Cellnex Telecom SA

MAD:CLNX

Earnings Call Transcript 2020-Q1

[Juan Jose Gaitan Mañoso, Head of Investor Relations]

Good morning, 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 Q1 2020 Results Conference Call. We appreciate that today's a bank holiday for many of you, so thank you so much for the extra effort. And we also hope that you and your families are well. We look forward to seeing you again in person very soon when things come back to normal. As always, I'm joined by our CEO, Tobias Martinez; our CFO, José Manuel Aisa; and our Business Deputy CEO, Alex Mestre, who will lead today's session. Throughout our prepared remarks, we will refer to the presentation we published yesterday, and then we'll open the line for questions. Please note that this session will have a maximum duration of about 1 hour. So now I'll hand over to Tobias Martinez. Please, Tobias.

[Tobias Martinez Gimeno, CEO, MD & Director]

So thank you very much. Good morning, everyone, and thank you so much for your time today. I would like to start sharing with you the main highlights of the period, which has been marked by our ability to adapt to a situation with our President. Thanks to the early measures we implement at the beginning of the virus crisis, we have been able to guarantee 100% continuity of services in all of our countries. It has been key. We are currently operating with a maximum level of responsibility with regards to our clients, our suppliers, our employees, who continue to work normally and ensuring the continuity of our operations and a society as a whole, committing financial and technical resources for cooperation projects and try to alleviate the short-term impact of the crisis. Therefore, the numbers we are presenting today are only the consequence of our capacity to adapt to a new reality in a very short period of time. As for the numbers themselves, they show a consistent organic performance, our focus on efficiencies and the contribution from our recently acquired assets. Revenues have increased around 50% compared to last year. Adjusted EBITDA has increased 64%, and our recurring leverage free cash flow are robust 50% with our contracted revenues reaching EUR 46 billion. Not only we have seen limited impact in our business, but we are actively engaging with our customers in order to assess the potential for more services. We are also reiterating our guidance. Please remember that it includes the contribution from Arqiva and the towers from NOS in Portugal. And as we approach the closing, we will update our outlook accordingly. Since the COVID crisis started, we have been approached with questions around our ability to deliver in this situation. And I think that recent developments provide a clear answer. We have been able to execute our second step in Portugal just 4 months after entering the new market and signing the deal in the middle of the crisis. We are seeing that the mindset of customers and governments is evolving, and they are appreciating the strategic nature of telecom services more than ever. The majority of European countries are classifying telecom as an essential service, and we are also seeing a dramatic increase in the demand for data. And finally, I would also highlight that thanks to the homework we have been doing, today, we have plenty of financial flexibility. We have around EUR 6 billion of available liquidity fully contracted, and we keep all the doors open in terms of potential sources of funding. So moving to Slide #3, let me please reiterate our ability to adapt to this new situation. We have made sure that all of our network operation and control employees have the means to work from home, not having experienced one single disruption in any of the services we provide. The rest of our organization is also working from home, having adapt our IT systems to warranty 100% business continuity, with the exception of our field engineers, to whom I would like to thank their dedication and their commitment in these challenging times. Yesterday, it was our birthday. Our IPO took place 5 years ago, and it is thanks to this team that we have built the Cellnex you see today. On Slide #4, just a quick update on how our growth strategy translates into geographical presence and financial metrics. When all of our deals are closed and our build-to-suit programs complete, Cellnex will strength its position in Europe as the main independent telecom infrastructure operator, managing a portfolio of around 61,000 sites, increasing our financials and significantly improving our business profile. Our portfolio of sites will be around 9x bigger than the moment of our IPO only 5 years ago. Around 85% of our revenues will be generated by telecom services and around 85% of our EBITDA will be generated outside of Spain. And with this, I will now hand over to our CFO, José Manuel Aisa, who will provide more details on the period.

[José Manuel Aisa Mancho, Corporate Finance, CFO and M&A Director]

