Cellnex Telecom SA

MAD:CLNX

Earnings Call Transcript 2018-Q1

[Juan Jose Gaitan Mañoso]

Good morning, everyone. My name is Juan Gaitan, Head of Investor Relations at Cellnex, and I would like to you thank you all for joining us today for our Q1 2018 results conference call. I'm joined today by our CEO, Tobias Martínez; and our CFO, José Manuel Aisa. Both will lead today's presentation. We have posted, this morning, our presentation, which we will refer to throughout our prepared and then we'll open the line for a Q&A session. After the session, the Investor Relations team will be at your disposal to answer any remaining questions. So now I will turn it over to Tobias. Please, Tobias.

[Tobias Martinez Gimeno, Chairman, CEO & MD]

Thank you, Juan Jo, and good morning, everyone. And thank you so much for your time today. I will like to start underlying the main milestones of the period, a quarter that has been marked by solid execution, both operational and financial. You look, we continued to deliver on our organic performance, posting a solid organic growth in line with our guidance. We continue to generate a strong recurring leverage free cash flow, our main valuation metric, growing at a robust 10%. We continue to focus on finding new sources of organic growth. We are making process with Iliad, both in Italy and France, and our framework agreements. We have conversations with Salt in Switzerland. We have reached an agreement with Sigfox to provide an IoT network in Switzerland and we are pursuing a number of small sales opportunities across Europe.For revenues and adjusted EBITDA, grow 15% and 20%, respectively, as a result of our focus on operational excellence. Organic growth new deals and our efficiency plan contribute to our adjusted EBITDA margin improvement from 46% to 48%. And our win-win agreement with our staff in Spain has also been implemented. We have a strong pipeline of proprietary deals, working directly with key partners on an industrial approach with the objective to achieve long-term agreements. We are working hard to execute value-accretive projects in 2018. And finally, we are reiterating our financial outlook for the year 2018. If we move to Slide #5, the total PoPs have increased 24% in the period, including the contribution of both organic growth and change of perimeter. If we focus on organic growth only, PoPs have increased 4%, at the top-end of our medium-term guidance of 3% to 4%. And finally, the DAS nodes have increased 20% year-on-year, and we believe is more sales on DAS will become more a significant contributor to Cellnex's business in the future. Flipping to Slide #6. You can see an update picture of the results of our growth strategy, with around 70% of our revenues to be generated by telecom infrastructure services and around 60% of our adjusted EBITDA to be generated outside of Spain on a pro forma basis. Today, we are present in 6 countries. Our portfolio will consist of 28,000 sites, therefore, becoming one of the main independent power operator worldwide in number of sites.Slide #7. Just to provide some additional background, as you can see in this slide, the historical performance of our key value metrics from 2014, with revenues, adjusted EBITDA and recurring leverage free cash flow growing annually at around 20%, at a speed that has doubled this magnitude over the period. Next slide, just to finish my section, a few words on corporate governance and the new proportion composition of the board to be approved at our annual general assembly that will take place on May 31. As you can see in the Slide #8, it has been proposed the appointment of 2 new independent board members, bringing the total number from the current 10 to 12. Upon approval, the number of proprietary directors will remain at 4. And independent directors will reach up to 7, demonstrating the importance given to achieve a best-in-class corporate governance with a clear majority of independent directors and on track to meet the CNMV recommendation in terms of female representation. It has been proposed for approval the appointment of Anne Bouverot, who was Managing Director of the GSMA between 2011 and 2015, and had developed -- had professional career in companies of the telecom sectors such as France Telecom, Orange today, Global One Communications and Equant. Anne has a degree in mathematics, is a [ Ph. ] in artificial intelligence and a degree in telecommunications engineering. It has also been proposed for approval, the appointment of María Luisa Guijarro, who has extensively developed her professional career at the Telefonica group, where she held positions including Global Marketing Manager, CEO of Terra Spain, Director of Marketing and Business Development, and member of the executive committee in Spain as Head of Strategy and Quality. I will now hand over to José Manuel Aisa, who will focus on the financial details of the period.

[José Manuel Aisa Mancho]

