Cellnex Telecom SA

MAD:CLNX

Earnings Call Transcript 2023-Q1

[Juan Gaitan, Director, Investor Relations]

Good morning, everyone. My name is Juan Gaitan, Cellnex Director of Investor Relations, and I would like to thank you all for joining us today for our Q1 2023 Results Conference Call.

As always, I'm joined by our CEO, Tobias Martinez; our CFO, Jose Manuel Aisa; and our Deputy CEO, Alex Mestre, who will lead today's session. We will now share the main highlights of the period, and then we will open the line for your questions. [Operator Instructions]

So without further ado, over to you, Tobias.

[Tobias Martinez, Chief Executive Officer]

Thank you, Juan, and good morning, everyone, and thank you so much for your time today. I would like to start highlighting that Cellnex once again providing a solid quarter both commercially and operationally. And that while the new CEO search process is well on track. The whole organization is aligned and fully committed to the execution of our strategy and meeting our public targets.

Of course, this also applies to our Board of Directors who completely endorses our new capital allocation policy, which will remain in place and guide our actions regardless of leadership changes. Therefore, today, I would like to take the opportunity just to provide some additional color about the quarter, but also to insist on the main characteristics of the next chapter of our equity story, which will be focused on execution, maximization of cash flows and unconditional commitment to investment-grade rating.

The period has been marked by an excellent commercial performance and a consistent operational execution with PoPs increasing close to up 7% compared to last year. Revenues increasing 15%, excluding pass throughs. Our adjusted EBITDA 15% and our recurrent leverage free cash flow 12%. This will constitute Cellnex's pattern going forward and increased focus on organic growth and continued progress on the crystallization of efficiencies and synergies in order to make sure that our OpEx leases remain under control.

The Next Chapter will also focus on free cash flow generation. With this metric trending to neutral by the end of this year, thanks to the contribution from the remedies process in France. Securing investment-grade rating as the overarching priority with any excess cash generated in the future to be deployed in a manner consistent with maximizing long-term shareholder value. Linked to this, the assessment of strategic options for our current portfolio in order to crystallize value, accelerate the investment grade process and further reduce our cost of capital.

As mentioned earlier, we have an unconditional commitment to our public targets, so we are reiterating our guidance for 2023 and 2025.

And finally, as a result of recent changes, we are strengthening our corporate governance with Anne Bouverot appointed as non-executive Chair of the Board and two vacancies being filled with a representative from TCI and an Independent Director. As we have constantly reiterated our executive compensation structure ensures a perfect alignment between remuneration policy and our strategic targets.

And I will now hand over to our CFO, Jose Manuel Aisa, who will provide more details on the period.

[Jose Manuel Aisa, Chief Financial Officer]

Thank you, Tobias. Since you already have the full presentation, I will just provide a few additional comments on the quarter, our capital allocation priorities and financial strategy. The quarter has been an excellent commercial performance with organic PoPs growing at 6.8% compared to the same period last year. This is primarily due to the build-to-suit progress made in France and Poland. The strong contribution from the new entrant in Portugal and organic revenue generated in Italy in the context of brand sharing agreements in place.

Excluding the impact from pass throughs, revenues have increased 15% in the period and recurring leveraged free cash flow 12%. Please bear in mind that recurring leveraged free cash flows is temporarily affected by payment of leases and interest being concentrated during the first half of the year.

Refining free cash flow as recurring levered free cash flow minus expansion CapEx minus build-to-suit plus cash received from remedies, we are expecting to become free cash flow neutral in '23. Going forward, our free cash flow generation will further accelerate as we reach the end of our build-to-suit programs and this underpins our rapid deleveraging.

Cellnex is constantly monitoring market conditions and assessing the benefits of different instruments in order to decide the most up prepared way to tackle near-term refinance needs. As such, we are currently working to boost debt maturities forward, considering a number of options. And if required, we can always use already available undrawn credit facilities to meet these financial needs. Going forward, generated cash flow will substantially exceed our debt maturities.

As Tobias has already mentioned, we have made the unconditional commitment to maintain adjusted leverage consistently below 7x with the objective to become investment grade by S&P as well as to maintain our investment-grade status by Fitch. This commitment to investment grade should allow Cellnex to access a deeper market at compelling terms. And in this sense, we are already assessing strategic options for our portfolio to crystallize value and accelerate this process.

And finally, just a quick reminder of our executive compensation structure that ensures a perfect alignment between remuneration and strategic targets. First, our annual bonus in 2023 will be linked to organic growth, recurring leveraged free cash flow, net debt-to-EBITDA, consistent with our past investment grade as well as ESG initiatives. Our '23, '25 long-term incentive plan is linked to absolute and relative TSR, free cash flow generation and ESG initiatives. And this is the structure that will remain in place when the CEO process is resolved.

And with this, we remain now at your complete disposal to answer any questions.

[Juan Gaitan, Director, Investor Relations]

Thank you, Tobias. Thank you, Jose Manuel. The first question comes from Akhil Dattani from JPMorgan.

[Akhil Dattani, JPMorgan]

We should expect an update soon. I just have to clarify...

[Juan Gaitan, Director, Investor Relations]

Sorry, Akhil. Can you hear him, again?

[Akhil Dattani, JPMorgan]

Sorry, can you hear me?

[Juan Gaitan, Director, Investor Relations]

Now we can hear you, apologies. Can you please start your question, please?