Thank you, Tobias. If we move to Slide 6, we are showing here our operational performance in the quarter. As we have already mentioned, we have consistently generated organic growth across all of our geographies. Total PoPs have increased around 60%, including the contribution from organic growth and also from our recent acquisitions. If we focus on organic growth only, excluding any change of perimeter, PoPs have increased around 5% compared to last year as a result of the continued densification process that we are seeing across Europe. Finally, DAS nodes grew at around 25%, and we expect to be more active in this area, pursuing a number of opportunities related to broadband connectivity for indoor coverage and transport networks.On Slide 7, you can see a list of the commercial opportunities we are seeing, assessing in order to secure future organic growth, both in terms of our traditional services but also new services in order to become a more relevant industrial partner for our clients. In summary, Iliad continues to generate organic growth in Italy and France, and we believe we can continue expanding this successful industrial partnership. We are seeing demand for our services, not only in established markets but also in more recent markets, with collocations requested by new tenants and discussions around potential densification solutions. We continue to execute in the area of indoor coverage and other densification solutions as a neutral host across Europe, with attractive opportunities being assessed for football stadiums, transport networks or shopping center. We are also expanding our 5G capabilities beyond our core business by analyzing opportunities in tower adjacent areas, such as fiber-to-the-tower, outdoor small cells or mobile edge computing, always with towers at the core of our strategy and only winning to proceed as a natural extension of our relationship with anchor tenants and with the same tower economics and business model. Moving to Slide 8. You can see here the building blocks of our recurring levered free cash flow in the period. The positive impact from our organic growth, including efficiencies and the gradual deployment of sites associated with our build-to-suit programs is significantly reinforced by the contribution from our recent deals. This is partially offset by cash elements below our adjusted EBITDA, being the payment of leases linked to new portfolios, the main contributor. Taking all these effects together, Cellnex has generated a strong recurring levered free cash flow growth of 50% year-on-year. Moving to Slide 9. Our revenues have increased 49%; our adjusted EBITDA, 64%; and our recurring levered cash flow, 50%; with our adjusted EBITDA margin significantly increasing to 74% from 68% last year. If we look at the figures in the table, you can see that this adjusted EBITDA growth is mainly explained by the contribution from Telecom Infrastructure Services' organic growth, build-to-suit plus acquisitions, and by the efficient management of our OpEx base. Payment of leases increased due to the larger footprint. Maintenance CapEx is expected to converge towards our guidance during the year. And interests paid reflect the terms of our debt structure and our available liquidity. Moving now to our balance sheet on Slide 10. Movements compared to December 2019 are mainly explained by our M&A activity in the quarter. Increase in total assets and decrease in available cash as a result of our deals, and liability is up due to the new instruments in the period. Compared to December, our net debt increases, again due to our M&A activity, but our strong liquidity position allow us to face our committed investments and also continue pursuing the opportunities in our pipeline. Following up on this, you can see on Slide 11 the details of our capital structure and our available liquidity position. Our debt has an average maturity of around 6 years, a cost of around 1.5% and no refinancing is required before July 2022. It is important to highlight in the current context that we have a strong position of available liquidity at around EUR 6 billion, fully committed that we will reach a backlog of EUR 46 billion when we close all of our transactions and that our debt has no covenant, no pledge nor guarantee. This unique combination allow us to maintain our financial flexibility even in this challenging environment and provide us with a wide array of options in order to continue financing for our growth. And with this, we are now at your disposal to answer your questions. So please, let's open the line.

[Operator]

[Operator Instructions] The first question comes from Andrew Lee from Goldman Sachs.

[Andrew J. Lee, Equity Analyst]

I had a couple of questions. One on organic growth, and secondly, on the M&A pipeline. Firstly, on the organic growth outlook, your outlook under this COVID environment. There was a slight slowdown on organic PoP growth in Q1. Does this mean we should extrapolate the small impact from COVID in March to a more extended and larger impact through Q2 and that the run rate of organic growth rate -- of organic growth in Q2 will be meaningfully lower? Another way of asking that question is what do you think the organic PoP growth rate will be in Q2? And then the second question was on the M&A pipeline. You stuck to the old pipeline numbers in the presentation. I wondered if you could give us a bit more color on the scale of opportunity going forward, and what the mix is of the future M&A opportunity between towers and by the backhaul.

[José Manuel Aisa Mancho, Corporate Finance, CFO and M&A Director]

Thank you, Andrew. On your first question, I would say that applies -- maybe too early to try and extrapolate what we've seen in March for the rest of the quarter. I guess that we have like almost 2 full months, May and June, to make our conclusions. Also bear in mind that we are coming from a very strong quarter in Q4 2019. Also where in some cases, the -- maybe the commercial activities is lower. Typically, we also see that during the summer months, for example. So I guess that -- no, I think it's maybe too early to make conclusions on the rest of the organic performance during the year. So far, we haven't seen any change in underlying trends from our customers. Maybe pipeline...

[Tobias Martinez Gimeno, CEO, MD & Director]

Well, about the structure of the pipeline remains the same, I mean, but we are seeing that, obviously, 5G is becoming more and more on the table. I mean when we are approaching customers beyond of this temporary impact of the corona crisis, customers are raising 5G project. So that I think this is a very good information. This is a very good clue of -- they are looking at beyond of this crisis because 5G, no doubt, is a strategic part of the future CapEx plan or outsourcing opportunities. So I think the trends, it's moving accordingly with this evolution of the technology, typology and the requirements from the customers. So I think, in a nutshell, we could say that we are seeing strong activity, a very, very strong activity on the telecom operator side.

[Operator]

The next question comes from Simon Coles from Barclays.