Thank you, Tobias, and good morning, everyone. Moving to Slide 10, you can see the evolution of PoPs and our consolidated customer ratio, with increases mainly explained by consistent organic growth and change of perimeter. We have started around 1,000 organic PoPs over the last year, reaching a consolidated customer ratio of 1.54 if also considering change of perimeter, which usually contributes with a ratio close to 1. Additionally, we have several commercial initiatives in place in order to secure future organic growth. We are strengthening our partnership with existing customers. We're working under our framework agreements to secure new tenants. We're expanding our relationship with existing technological partners in new countries. And we continue to explore opportunities to provide densification solutions in dense urban areas. On Slide 11, you can see a graphical explanation of our adjusted EBITDA performance in the period. The positive impact of organic growth and efficiencies achieved is reinforced by the contribution of new deals, which explains the strong adjusted EBITDA growth in the period of 20%. Let me now move to our recurring levered free cash flow generation in the period on the Slide 12. I would like to highlight that the cash conversion rate of adjusted EBITDA into recurring levered free cash flow has been again a strong circa 80%, with aa significant margin expansion of around 200 basis in terms of adjusted EBITDA from 46% to 48%. Moving to the table, the contribution of Telecom Infrastructure Services, coupled with a very well managed cost base, leads to an adjusted EBITDA increase of 20%. Maintenance Capex is below our guidance due to timing factors. Our change in working capital is slightly positive, interest paid reflect our current capital structure, and taxes mostly reflect our management measures in place and the schedule of payments throughout the year. I think that also in the Q&A session, you will find an interesting benchmark regarding our recurring levered free cash flow conversion in full year 2017 compared to our peers. And in this page, which I think is Page 16, you will see again that Cellnex is on the top of their peers when talking about recurring levered free cash flow conversion. Moving now to our balance sheet on the Slide 13, it is important to highlight our strong liquidity position of EUR 1.8 billion and the significant level of contracted revenues, in other words, our backlog of EUR 16 billion or 20 years of revenues. Compared to December 2017, our balance sheet mostly reflects the increasing debt instruments and the associated cash, while proceeds have been devoted to the execution of our growth strategy. Debt to EBITDA ratio is around 5.5x, net debt analyzed EBITDA, including the full year contribution of new transactions both in debt and adjusted EBITDA. Last but not least, I would like to move to Slide 14, where you can see here the details of our debt and our maturities profile. Our debt has an average maturity of 6.1 years. No material refinancing is expected before 2022, and our inflation mix revenues plus our fixed rate debt provide us with a strong protection against interest rate increases. In summary, I would like to emphasize a solid available liquidity position, very high contracted revenues of EUR 15 billion (sic) [ EUR 16 billion ], no short-term financing need, long maturities, highly attractive terms and a competitive business risk profile, with no financial constraints, no covenant, no pledge, no guarantees. And all these together provide us with a wider rate of funding alternatives and flexibility, cash generated by current operations, this a structure and a status, alternative [indiscernible] instruments, debt financing, or equity partners at prior levels, among others. You will find further info in our frequently asked questions and also in the Excel sheet that we have provided to you in our website. And with all this, we are now available to answer any questions. So please, let's open the lines.

[Operator]

[Operator Instructions] The first question comes from Simon Coles from Barclays.

[Simon Alexander Arulraj Coles, Research Analyst]

My first one is big picture, I was just wondering, we're seeing lots of hype and talk about 5G, fiber, mobile as computing, things like that. I'm just wondering if you can talk more about the revenue opportunities you see from this. Are there new revenue streams you can potentially pursue? And are you having any discussions with operators already around these? [ Definitely ] on corporate governance, there's obviously been a lot of news around the purchase of Edizione, who will be your majority stakeholder. And I see you're expanding the board as well. I was just thinking -- wondering if you can give us more color on how your corporate governance, what you're seeing here? Have you spoken to [indiscernible] at Edizione yet? And just quickly maybe linked to the first question on the U.K., it's the last market where I think you don't quite have the scale potentially that you want. And I saw you there in an interview recently, Tobias, where you said there's an organic growth opportunity here. Is that micro towers around new BTS? Or is it more of a small cell opportunity?

[Juan Jose Gaitan Mañoso]

Simon, yes, with here your first question, 5G followed by [indiscernible] small cells. That is something that necessarily we feel like we are extremely well exposed to. Any underlying trends we have identified, I think there's an opportunity to be [indiscernible]. For us, we are very well positioned and we are, I'll let you know, we are working with our typical neutral [indiscernible] partner [indiscernible] of our customers. It means that we're in the very early stages for [indiscernible] at this point for us to quantify this opportunity, but we will continue working in this sense. As we are seeing today on these nodes, performance is doing great. It is true that we are starting from a quite low base, but we are working here to make these opportunities any second.

[Tobias Martinez Gimeno, Chairman, CEO & MD]

Simon, I'm Tobias. Well, on your second question regarding governance. For us, governance has been an important and is a very important matter. I mean, we think that we should adjust the size and the weight of the new shareholder, and this is the reason why we, first of all, we are enlarging from 10 to 12 because we expect maybe in the next 2 or 3 months to get in Edizione Holding and therefore they will nominate their 4 board members. So the idea is to reach up to 12 and then Edizione Holding are having 4 out of 12. And the second important thing in the governance has been to appoint 2 women, because we didn't get a lot of women on board and the full commitment of the company is to improve the female representation on our board. The third question related with U.K., we are pursuing different organic opportunities, different -- with different type of infrastructure. This is not just a question of the small cells. Obviously, as small cells will be part of these projects, I cannot disclose you more information today, but it's a combination of small cells, fiber optic, micro cells. So this is more looking the improvement of the current 4G networks and looking 5G as well. So this is the type of opportunities that we are pursuing currently in the U.K.

