wondering if you could maybe expand a little bit more on what are you seeing in terms of fiber-to-the-tower uptake. Is it just Bouygues?

Or are you seeing interest from other parties? And are you seeing similar or you're rolling out similar projects in other markets that are starting to add to revenues as well?

And then just secondly, could you maybe just give us an update on what is the latest thinking around the sort of completion of your M&A pipeline? I mean, I guess, you sort of expect it probably will take the full 12, 18 months.

So just any comments you can make around the timing of completing that pipeline.

Thank you, Jakob. Maybe I will start with the second one.

We do believe that in this occasion and maybe compared to other capital increases, when we use this language of requiring 18 months to deploy our pipeline, that's because in this case, we do believe that it will take longer compared to other locations. So we are actively working, as you can imagine, we are seeing a number of opportunities.

I guess that one factor that adds a bit more complexity on the discussions is 5G. I mean, we are not just discussing plain vanilla deals.

Densification and other potential solutions for mobile operators are playing a role. And I guess that extends somehow the conversations that we are having, so nothing has really changed.

I mean in terms of the number of projects in our pipeline, in terms of the intensity of our conversations and in terms of expecting timing in this particular location, we will need, we think, these 18 months starting since the completion of our last capital increase in order to deploy our pipeline. And maybe, Alex, if you want to...

Yes, on the second -- on the first question in relation to fiber-to-the-tower, well, of course, Bouygues, this is what we are deploying and this is going perfectly on track. I would like also to remind that in the second Polish transaction, there is a type of asset very similar to the one that we have with Bouygues.

So you have all the fiber connecting the central offices, metropolitan offices with the towers. So in that case, we have acquired an already an existing base of fiber-to-the-tower that will require to be updated 2 more towers as well.

But it's not only Bouygues. It's also the -- with Polkomtel that we are having an important fiber-to-the-tower infrastructure.

Then how this conversion? Because actually here, we are converting from radio links to fiber.

Because historically, if there was no fiber, it's because there was a radio link. So the radio link, as we've been also discussing in the past, today's capacity is quite high.

However, when you are adding 5G on a site, probably that radio link needs to be replaced by fiber. So the growth that we expect on fiber-to-the-tower deployed by ourselves or deployed by our clients to our towers, which is also something which is possible, will be very much linked to the -- not only the deployment but also the actual usage of 5G.

Because you may deploy 5G, but if there are no cell phones actually capable to connect to the 5G, then this demand of additional data is not there. So there is no need to replace that radio link.

So that will be very much in line and in parallel with the 5G data usage in the coming years.

My question actually relates to Slide 11 and the lease optimization program. And just a very simple question.

Can you just maybe give us a number for what the kind of cost-benefit analysis you're seeing at the moment is? So if you were to spend €100 million on seeking to generate, we'd say, lease savings, what savings are you seeing?

Is it an 8:1, a 10:1, a 12:1? And maybe just say a few words as well about which geographies you're seeing the biggest benefits in.

Is it still quite Spain and Italy centric? Or are you also beginning to see better lease-saving opportunity in other markets as well?

Thank you, Emmet. Jose, do you want to take -- but the -- basically, the way we are assessing this type of projects is, in a way, very similar to an expansion CapEx project.

So we are targeting returns very similar to those of our historical transactions and financial efforts. So around 10%, 11%, 12%, depending on the contract, but around that.

Also in terms of geographies, historically, we have been doing very good progress in Italy and continue to do so because also bear in mind that now, we have recently closed a new transaction. So that gives us, I would say, raw material in order to continue progressing on this front in a country where it was already mature.

Now we're integrating new contracts to be potentially renegotiated. Now we are in the process of seeing if we can align these new contracts that we are integrating into our -- align with our best practices.

In Spain also, there is a room to continue improvement. Portugal as well.

Yes. So basically, there are two elements here that we are taking into consideration, Emmet.

One is where we have high ground lease costs. And this is where, logically, we try to put priority in terms of generating efficiencies as soon as possible.

Historically, Italy has been a country where the ground leases has been, in average, higher than the rest of geographies. So we are putting priority based on that.