[Simon Alexander Arulraj Coles, Research Analyst]

I guess just a follow-up on the M&A one. I saw in an interview, Tobias, you talked about the portfolio potentially doubling over the next 3 years. So I was just wondering is that still macro towers? And is that you buying existing assets? Or should we start to think about the pipeline moving more towards a BTS opportunities or predominantly BTS opportunities? Or will we start to see increasing deals around small cells or further fiber-to-the-tower? And then secondly, and probably a question for José Manuel. Previously, we've always expected deleveraging to happen at about 0.6x EBITDA per year. Now we're entering a phase where you're spending quite a lot of expansion CapEx on the BTS programs that you've signed. How should we sort of think about that deleveraging profile going forwards if we assume no more M&A after Arqiva and the NOS deals? And is it purely going to come from EBITDA growth?

[Tobias Martinez Gimeno, CEO, MD & Director]

Well, thank you, Simon. I will reply your first question. And it's -- again, it's maybe same question for. We are seeing that 5G is impacting on the requirements of the telecom operators. So this is a fact, not just for Cellnex, it's a fact for this industry. We are seeing that wireless infrastructure and the opportunity to outsource, it's becoming more and more a fact. I mean after 5 years -- because yesterday, it was our fifth anniversary since the IPO, we are seeing that today, no doubt, no doubt, 100% of the players in Europe are looking at outsourcing as a strong tool in order to monetize and/or to create value. Doesn't matter. We are following the evolution of these players. And we are designing a tailor-made solution for everyone. I cannot tell you that -- well, fiber-to-the-antenna, it's becoming more and more relevant. Well, we'll see. We'll see. But it's a fact that if you look our recent agreement with Bouygues, fiber-to-the-tower will be a must for 5G. It's a must. Same -- the densification. So densification will be a must. I mean -- but it's a different type of densification. It's not just about towers. It's not just about rooftops. It's about the AES. It's about small cells. So I think the evolution of the technology, it's accelerating also. It's creating new opportunities in different type of infrastructure. So this is the reason why we are seeing that -- if you look at our backlog, if we stop the sales process today, we are doubling the company at the end of 2022, since the figures you can look at the end of 2019. But in our view, the M&A process will allow us also to doubling the size of -- in the next coming 3, 4 years from now. So this is not just about of the capitalization of the contracts we already have in our backlog. It's about the opportunity to consolidate this positioning to improve the efficiency, to improve the build-to-suit program. But build-to-suit will be also a part of this evolution of this growth because, again, densification will be a must as well. So densification, fiber-to-the-tower, so we will find more and more opportunities in this regard.

[José Manuel Aisa Mancho, Corporate Finance, CFO and M&A Director]

Simon, regarding your second question, you are right when you see that, somehow, in the next 3 years, as we develop our strong build-to-suit programs, it is true that our -- the cash flows that we generate are deposited to these build-to-suit programs. So we are somehow out and self-sufficient ourselves. We can self-fund it ourselves. But at the same time, it is true that our net debt EBITDA deleverage profile, it reduces a little bit, this is on one hand. On the other hand, we are improving significantly our business risk profile and our diversification in terms of clients and in terms of countries. So from a credit perspective, this has a neutral impact. Once these build-to-suit programs are somehow reduced, we will come back to the deliveries profile that we had initially. So yes, it's true. We are in the middle of important process of investment. We are self-sufficient. So all the cash that we generate, we devote to build. We do not need any cash from outside. But it is true that our net debt to EBITDA in the next 3, 4 years will show how deleveraged but not at the same speed as before. After that period of time, we will come back. The company generates cash flows, has good profiles of cash flows. And in the long term, this is a good strategy.

[Operator]

The next question comes from Roshan Ranjit from Deutsche Bank.

[Roshan Vijay Ranjit, Research Analyst]

Great. Two for me, please. We see -- we saw a pickup in the lease liability this quarter as a result of the -- these Iliad sites coming online and OMTEL. Is it possible to get a sense of how we should think about this tracking through the year as the kind of build-to-suit programs ramp up there? And secondly, a kind of, I guess, high-level question. In your discussions with the MNOs, what kind of commitments are they asking from you? I guess, my question is based on -- if I think back to last year, beginning of last year, you came to the market and raised equity prior to announcing a deal. And then, again, later in the year, you announced the deal at the same time as raising equity. So were you seeing the same kind of dynamics for MNOs? Are they wanting kind of commitments or the ability to self-funding? Or are they a bit more relaxed now?

[Tobias Martinez Gimeno, CEO, MD & Director]

Thank you, Roshan. Maybe I will take the first one. Basically, you shouldn't be expecting a major impact from incremental lease liabilities as a result of our build-to-suit program. I mean, of course, change of perimeter, at the moment, we closed a significant site transaction. In the balance sheet, you will see the impact of the lease liabilities associated with these towers that we are acquiring in day 1. But also it is that we are making progress on our build-to-suit programs. In terms of number of our new sites per year, it's maybe a few hundred. So you shouldn't be expecting a major impact in our balance sheet coming from this activity. And I will leave the second question for José Manuel.