[Operator]

The next question comes from Roshan Ranjit from Deutsche Bank.

[Roshan Vijay Ranjit, Research Analyst]

Two questions from me, please. Firstly, this quarter, you announced further transition of towers from [ mass ] mobile and initially some new sites in Italy. Is this a strategy that you will see can support growth in your legacy Spanish and Italian operations in the near term ahead of a material pickup from some of the framework agreements in Italy? And secondly, in France, you highlight that you had an agreement that is close to bearing fruit. Can you provide a bit more detail there? And if this includes some of the global rollout that [indiscernible] had mandated from the operator as well?

[Juan Jose Gaitan Mañoso]

Roshan, on the acquisition pickup announced this quarter, [indiscernible] they are small. I mean, we are comfortable with the economics. Those are not big transactions, but we like the economics. Also, we see these deals as a way also to continue strengthening our relationship with customers. So I think those type of things, we can continue doing in parallel of other bigger opportunities. So is that a part of our strategy? Of course. On Iliad in France, I would say that our relationship is mostly linked to attracting them as our client on the sets that we are acquiring from [indiscernible] telecom in cities in the [indiscernible] areas. Of course, we would like to continue assessing opportunities to extend coverage and help operators densify in [indiscernible] spots, but we need to confirm that the [indiscernible] remain in the ability to capture Iliad as a [ secondary ] in France, listening to the portfolio we are using today in France in the cities.

[Roshan Vijay Ranjit, Research Analyst]

So sorry, just strictly, I guess, is it fair to say that discussions have already started or progressed on the asset [indiscernible] on the rural areas?

[Juan Jose Gaitan Mañoso]

No, [indiscernible] we have recently learned from the agreement between the asset and French mobile operators, and we are seeing how we can help in this process.

[Operator]

Your next question comes from Henrik Herbst from Credit Suisse.

[Henrik Herbst, Research Analyst]

I just want to follow up on France, really. So you've had a few organic tenant positions in France, but it seems to be mostly related to build-to-suit. So can you just talk a little bit about what interest you're seeing for your towers in France? I guess Iliad, it seems like you're still working on the framework agreements, but from the other operators, and when can we sort of start to see, you think, organic tenant additions that are not related to build-to-suits but lease-up on the towers you now have in France?

[Tobias Martinez Gimeno, Chairman, CEO & MD]

Well, our main third party in France is Iliad, rather than SFR or Orange, but it doesn't mean that SFR or Orange are not asking for co-location, but the main demand is coming from Iliad. This is [ vert ]. Second one, you have to take into consideration that the acquisition of our current main footprint in the urban areas are rooftops. So we need time in order to adjust the current ground lease contracts. We need some months in order to be ready to allocate to host additional tenants on our rooftops. This is the reason why, maybe, we need more time to bring you more visibility. But I have to tell you that these urban infrastructures are very well known for all the telecom operators and they are asking for co-location. So it's a question of timing.

[Operator]

Your next question comes from Sunil Patel from Bank of America.

[Sunil Praful Patel, Vice President]

I just had 2. One is on -- with potential consolidation in France, I just wanted to understand the dynamics of any potential acquisition of LT's towers and what that means in a consolidation scenario? Is there potential protection for any buyer, so to just really understand more -- what it could mean if there was a sale of the LT's towers? And second was just really an update on Portugal. I really want to understand where we were into that process? And when we should find out if there is going to be a potential acquisition there or not?

[Tobias Martinez Gimeno, Chairman, CEO & MD]

Thanks, both questions seems to be somehow related. So the third one is about France and consolidation of different MNOs, we have little to say on the potential impact of potential transactions of towers. It will depend on the contract, on the contract that those towers may have or not. So we cannot comment. And this is something that we do not know, to be honest, in terms of the consolidation between different players and how it is going to end up that process that you're suggesting. Everything is on track, is a work in progress. So it seems that -- and regarding the consolidation of the different terminals, it seems that it has been a non-story, no? So we'll have no more info than that. It seems our contract, for instance, in other geographies in terms of towering are fully protected in these scenarios.So second, you were asking Portugal, you know that yes, we do have -- somehow we're interested in understanding the deals that are visible and those that are not visible. And we have to assess those deals from an M&A golden rule perspective and we're not going -- we have to live this M&A golden rule. So yes, as any other investment, we will be ready to acquire as long as our criteria are met. And also, as we were saying before in this same question, as long as also the contracts are good enough for our standards. So we have different deals on the portfolio. We're working different deals. And I think that not only the visible but also [indiscernible] in which we are devoting a lot of time.