And second, based on the maturity of our teams in the ground because as you can imagine, in those countries where we have just landed our focus, first of all, on establishing and stabilizing the operations, making sure that with the acquisition, we are not creating any quality issues to our clients. But as Franco was saying, when we are already settled like, for instance, in Portugal, we are starting to work on also those efficiencies.

So there are always those two elements that we take into consideration. The idea is that we do have -- well, this -- settled machine of efficiency generation in every country.

Thanks for taking my three questions. The first one is going back to the capital structure and to the Slide 20.

You are adding some, let's say, additional alternatives to your funding -- available funding alternatives. And in that sense, I would like to understand how we stand as likely to see either the exchange of your current minorities, some MNOs, with new investors or even including new investors in your potential new projects of inorganic growth?

And not just as an alternative, how likely are you considering that option? And not only that, at which extent the increase in the level of minorities in your corporate structure would also affect to the leverage ceiling understood as a net debt-to-EBITDA of 7x when looking to the M&A?

My second question is related with organic growth and particularly with one of your midsized markets with Portugal. We have just seen the outcome of the 5G spectrum yesterday.

And in that sense, 2 new antennas are coming to the market. And I would like to understand what are the organic growth outlook that you are foreseeing for that market, thanks to the outcome of this spectrum auction.

And finally, also on the organic growth. In previous calls, you gave -- or you had more than gave -- you had limited visibility on the impact on the European Union Next Gen funds.

And I would like to understand if there is any increased visibility on the impact of those funds could have in your business.

Thank you, Fernando. I will -- maybe I will take the third one, which is the easiest, which is no news.

I mean, you know that we have a very large pipeline of projects, a very long list of projects that we think could be eligible. But we are still, I would say, awaiting for the rules of the game to see how these funds will be allocated.

So no news on that front.

Regarding leverage and minorities and just to complete also a previous question, yes, I think that we have always had tough partners. I mean, if I recall, Galata was our first acquisition.

We had 10%. And then we repeated with other partners.

I remember Swiss Life in Switzerland. We have Iliad in Poland.

And we have Iliad also in France. We have Deutsche Telekom Capital Partners, I think, is in Netherlands.

So for us, a partner has always been there, and it can continue. I mean, why -- we do not have the obligation to buy.

We can say to someone, you can buy this stake, maybe no. We do have all the right, all the optionality open.

We have done it, and we will continue doing, and we can swap also. In fact, for instance, Deutsche Telekom Capital Partner was in Switzerland.

And today, it's in the Netherlands. So there has been somehow a swap through other transactions, but we have been able to show this flexibility, which is key in our net debt -- in our credit quality structure.

Then you raised the point about net debt to EBITDA, if there are minorities. If they're our partners, as it is happening, for instance, in Cellnex in Switzerland, just to take on Cellnex Netherlands, there is a ring-fenced financing.

Ring-fenced financing somehow has this characteristic that maximize the level of the debt in the different companies without having an impact on the corporate rating of Cellnex. And this is called subordination.

Obviously, for us -- for me, in my view, as a CFO of this company, subordination is a red line that I will never cross. And so in this case, Fernando, I think that the answer is a little half -- more angle than only a net debt-to-EBITDA calculation.

There are clear rules of subordination, clear rules of refinancing of the debt at the level of the countries and also the partners that we can also to take into account. If you put all these things together, as always have been on the table, give us the flexibility that we require in order to fund the next round of M&A.

And I think...

And the second question, Fernando, [Foreign Language] for the question. Finally, the auction has finished.

There are 2 new entrants. And honestly, we believe we are well positioned.

So we have 2 out of the 3 networks. The third network is one of those captive networks.

So as we did in Italy, if we do not make major mistakes that we will not make, we will be able to seize that opportunity massively.

Just a follow-up on that, Alex. Given that you bought 2 different portfolios in Portugal, have you had any kind of, let's say, restriction on tenancy ratio, particularly in urban areas in the big urban areas Portugal, given the coverage requirement for the new entrants?

So in that sense, are you having any restriction to allocate both new entrants in your towers?

Not at all. And having two portfolios is giving a good flexibility on our side to make the right combination.

So no restrictions on that sense.

Thank you so much for your time, for your attention, and we hope to see you very, very soon. Bye, bye.