[José Manuel Aisa Mancho, Corporate Finance, CFO and M&A Director]

No, listen, the commitments that we are doing, we are obtaining from our partners and also come from a discussion with them. And what we do offer are deals from scratch, which means that we sit down together and we understand each other needs. And obviously, from that discussion, we obtain a commitment. And on our side, it's very important to be commensurate with our rating, in the long-term, with our cash flow generation, as we were saying before to Simon. So obviously, on the other hand, the deployments of the clients do not have to be executed from 1 day to the other. This takes time. This is about industrial developments. So I think that sitting down together, we can find ways of collaboration, which are somehow sensitive to their industrial needs and also to our industrial capacities and funding possibilities. When we come to you to ask for equity, as you were saying last year, what we try to do is to obtain the highest visibility in our pipeline and also from our discussions. And this is a good part of Cellnex. We work from scratch, from an industrial perspective, and we try to reach win-win agreements.

[Operator]

The next question comes from Ottavio Adorisio from Societe Generale.

[Ottavio Adorisio, Equity analyst]

A couple of questions on my side. Could you -- it's difficult to comment on future deals. I just want actually to go back to a deal you recently announced, the NOS one. You announced 2 deals this year in Portugal and pretty sizable. So I believe there are significant overlaps in the towers between the 2 infrastructure you bought. I guess you also had the opportunity to do some due diligence on these 2 deals. So my question is, which sort of how -- what's the overlap in between the 2 infrastructure? Which kind of synergies you can extract? And also how difficult is to move customer equipment from 1 tower to another to extract these synergies? This question is actually tied up with a deal that you looked at, publicly, you're looking at the moment is in Ireland. Of course, you cannot comment on future deals but because that would, for sure, overlap with another deal you did a year ago with Cignal. Again, the question is, how easy to move equipment? How the contract starts with the clients whenever you buy the towers? Do you have full flexibility or you have plausible information?

[Alexandre Mestre Molins, Business Deputy CEO]

Thank you, Ottavio. This is Alex Mestre. So yes, in relation to second deals in a country, where we already have a previous anchor client, this is an element that we always try to factorize as much as we can on the contracts on ensuring the capacity to moving equipment in the event that, that makes sense, okay? So the ability to do that, this is so-called decommissioning, as we've been doing already up to a certain point in the past is an element that we want to have a certain degree of liberty to drive that in the relationship with the clients. When we look at the case in Portugal, there is a certain portion of it. However, this is linked to 2 trends happening at the same time. One is the 5G densification, which may be requiring sites that, in principle, potentially could be with lower frequencies decommissionable. However, when you look at 3.5 gigahertz that you know the radiation distance are shorter, maybe it's not that obvious. This is on one point. And the second one, also happening in parallel in that case, particularly with NOS, to whom we acquired the second portfolio, there is an announced RAN sharing agreement with another player in the market that is yet to be crystallized. It's yet to be formalized also on their side, and this is potentially not allowing to have a clear vision on how this combination could be done in the future, okay? So be in mind those 2 elements running in parallel. You mentioned about Ireland. Our first acquisition in Ireland was not an acquisition that we did directly with 1 MNO. It was with TowerCo. That was not having an anchor. So this means the overlap here, we need to pay attention. In fact, [ AIR ] is a good client of our first portfolio, which means that the potential decommissioning is less obvious because that efficiency has already been done previously being us, Cellnex Ireland, as of today, a company which is already hosting [ AIR ] in an important proportion of our sites.

[Operator]

The next question comes from Giles Thorne from Jefferies.

[Giles Thorne]

My first question was on France and Bouygues. I was very surprised to see Bouygues choose to work with Phoenix Tower for a very large build-to-suit program. So if you could give us some color as to why you are doing that work for them? Second question was, yes, back on Portugal. And Alex has hinted it's part of the answer. But last year, Vodafone obviously negotiating the network sharing. Can you confirm whether you will or won't be part of that overall agreement? So if you are, presumably, you will be asked to do some type of upgrade CapEx to the sites in preparation for 5G, maybe fiber and maybe you'll be allowing RAN sharing on your site as well. And the reason I feel justified in asking is just because you included an expansion CapEx in your guidance for that deal. So it feels like you will be part of that solution, but if you could just confirm. And then Germany, Tobias, in an interview, you've expressed what I would interpret as a little bit of frustration around Germany and how -- and I don't mean to put words in your mouth, but I will, how Deutsche Telekom is perhaps being a bit slow in making a decision around a partnership. Why not just force their hand by participating or looking at the Telefónica Deutschland deal that's ongoing at the moment? That was it.

[José Manuel Aisa Mancho, Corporate Finance, CFO and M&A Director]

Thank you, Giles. Maybe Alex will answer the first 2, maybe Tobias the last one on Germany.