[Sunil Praful Patel, Vice President]

As a follow-up, do you see synergies from the Portugal tower portfolio having an, obviously, very large presence in Spain. Are there synergies that are cross-border in this case?

[José Manuel Aisa Mancho]

Obviously, we have operational synergies across Spain and Portugal, but -- well, this is part of the economics; it's not all the business case. But yes, we have some operational synergies. We know very well the country, the market, the assets. So this is a target very well known for us. But well, as you know, in our business case, operational synergies are not dramatic savings.

[Operator]

Your next question comes from Jonathan Dann from RBC.

[Jonathan Dann]

Three very quick questions. One, the first one, would we expect the restructuring in Spain to help EBITDA in 2018? My second question is, I'm just looking at the M&A CapEx of EUR 111 million. Does that include Bouygues towers that you've acquired plus the 2 tower companies you mentioned in the text? Could you just give us the Bouygues figure, please? And then my third question, probably easy to answer. Have you started looking at Dutch towers with T-Mobile, I believe, they're carving them out?

[Juan Jose Gaitan Mañoso]

On your first question, [indiscernible] plan. We'll need to wait until we can provide more visibility on when the savings will be seen and the plan has already been implemented. We have reached agreements with unions. So the savings will start to be seen upon the acceptance of the terms by the staff willing to participate in this process. It could be [indiscernible] opportunity will start seeing something, but I think it is just the beginning of the year. So we will have not much visibility on the number at all accepting the terms. We will provide for obviously there on the savings piece this year, if at all. On your second question on M&A CapEx, it's true that we have posted EUR 111 million of M&A CapEx. Basically the drop-down is around EUR 3 million for the acquisition of 85 sites in Spain as mobile. Around EUR 3 million associated with the portfolio sites in Italy, it's 214 new sites, and the remaining amount, which is majority is linked to [indiscernible] acquisitional site in France.

[Tobias Martinez Gimeno, Chairman, CEO & MD]

And Jon, no worries, you know perfectly regarding the last question, you know perfectly that we cannot comment. And that's -- but again, we're looking different alternatives in Europe, and for us it's important to cover all of them, so this is what we can say.

[Operator]

The next question comes from Ottavio Adorisio from Societe Generale.

[Ottavio Adorisio, Equity analyst]

Couple of questions and a clarification, if I may. The first is on your adjustment for the IFRS 16. In the presentation, you mentioned that you will be adopting the standards in H1 2018. I double-checked the changes at least you made between the fourth quarter slides and the first one, and I've seen that the pro forma debt on under IFRS 16 has been adjusted upwards by EUR 392 million. However, in the fourth quarter, in the same slide, you were adjusting upwards by EUR 512 million. So I'll be interested to know what has changed in terms of the adjustments you make under IFRS 16? Why did debt increase? Basically it has been scaled back by almost EUR 120 million, despite anyway the overall debt has increased. The second one is on the broadcasting. It doesn't receive a lot of color or a lot of visibility during the call but has been relatively weak in recent quarters. And I've seen that most start on Q3, and ever since you kept on the same growth rate and change. So is that a case that, that particular impact will fade starting from Q3 '18 when we basically lap that effect that you had in 2017, and therefore, broadcasting can start stabilizing?And the clarification is from your provision. You have 2 different figures on the press release and on the slides. In the press release, you mentioned EUR 55 million provision; in the slides you mentioned EUR 60 million. I believe that potentially the EUR 60 million includes something else. So if you can basically say what's the difference between the EUR 55 million that is mostly Spain and the EUR 60 million that potentially could have also some headcount reduction across Europe.

[Juan Jose Gaitan Mañoso]

Very quickly on the second or third, the provision for the [indiscernible] EUR 55 million, simply that we chose to maybe provide a rounded figure for the presentation, I guess that's why we said around EUR 60 million. The accurate figure for the provision linked to the workforce [ agreement ] is EUR 55 million. On broadcasting, you will find in Q1 2018, if you compare that to Q4 2017, you will see a slight increase. So in our view, we've seen the bottom in Q4 2017. Of course, if you compare year-on-year, you will continue finding declines, but I will say that at Q4 should give you the floor and from Q1, you can start seeing a more stable performance. It equals to continue business, so it will be a mere combination of inflation, but in any case, the bottom that this floor should be equal. And on the first one, [indiscernible]...