[Alexandre Mestre Molins, Business Deputy CEO]

Yes. Thank you, Giles. In relation to France and build-to-suit program on rural areas that we are not participating, that is, it can be understood that on the strategy relationship that we have with Bouygues is very much devoted to dense areas. If you look all the portfolio, all the different projects that we are having with them in terms of central offices, metropolitan offices and tower deployment is -- and our tower acquisition is basically on the dense areas. So it is our understanding that what really we wanted to have is foster -- and a strong partnership with someone -- only 1 partner on the dense areas. Then on rural areas, those have been competitive process. Of course, we participated, but probably someone make a better offer. And this is the way it went ahead. So we are fine with it. Moving to Portugal. Yes, as we mentioned before, there is this announced agreement, not yet crystallized. And of course, we have given all the flexibility to our new partner in Portugal to handle that on the best way they need. So we've been always of the opinion that having active sharing agreements does not necessarily mean that you need to do a passive sharing agreement. This is a way to do it, and 2 operators can join forces on the active and on the passive. But then on the passive part, they are both more bounded onto each other on the final decisions. So technically, it's completely possible to do monetization, carve outs and not sharing into the single entity the passive equipment, however, still doing the active equipment agreements. This is an element which we believe it gives the highest degree of flexibility for everyone, and this is how we have been endorsing and supporting our partner in Portugal in order for them to have full degree of flexibility on how to rearrange the -- finally the RAN sharing. In this RAN sharing, there will be RAN sharing assets on the top of our new towers. There will be sites, potentially, that may survive the RAN sharing efficiency agreement. So that will bring a potential opportunity in the future. Let's see. But now, let's say, NOS will have full flexibility to have their discussions with Vodafone, and we are happy to be supportive to that.

[Tobias Martinez Gimeno, CEO, MD & Director]

Then about Germany. Germany, as a market, as a country, obviously, I think it's a target for everyone, I mean not just for Cellnex. But there are just a few opportunities. You know that you have -- we have a very good and fluent relationship with Deutsche Telekom, but we are -- in executing our strategy, we are interacting with them. We are always in conversations, but it doesn't mean that, currently, we are discussing on a specific opportunity. And I think we have to keep going, I mean. But we are not feeling this situation as a frustration. I mean it's obviously an opportunity and sometimes wishes could be stronger than the reality. But again, no complaints at all. We are very passionate in order to find the right opportunity in every country, in every market. So -- but it's not a frustration. It's not at all. We are very happy up to today. But obviously, we don't want to renounce in order to find the right opportunity to be in Germany, obviously.

[Operator]

The next question comes from Jakob Bluestone from Crédit Suisse.

[Jakob Bluestone, Research Analyst]

I have one question, please. I'd just be interested in hearing your sort of perspectives on the fact that a number of operators have suggested that they might slow CapEx a bit in the sort of current environment in order to protect cash flow in the near term. It's -- obviously, there's a lot of things in CapEx and perhaps some of the issues are more related to fixed line and some of the difficulties of deploying fiber. But I'm just interested to hear from your point of view and your discussions with the operators, are you seeing any sort of signs of perhaps they're taking their foot off the pedal a little bit and trying to go a little bit slower on some of their deployments? And sort of whether there's any shift in their desire to pursue build-to-suit at quite the same pace? So just sort of curious about your thoughts around those comments we've had from the operators.

[Alexandre Mestre Molins, Business Deputy CEO]

Can you please repeat the last part of the question? Sorry.

[Jakob Bluestone, Research Analyst]

Yes. I mean my question is really just some of the operators have suggested that CapEx might undershoot this year, in particular, because of the current macro backdrop. And so I was just wondering, does that have any implication for you guys in terms of their desire to roll out 5G, for example, at quite the speed that you've -- that we perhaps were originally hoping?

[Alexandre Mestre Molins, Business Deputy CEO]

Well, we cannot comment on CapEx plans from our clients logically. But if that would be the case, we see that as a potential opportunity because we are -- because the needs for deployment still exists. Whatever it is, because regularity obligations are as a result of the commitments on the spectrum concessions, or because as we have been -- all of us enjoying/suffering the massive need of networks to be deployed during this current situation. So the need is there. And why is this an opportunity? Because it allows us for a potential organic growth capabilities or even, why not, we're deploying CapEx on behalf of our clients in -- and we are already used to that. We have several projects, which are for CapEx projects than actually M&A projects. So it's part of our value proposition to the clients today. So happy to continue, let's say, boosting this business case.

[Operator]

The next question comes from James Ratzer from New Street Research.

[James Edmund Ratzer]

Two questions, please. Just I'm interested in your thoughts on the announcement earlier this week about the formation of a larger open RAN alliance between a number of vendors and operators. I mean do you think that has any implications on your business going forward? Just to hear your thoughts on that.And then secondly, specifically in Spain, I'd just be interested in hearing what you're seeing from Vodafone and Orange as they execute their own tower and RAN sharing deal. Is that likely to have any impact at all on your level of tenants during 2020 in the Spanish market?

[Alexandre Mestre Molins, Business Deputy CEO]

Okay. So in relation to the open RAN, we monitor that quite closely. Actually, we're active in associations, like TIP from Facebook and others, where we are envisaging the virtualization of the radio networks. So we believe that this is an interesting opportunity that will help to reshape a little bit all the vendors' ecosystem, bringing more players into the market of radio access networks. So it is interesting because it's shaking the industry, and it is a good element. And we are closely monitoring all those initiatives from a standardization standpoint. In relation to the second question, I understand that you are referring to the Vodafone and Orange RAN sharing agreement in Spain, particularly?

[James Edmund Ratzer]

Yes, correct. Yes, but whether that's actually even -- they've talked about, I suppose, trying to reduce their tenancy count in Spain. But I was actually trying to kind of work out if that is really starting to kind of come through on your business at all, or if that actually ends up getting pushed out for some time?

[Alexandre Mestre Molins, Business Deputy CEO]

No. This is something which is not being affected for us, especially because, for instance, the last acquisitions that we've been doing on Orange sites, those are post efficiency of the RAN sharing agreements that they have with Vodafone. So no one of those sites is part of the potential decommissioning in the way that they have geographically split Spain into areas, 1 Orange and 1 Vodafone. So this is very much in line on my comment before that we really envisage the way to monetize infrastructure, to carve out infrastructure by the operators, but still having very strong bindingness on the RAN sharing part, which is the case of Spain. And again, happy to support our clients on their efficiencies, too.

[Operator]

The next question comes from Sam McHugh from Exane.

[Samuel McHugh, Analyst of Telecom Operators]

A couple of questions quickly. Just firstly, what proportion of your sites today are owned versus leased? And I just wondered if you saw any opportunity, a, given the current macro environment to opportunistically prepay rents or acquire more land. And just related to that, how much non-BTS expansion CapEx would you be comfortable spending? And then secondly, you now own a lot more towers than you did a year ago. Just wondered if anything had surprised you now that you've taken ownership of some of these sites, and whether your approach to M&A has changed given your experiences in those last 12 months. So kind of a bit of a big picture question.

[José Manuel Aisa Mancho, Corporate Finance, CFO and M&A Director]

Thank you, Sam. I would say that on your first question, you can see that maybe 90% of our sites are on land that we basically lease, and generally 10% we own this land. It is true with maybe an enhanced strategic nature of our sites, we are proactively assessing the potential to acquire land. I mean, of course, that needs to make sense financially. Also that should be linked to the, I would say, the specific strategic nature of that site. So we're going to be careful about committing to that total land derivative on terms. So yes, I would say that we are more open to consider either land acquisition or maybe very long-term right of use. On the second question, maybe let me please rephrase for the team because I'm not sure that we've got that, which is, if we have seen different dynamics in the way we approach M&A now, what we have learned from our experience in the past, having done many deals now.

[Tobias Martinez Gimeno, CEO, MD & Director]

Because COVID or...

[José Manuel Aisa Mancho, Corporate Finance, CFO and M&A Director]

No. Is that correct, Sam?

[Samuel McHugh, Analyst of Telecom Operators]

Yes, exactly. Like -- whether like -- you've obviously been negotiating kind of the deals. I wondered if -- your kind of view about how you do deals, how you structure deals, or anything that you've learned maybe in the last 12 months.

[Alexandre Mestre Molins, Business Deputy CEO]

Well, I'm happy, José Manuel also, since you are a head of M&A, but we are continuously learning. There are mechanisms that were not applicable 2 years ago and now are applied, not only from our side, but also in many other M&A deals that we are not even having presence. So we haven't reached quite a lot the different elements that we can offer in our value proposition to our partners in all senses in the operational, in the financial, in the build-to-suit schemes, on the asset classes in order to tailor deals, which are tower-like 100% in any case, irrespectively if it's a fiber-to-the-tower or it's a tower itself. So there is a learning process, yes, on that. I'm sure we can continue learning. But after the amount of deals, we are quite steady already on that. But, Sam...

[Tobias Martinez Gimeno, CEO, MD & Director]

I will say to you that the key point is not to change the business model. This is the key point. So at the end of the day, all the asset class must have exactly the same M&A dynamics in terms of revenue growth, OpEx, in terms of CapEx maintenance, in terms of expansion CapEx, so everything. If you print out an Excel sheet of a tower deal and a fiber-to-the-tower, and you bring both P&Ls and cash flows, and you hide the name, it must be very difficult for anyone to know who is who. So this is key for us. This is to retain the business model, the cash flows, visibility, the organic growth in the future that has given us the opportunity to create value in these last 5 years.

[Operator]

The next question comes from Luigi Minerva from HSBC.