[José Manuel Aisa Mancho]

Yes, and thank you, Ottavio, for [indiscernible]. It's an interesting question. Listen, you're right. I mean, we have been working with PricewaterhouseCoopers and with our auditor in order to assess [indiscernible] system in detail, so while we present it you back in you in November 2017 was our first step, what we are presenting here is the second step, which is more refined, which is more fine-tuned. And there is a third step, which will be the presentation of -- hopefully, the presentation of the [indiscernible] annual accounts or big year and hard year accounts audited as of June 2018. What you can see, Ottavio, is back in November, the relationship, our decrease of leverage was only 0.2x. Right now, the decrease of leverage after the implementation of IFRS 16 is 4.6x. So as we work IFRS 16, as we implement IFRS 16 with our numbers, we're able to fine tune and to reduce the impact, and to reduce the impact of this IFRS 16 into our numbers. Or in other words, to improve the impact of IFRS 16 into our numbers. And this is the key point, because right now you see us, for instance, are factoring much more debt in our leverage. And what we are understanding from IFRS 16 is that, as we speak in Slide 19, you will see that we only have EUR 400 million of more debt coming from IFRS 16. And also at the same time, we will have an improvement of our EBITDA in EUR 156 million. So if you divide EUR 400 million divided by EUR 156 million, you will have this 3x net debt-to-EBITDA, which is less than our current 5.5x. In other words, fine-tuning profit, that should end in June 2018, in which we will confirm and we will present to you audited numbers. And what we're seeing is that we're working on the very right direction, and in other words, the net debt of Cellnex after implementation IFRS 16 will be less than currently we have presented to you.

[Ottavio Adorisio, Equity analyst]

It's all very clear. If I may basically ask a much more generic question, a bit of a summary of all the question you keep receiving potentially or would be even coming in terms of the M&A. You have very specific criteria how -- when you will basically engage in M&As and acquire towers. You didn't put within the sort of priority the footprint. In the number of countries, your footprint is not nationwide as yet. So in France, you basically are actually increasing the footprint. In Italy, you have made bigger positions before the IPO and you stopped there; you're only doing very small acquisitions. Wind still retain a significant portion of the towers. Those towers do not have any overlap with your footprint. Given the balance sheet, let's say, situation of the Newco is not one of the best. It's pretty likely that Wind at some stage will probably want to sell these towers. With that completion of the footprint in Italy be a priority for you, or you only assess any deals according to the financial metrics and not any sort of strategical considerations?

[José Manuel Aisa Mancho]

Well, you know possibly well, and we have talked many times of targets and about the importance that is for Cellnex the customers, the consent of customer. And we take care of them. We try to understand all their needs. And yes, you -- it seems that we very may have these towers, you're suggesting of course. And obviously, we know these towers by heart and they constitute this inevitable that we are managing somehow so as a remaining part. As long as our client is happy to proceed, we will be there to help. We will be happy to create value for our client and for our shareholders. By the way, also, just to -- this belongs to our remedy package of the European Union. So there are many things that have to be considered when talking about this deal.

[Tobias Martinez Gimeno, Chairman, CEO & MD]

Yes, maybe -- this is not just a question of financial golden rules or return. You're right, Ottavio, this is also a question of the quality of the footprint and how it fits with our current footprint. But this is not the case of Wind. We don't have any constraints, because the part of the overlapping with our current footprint in Italy are not on sale because those assets are part of the remedy package imposed by the European Commission. So it means that these overlapping doesn't exist as a disposal package. And therefore, it is not -- constraint is not an issue and obviously, for us, to go further with Wind Tre in our current relationship fits perfectly on our strategy.

[Operator]

Your next question comes from Luigi Minerva from HSBC.

[Luigi Minerva, Senior Analyst]

The first is a clarification on the provision. I apologize if you mentioned it already, but can you tell us the number of employees that are attached to the provision you booked in this quarter? And maybe give us an indication if there is more to come, let's say, this year or in the next 2, 3 years? And secondly, it's on Italy, and just going back to the comment you make in the presentation about Iliad. Our impression is that their approach to deployment would be very light and gradual over time. And I'm wondering whether instead, I think this be your message as well from previous calls, do we did read some incremental in the comments you make, a more accelerated on network from Iliad? And last question is whether the change in ownership with Edizione Holding becoming the first shareholder with a [ plant ] here should bring a change in strategy? Any color from your early discussions?

[José Manuel Aisa Mancho]

Luigi, the -- with regard to your first question, the amount that if you link to this provision is EUR 55 million and it is calculated under the assumption that 180 people in the [indiscernible] will accept its terms. We are not presenting a further acceptance below this number. So that is the amount that is fully provisioned this quarter. That is also the amount of people we believe that will accept these terms. And it is true that is an elaborate process. Evolution has been booked this quarter, but it will be booked over the coming quarters, so in 2018, '19. These people will be leaving the company, and therefore, we will have seen the [ savings ].