[Luigi Minerva, Senior Analyst]

Yes. My three questions, the first one is for Tobias, just going back to your interview a month ago on the Spanish press. You mentioned about integrations of assets, and that's not always straightforward, given the numbers you've executed. So I just wanted to ask you to what extent the effort required in integrating all the various assets you have acquired recently actually becomes predominant on your ability to acquire new ones. And the second question is related to the fiber-to-the-towers opportunity. Are you able to give us maybe a 3-year view on the size of the opportunity? And in which market it is more important? I presume it is in the markets where you cooperate with smaller players rather than the larger ones. And then maybe, finally, on the competition to acquire new assets. If we enter a recession or a partly severe recession, as expected, do you see infrastructure fund, private equity to become less competitive in public tenders? And so what do you see the valuation of the assets going in terms of the ones that will come from public tenders?

[Tobias Martinez Gimeno, CEO, MD & Director]

Well, thank you. I will reply the first question. So integration, obviously, is a must. I mean we are not an infra fund. We are not a private equity. So we are an industrial group, so it means that we have an industrial model. One of the things that we are receiving these lessons learned on the corona crisis, positive reception is from customers. So customers are realizing that in this current situation, companies like Cellnex, with a strong industrial structure and track record, reliability in our services are a must. I mean providing 100% of continuity since the very beginning has been an outstanding value proposition, but by facts, I mean, not just as a pure nice words. And this is the reason why we are paying a lot of attention to integration. And you are right. It's an effort. And sometimes it's challenging to manage in parallel integration with the M&A opportunities and therefore, the speed of the growth. So this company is true. We -- when we find the right opportunity to create value, to integrate companies, to improve our presence in 1 country, we go for it. Obviously, sometimes, we cannot reach the success, but we try. And I think we have a very high success ratio. But you are underlying one of the most important topics on the day by day. This is about integration. And this is -- again, this is the reason why we're having a specific structure, led by the Deputy CEO and COO. We have a specific structure devoted to ensure that we are integrating people, processes, setting our own industrial model, combining a common culture but, obviously, respecting the country-by-country culture. But integrating, integrating, integrating because it's about a group. We are an industrial group. And this is -- well, it's time-consuming. It's an effort in terms of managing the growth. So as you can see in the figures, we are showing you that we are consolidating our M&A acquisition in 2019 but in a very good shape. I mean delivering reliability even in the current situation on the corona crisis. So -- and we are receiving a lot of congratulations, a lot of good feedback from our customers. Thanks, Cellnex, to be there, thanks to helping this difficult situations. As you can imagine, we are not making noise, but we are supporting strongly the operations in every country because now is the right -- this is the right time, it's the right opportunity to show what does partnering means for Cellnex.

[José Manuel Aisa Mancho, Corporate Finance, CFO and M&A Director]

On your second question, Luigi, I think that fiber-to-the-tower is an opportunity that makes sense where we already have a presence. So I would say, existing countries and when we already have our anchor tenant. If on top of that, our anchor tenant also have the need to invest in fiber backhauling, that is something that -- for obvious reasons, and because of the same economics as towers, that is something that we can do -- that we can do for them. In any case, as you can imagine, the proportion of these opportunities compared to our core strategy, which is towers, is limited. So the variety of the opportunities that we are pursuing today is based on macro sites. On your last question, I would say, competition dynamics have not changed. I mean this is an area that has attracted interest for many years. Many different players, different profiles are willing to have a presence. But I guess that -- well, we have quite a unique combination, investment profile, partners are comfortable dealing with us and that's why we do believe that we continue to be in a good position to continue growing in Europe.

[Operator]

The next question comes from Emmet Kelly from Morgan Stanley.

[Emmet Bryan Kelly, Head of European Telecoms Research]

Yes. This is Emmet from Morgan Stanley. I just had one question, please. I know it's about 4 months, maybe 5 months since you started integrating the Iliad and the Salt towers. So I think you've brought on, I think, is it 1,800 towers in Italy, about 5,500 in France and just over 2,500 in Switzerland? Can you maybe just give us some early indicators of any success you're having at upselling secondary tenancies on these towers, maybe indications of interests that you're getting from other telcos to lease space on the towers? I'm conscious it's still very, very early days, yes, and we've also had the COVID crisis in the middle, but any kind of flavor of raising the secondary tenancies on those towers, please?

[Tobias Martinez Gimeno, CEO, MD & Director]

Thank you, Emmet. Yes, as you have said, we are in early stages. The beauty of those 3 projects is that we have already a previous anchor in each one of those geographies. So this allows us to facilitate the discussion among the players, so we can very quickly identify synergies in the middle of a 5G deployment. And again, this is something that it creates, let's say, an additional element for the CTOs to take into consideration, whether decommissions are possible or not. So there is -- in front of that, there is more a prudent element before decommissioning a site level. Let's think twice because I may be needing it for on 5G. But there are initial talks, positive. Difficult to give you, as of now, any indication on the potential absolute periods of uptakes as of now.

[Operator]

And the last question comes from Stefano Gamberini from Equita SIM.

[Stefano Gamberini, Analyst]

If I may, the first regarding electromagnetic pollutions. You said that the demand of new investments from MNOs for the development of 5G is growing a lot. On the other side, it seems that also from local communities the concerns about 5G pollution are growing. So you see some risk there. What is the main obstacles to accelerate these investments that could arise from this perception from local communities more than from governments or EU? The second regarding P&L figures. You accounted the EUR 18 million one-off in the first quarter. Do you think that there are some other one-offs during the years related to the crisis, probably, and so on? At the same time, as regarding cash one-offs, if I'm not wrong, in the first quarter, were around EUR 85 million. Could we expect something also in the rest of the year? The last question regarding the cash tax rate. I noticed it was 0 in the first quarter. But when you go ahead with the new acquisition and you calculate your levered free cash flow targets, what is the average cash tax rate that you applied? This is, if I'm not wrong, in the last acquisition in Portugal. This was close at normalized level, while, historically, it was lower, thanks to the tax shield that's from goodwill, depreciation and so on.

[José Manuel Aisa Mancho, Corporate Finance, CFO and M&A Director]

Thank you, Stefano. Let me maybe start with the second one. The answer is yes. I mean there are a number of elements that because we don't pay net at a -- directly attached to our business, we are classifying as a nonrecurring. So for example, given the -- our growth, we are booking M&A expenses and that constitute the bulk of this line. But yes, which should add the -- of course, that we're going to much depend on our M&A activity during the year, but you can foresee a similar performance during the rest of the year. On the third one on...

[Tobias Martinez Gimeno, CEO, MD & Director]

Yes. No. On the tax, and you know that since every year, Cellnex has been very focused on structuring a tax scheme that is, first of all, fully compliant with the law. And secondly, that helped us to optimize the tax -- the tax cash -- the cash tax. So when you raise this topic, let me give you what we have done so far. Since 2015, the last 5 years, our tax -- our cash tax over total revenues have gone from 2% to almost 4%, depending on the year of total revenues. There has been some years in which the tax bill has reduced a little bit, has been increased a little bit, but this seems to be -- this is to me that what we have done so far. What can happen in the future? It will depend on how we structure the deals of M&A. It was highest in the area. It is true that Cellnex -- for Cellnex, there is no -- we do have M&A golden rules. And these M&A golden rules are fully focused on the cash flow that we generate. It is obvious that we do prefer those transactions in which we acquire assets to those transactions in which we do acquire shares, because of our reasons, assets are fully tax deductible. In the next years, we will continue doing so. So I think that if I -- when we run our models, we continue projecting what we have done in the past. So the same tax strategy. And what -- I think that's a very, very competitive tax structure compared to our peers, even though our peers are real estate transfer tax company -- real estate companies, so we've -- I think we can be very competitive in the next quarters also, very competitive.

[Alexandre Mestre Molins, Business Deputy CEO]

And in relation to the first one, Stefano, well, needless to say that there are no physical evidences that these radiations are causing any harm to the health. But well, we are, nowadays, let's say, health-sensitive and this is normal. The reality is that these electromagnetic emissions are normally measured through the distance from the emitting point. So clearly, there is a difference in that sense from a rooftop to a tower. So towers are, by definition, further from the areas where the people may be living. And there is clearly a different way to measure from a tower to a rooftop. Clearly, on the towers, there is no impact on this because precisely the way it is measured. On the rooftops, people are closer. However, physically-wise, a rooftop is not able to hold the same amount of antennas than a tower. So as of now, we do not see any change on our projected tenancy ratios as we've been doing, or colocation abilities that we've been considering up to now because that's more sensitive element maybe coming on the social landscape.

[Stefano Gamberini, Analyst]

A quick follow-up, if I may. Are you experiencing that from MNOs, the installation of small cells could improve the situation or not?

[Tobias Martinez Gimeno, CEO, MD & Director]

Yes. It's a measure that we are discussing. But MNOs, as we've -- been mentioned previously in other occasions, they want to squeeze the macro as much as they can. So meanwhile, the macro can collocate elements that is what is going to be used. You well identified that small cells is a mitigant of that. So you can put, let's say, 10 small cells over a -- even furniture, which is an area where we are also, as you know, looking after to be prepared when the time is ready to substitute a macro or a part of a macro because the lower frequencies always have to remain in the macro, okay? So you could do small cells at 2.6 gigahertz or 3.5 gigahertz, but not below. However, we have not yet seen that for the reason you are mentioning, the densification through small cells has been triggered because emission radiation limitations.

[Operator]

There are no further questions. Ladies and gentlemen, this concludes today's webcast call. Thank you for your participation.