[Tobias Martinez Gimeno, Chairman, CEO & MD]

Well second question, Luigi, about Iliad, I have to say that the current rollout of Iliad is as expected from Cellnex. I mean, we never saw an aggressive, strong rollout in Italy. And we were and we are in the -- in our covering our expectation, we are reaching our projections. I mean, I do believe that we could show you more attractive figures in the last quarter of 2018. Because you are right, Luigi, the rollout of Iliad up to date has been, at least, let me say, prudent, if I may. Having said that, I have to say that we are already provisioning hundreds of services to Iliad. So we're extremely happy of our current relationship with Iliad. Everything is on track. And we, at least, from our point of view, the achievements are on track. Third, regarding our new shareholder, Edizione Holding. Well, first of all, I have to say clearly that we are very happy having Edizione Holding as a major holder. And why? Because it is a long-term investor who knows very well the infrastructure business and with a lot of competency, if I may, in the telecom sector thanks to Marco Patuano. So all in all, fits perfectly with our current strategy. They know the company, they know our equity story and our strategy. And I think they were very vocal, being supportive on our current and future strategy. So we -- this is the reason why we are happy, because fits perfectly with our current and future strategy.

[Operator]

Your next question comes from Domenico Ghilotti from Equita.

[Domenico Ghilotti, Analyst]

A few questions. The first is a follow-up on the IFRS 16. In particular, I'm trying to understand if you see any impact on your leverage ability from the de-leverage that you're getting from these application, or is that just as a nominal improvement? Second question, on the broadcast business, I wonder if you are -- if you could be interested also in M&A on the broadcast or mixed tower portfolio? And third question is on small cells. Do you think at some point in the future you will be able provide some quantification of the opportunity? And if yes, what could be the timing for this?

[José Manuel Aisa Mancho]

Yes, regarding IFRS 16 and the net debt that we have is the same. I mean, nominal net debt is the same. The only thing that changed here is how [ recognizes ] factor, IFRS 16 within the numbers. When they capitalize the leases we have, recognizes tend to capitalize more money than IFRS 16 is taking into account. So for us is just good accountancy and so how allow us to benchmark better Cellnex vis-a-vis the American piece. So that's the key point, but at the end of the day, the nominal net debt will be the same, okay? That's all. Regarding the broadcasting business, well, you know that we are -- we have what we have and that's all. And regarding broadcast, we -- you know that we talk about this largely in November. And our vision as managers is to increase our exposure to telecom infrastructure services and the other lines were -- are not in increasing point of view.

[Juan Jose Gaitan Mañoso]

On the last question on the [indiscernible], we are small cells, again, we are [indiscernible] we believe this will be an opportunity. We have seen [indiscernible] trend to maximize the capacity of the members we have in place, so we have what we are maybe facing now [indiscernible] challenge with demand, while with the mobile operators, [indiscernible] investments trying to maximize it in capacity. We, in the shorter term, maybe we do see an opportunity in the area of intercorporate based on the areas. This is our [indiscernible] project in place. We're also expanding our credentials outside of Italy with our contract with [indiscernible]. We are the providers of the certification solution. We are processing several opportunities in the U.K., so we're active in this area. But in terms of trying to quantify these today is very, very difficult for us. Of course, as we gain more traction, as we see more demand, we will try to provide more figures.

[Domenico Ghilotti, Analyst]

Another question, if I may. On the current deal that you are starting, should we assume that the financing of this deal is still possible for the existing cash available? Or would you be ready to consider also some equity raising?

[Tobias Martinez Gimeno, Chairman, CEO & MD]

Well, not only we will have the cash, this EUR 700 million or EUR 800 million, we have also credit lines, so total equity will be up to EUR 1.8 billion. So obviously, what I presented in the slide before is that we are fully aware of the cost of the different instruments. And we're going to be quite disciplined here. So our top priority is to create value for you. We have different levers before considering the equity raise. If so, it has to be well justified and after the [indiscernible] deal, an important deal in which our recorded [indiscernible] per share is accretive for you. So everything is open but being aware that we will try to optimize the resources, obviously. A structural facility is key, and we have always been very clear. Taking account of many of the deals we've done in the last year, we have also the capacity to pay [indiscernible] by different installments, and this is very good because it helps to the business. So different angles, we feel very comfortable with the current leverage of the company, very, very comfortable. As we were saying before, IFRS 16 is somehow in the very right direction. So let's keep on working in this way.

[Operator]

Your next question comes from Fernando Cordero from Bank of Santander.

[Fernando Cordero Barreira, Equity Analyst]

Three questions, if I may. The first one is related with the lease cost into P&L. Do you have a complete in Italy cost per site [indiscernible]? And I would like to understand if this decrease is also coming from the mix of sites that is derived from the M&A and [indiscernible] the increase is coming from the initiatives that you're implementing and presented some quarters ago. And would this tend [indiscernible] potential to reduce the ground lease per tower [indiscernible] basis, or what are your plans there? The second question is related with network services and line, which is [ 4% and 3% ] year-on-year. Just willing to know are we extent do you see this trend sustainable or how this drop can be offset in next quarters? And the third question is related with forecasting. And you have already in the past stated that you are not expecting the second deed or dividend to impact your profitably. But I would like to know, as these new standards in [indiscernible], like for example, have it be major rate, any kind of revenue [indiscernible]?

[José Manuel Aisa Mancho]

Fernando, on the -- maybe starting with the potential impact of the [indiscernible] plan, that is basically trying to protect the existing number of [indiscernible] multiplexes, and as you know, our revenue generating unit sustain [indiscernible] multiplex. So as long as we manage to keep that, that's why we are not expecting any impact. Maybe different issues in the very long term, but specifically to this process we are not expecting any [indiscernible] variation in our operation.

[Tobias Martinez Gimeno, Chairman, CEO & MD]

And maybe if I may, sorry, Juan Jo and Fernando. I have to say that below 700 megahertz doesn't make sense for telecom purposes. This is very important to understand. The future of the telecom development will be in the high frequency band and not below 700 megahertz. This is key. Otherwise, we will see a big, big antennas on our mobile phones. That doesn't work, as you can imagine. So this is just to reinforce that this is not a threat for the company. And the second digital dividend will remain the same number of multiplexes, the transmission unit for us. So doesn't matter if it's high definition or ultra-high definition inside. This is just to provide you more, more comfort, not just for the next second digital dividend. It's even more. Look in the future, telecom will not be below 700 megahertz because doesn't work.

[Juan Jose Gaitan Mañoso]

So your second question, Fernando, [indiscernible] other network services [indiscernible] provides [indiscernible] Compared to maybe other business lines. Maybe we will have combination of different [ sell-back ] activities we provided in Spain. So basically, what you see is the [indiscernible] contribution of our several activities at the same time that we report under this line. So maybe an activity within this area that provides some increases and decreases is a link to the emergency communication service we provide. In some cases, something we do is to provide handsets to our customers, firemen, policemen and it's an area that -- a very low margin activity, basically we resell handsets to our customers. So when we post more activity, also there's unassociated cost linked into that. And that is what's explaining the increases, for example, as we saw in Q4 2017 and now the decline in Q1 2018. In any case, I would say that going forward, these evolution we're expecting quarterly is what you're seeing today, with some increases and decreases based on these different performance of the subactivities we provide. Finally, on leases, what we're seeing -- the declines we're seeing today is mostly the result of our [indiscernible] program, [indiscernible]. I don't think the M&A is providing any [indiscernible] new towers contribute with the [indiscernible] associate our lease, but the majority our initiatives are focused on Spain and Italy, and this is where we are mostly showing these sales. We, for modeling purposes maybe in the medium to long term, you can expect that network increases in OpEx should be compensated with our continued efforts in our OpEx savings. And if it is true, [in a short time] we're even seeing even reductions. And for how long that is sustainable, that depends on our ability to finding new ways to continue new executing this [indiscernible].

[Operator]

Your next question comes from [ Albert Kerner ] from [ Kempton ].

[Unknown Analyst]

Just a question on clarification on the voluntary leave plan. I appreciate that you can't disclose because you don't know what the timing will be, but what kind of savings are you aiming for in total as a full year impact? And then second, you indicated that you were debating on whether or not to chase an opportunity in fiber in the U.K. Should I see this as, let's say, fiber inner-city and really just for small cells? Or what type of fiber are you targeting?

[Juan Jose Gaitan Mañoso]

On the agreement that we implement, we implement with our workforce, we are expecting maybe ground break saving of our around EUR 7 million whenever it is completed. Again, we like facility on the extra contribution of this program because of the same incentive [indiscernible] when to start accept these terms. But when everything is completed, we might be taking around EUR 7 million of EBITDA improvement linked to these savings.

[Tobias Martinez Gimeno, Chairman, CEO & MD]

Yes, talking about fiber optics is not just linked with a small sales for DAS. Obviously, looking 5G will be more, more relevant than having fiber optic. This is a fact. But we're not, let me say, tackling this type of project without customer contracts or a customer commitment. I mean, currently, we're in a very advanced negotiation with one of our main customer in order to deploy on behalf of our customer, fiber optic to the antenna. When we talk about fiber optic, we are referring about the last mile, this is maximum, and obviously, fiber to the antenna. I think this is synergetic business when you have long-term relationship with your customers. I mean, you cannot afford the future without fiber optic if you want to be in the 5G world. And this is the reason why we're facing accordingly with our customers. And we will be there for sure.

[Unknown Analyst]

Okay, and just to clarify, is it then something you would also consider in all the other geographies that you're active in?

[Tobias Martinez Gimeno, Chairman, CEO & MD]

Well, that's where we are today. I mean, first of all is to manage, to own wireless infrastructure. Then we can consider to develop on top of that further type of infrastructures and services like fiber optic connectivity to the antenna.

[Giles Thorne, Equity Analyst]

Sorry, can you hear me?

[Tobias Martinez Gimeno, Chairman, CEO & MD]

Yes.

[Giles Thorne, Equity Analyst]

Sorry, the line went really -- the line went dead. So I'm assuming it's my turn. So it's Giles from Jefferies. I have 3 questions, probably the last questions, all, certainly, M&A in nature. So the first one was, as you look at your businesses in France and Italy today, and putting aside timing or price and focusing purely on industrial and strategic logic, which is a higher priority market for you to consolidate at this point in time? Second question shouldn't have anything to do with M&A at all. It's about organic growth. You're now explicitly referencing a live dialogue with Salt in Switzerland, which is promising from an organic growth perspective. And you've also signed up a [ SyncOps ] operator there too. So it would be useful to be reminded of how much headroom you have to your tenancy ratio under the current omissions rules in Switzerland. And finally, from where I sit, I'm seeing some skepticism being expressed as to whether the MSA approach will actually remain -- will be sustainable in mobile operators as a way of avoiding IFRS lease capitalization implications. You've been out with that approach for a year now and certainly one auditing cycle for some of your customers and an auditing cycle for the credit rating agencies. So it would be useful to get any feedback you have on how the MSA approach is holding up.

[José Manuel Aisa Mancho]

Let's start with the last one, and we will. Yes, IFRS 16 and regarding our customers, okay. And we have our contracts and our semester service agreement and data compliant with IFRS 15, not with IFRS 16, obviously, and we have been -- we have this work performed with Deloitte, with Ernst and Young, and also with Price. And now we're working with the last one, okay? So it's a process, and from accounting perspective, this is done. And we're almost done. So it's only one Big 4 that is remaining now. It's a question of time. Second, you're talking about other stakeholders. Now listen, you know what's happening here, that IFRS 16 has not been implemented yet. IFRS 16 should be implemented on a early stage this year, but I think Cellnex will be the only company in Europe that will do it. And all the companies have obligation to start reporting IFRS 16 as of January '19. So at that time, we will see what different stakeholders can -- are going to do with IFRS 16. IFRS 16 has something which is good, which is going to do compatible many things as of today were not compatible. So I would -- we will require a little bit of time to understand the implications in other stakeholders, not only credit analysts, also banks, [indiscernible], I will say to you even investors, no? Maybe we are in front of one of the big, largest changes in accounting ever. So it is normal that different stakeholders are taking different views. However, regarding the first step in this process, which is the Big 4 auditing companies, I can tell you that right now at Deloitte, Price, and Ernst and Young fully back our view -- our accounting view on our contracts, master service [indiscernible] contracts. And the rest of the question, maybe, Tobias?

[Tobias Martinez Gimeno, Chairman, CEO & MD]

Yes, well, coming back your first question related with M&A priorities. For us, it's not just a question of countries, geographies. I mean, when we approach an opportunity, we like to understand the benefits, the value creation at the end of this transaction. I mean, beyond M&A, we like to talk about return of investments. Why? Because sometimes we are seeing that some opportunities, let me say, are so expensive. I understand that we like very much M&A; we like very much inorganic growth. But sometimes, mainly, the best investment is on your current customers. Why? Because you are improving your customer, your loyalty, you're improving your backlog, you are reducing your risk in the meaning of you have a track record with your customer. So you know very well how does it work in the meaning of day-by-day operations. And this is the reason why we're paying a lot of attention in order to work with our current customers, and maybe this is not just -- it's not always very attractive. Let me say attractive in the meaning of M&A, relevant highlights in the press release. But being with our customers it's very relevant when we have to face also an important change of technology from 4G to 5G. And this is the reason why for us, the main objective, the main priorities is to serve our current customers, to work with them and then to find synergies in the current 6 countries where we are. But first of all, it's to serve our current customers. Sometimes it's very difficult to define the border between organic or inorganic growth, because when we talk about hedge computing, fiber optics, small cells, it depends on the final CapEx allocation. This is the reason why we don't want to sacrifice, let me say in that way, our firepower just for growth, just for inorganic growth. And your second question was related, if I'm not wrong, about organic growth?

[Giles Thorne, Equity Analyst]

Yes, it was a very simple question. How much tenancy headroom do you have?

[Tobias Martinez Gimeno, Chairman, CEO & MD]

Well, sorry because it is -- well, it is difficult with the current electromagnetic limits. But first of all, Switzerland should review these limits for sure, otherwise they cannot roll out the 5G network. But I have to say that we are overperforming from our acquisition business plan, but maximum, maximum, maximum would be 2 tenants per site. But with the current limits in Switzerland and then mainly in the urban areas, I do not expect more than 1.6, 1.7, yes.

[Operator]

Ladies and gentlemen, there are no further questions. I now give back the floor to the company.

[José Manuel Aisa Mancho]

So we have now reached the end the session and I would like to thank you all for attending today. And so with the rest of the Investor Relations team, we'll be at your disposal to answer any remaining questions. Thank you so much, and have a great weekend. Bye-bye.