[Akhil Dattani, JPMorgan]

Yes, of course. Sorry about that. So I've got a few clarifications. The first one was just on the CEO process. And I guess I wanted to follow up on some of Tobias' comments from the beginning of the call. Tobias, you mentioned that there's obviously good progress. I guess I just wanted to understand a little bit better how we think about time line? Obviously, we have the AGM in early June. So would a CEO announcement proposal come in time for the AGM agenda so that this would be part of the AGM process? And if it would, could you just remind us when the AGM agenda would come out just so we have some sense of how the timing works over the coming weeks?

The second question was just on asset sales. You both mentioned good progress that is being made on this agenda as you focus on going to investment grade. I just wondered if you could comment on what sort of transactions we're talking about? Are these minority stake sales, which you've talked about before? Could this be full market exit? So what exactly is it we're talking about?

And then the final one is just on your revenue growth. You mentioned strong PoP growth of 7% organically this quarter. But your reported revenue growth rate is 19%. So clearly, there are lots of moving parts here. I'd just love to understand what you think your organic Q1 revenue growth is just so we have some sense of what sort of organic run rate the business is delivering?

[Tobias Martinez, Chief Executive Officer]

Thank you, Akhil. I'm Tobias. I -- you are right. Well, we do expect, and I can tell you, we'll be part of the CEO appointment, we'll be part of the AGM agenda. It's a question of a few days. And it's a commitment, and we do think that is the right thing to execute and to finish this process. So you are completely right. The CEO appointment will be part of the AGM agenda. So let's just wait for a while -- for a few days.

The second question about divestments. Our first priority is about minority stakes, but let me tell you why? So the small countries where we are today, are countries that are a bit young on our portfolio. And our sales process always takes a bit more of time. So the opportunity deserves a maturity period in order to grow. So we do believe that we have to devote a bit more of time. We have opportunities in order to consolidate the market and to continue growing in those, if I may say, small countries because we are just -- well, our priority maybe is to focus on small countries. And we do believe that selling majority stakes or full disposals, we would be losing the opportunity to consolidate and to grow.

So we are open to consider minority stakes, maybe even local investors, local means regional investors, which might be interested in order to invest in certain areas of Europe, and therefore, this is our first priority. Obviously, always at the right valuation, always at the right conditions, if I may say, and why not if, at certain point of time, in the future, we do believe that we do not have opportunities to continue growing? Why not to -- we are not against to consider full disposals? But I think that this is a pace in which we have to understand, we have to realize if there is opportunity to create value for our shareholders. If there is opportunities to continue growing, let's go ahead. If not, we are open to consider all the options. But our first priority today is about minority stakes.

The third question about the revenues, maybe Alex, you can comment on it or...

[Alex Mestre, Deputy Chief Executive Officer]

I can. I can take it Tobias. I would say that if you exclude the contribution from pass throughs in our revenues, as you know, those revenues, they have a neutral impact on our EBITDA and also some other revenues. I would say that organically, we have been growing at 7% in the quarter. That is Q1 '23 compared to '22 and maybe the building blocks of that 7%, maybe you can consider 3% linked to inflation/escalators, 2.5% coming from build-to-suit, maybe one additional 1.5% coming from pure colocation. You know that secondary PoPs, that organic growth is linked to a lower secondary fee compared to anchor tenants. So I would say that those are the building blocks of our pure organic growth in the region in the quarter.

[Juan Gaitan, Director, Investor Relations]

Next question comes from Maurice Patrick from Barclays.

[Maurice Patrick, Barclays]

Can you hear me, okay?

[Juan Gaitan, Director, Investor Relations]

Yes.

[Maurice Patrick, Barclays]

Great. Just checking. I guess just a couple of questions from me first. I mean the first one is that I can see why you're talking down full asset disposals, but you obviously had some time now to think about the assets that you have acquired and some were a part of larger transactions to purchase in the state. I just wondered if you -- now you're looking at the assets you have and the potential monetization, if there are any that you have, which you wonder if you are the right owner for it. And maybe a stake sale or full sale sooner rather than later might help with the deleveraging?

And the second question, just on France. If I'm not wrong, you've got about 300 new sites in the quarter. I think the new [PoPs] is about 350. So clearly, the focus of the operators seems to be the BTS build rather than leasing up colocations. So tenancy ratios are broadly unchanged. Should we expect that trend to continue for the coming quarters? I mean it feels like the MNOs have got so much BTS on their hands. They're not really focused on lease-ups. So wondering if we expect that trend to continue for the following quarters?

[Alex Mestre, Deputy Chief Executive Officer]

Thank you, Maurice. I will start with the second and [indiscernible] you can provide on asset disposals. I think in the coming quarters, that is going to be the trend. You know that still, our build-to-suit effort in France is quite important. It's quite significant. We are deploying sites for three anchor tenants in parallel. And clearly, also, as you can imagine, we are also making a huge commercial effort trying to increase the tenancy ratio on our existing sites. But given the size of the build-to-suit programs that we have in place, I guess that progress will maybe overshadow over the coming quarters, the pure colocation growth. When that trend is going to reverse as we reach the end of this build-to-suit programs. At that moment, we will be managing a significant platform in the country, in France, and then diversification needs of mobile operators in that country will be translated into pure colocation. But temporarily [indiscernible] you should be expecting is maybe a stronger contribution from build-to-suit rather than colocation, but it's going to be a temporary situation.

[Tobias Martinez, Chief Executive Officer]

Yes. And about the divestments is about value creation. So we have opportunities in order to improve our top line, but also to improve our efficiencies in those countries. And this is the reason why we do believe that this is not the right time to afford a full disposal because we would be in a position to leave a lot of value on the table. So there are, again, opportunities not just about efficiencies. It's about opportunities on growth. And therefore, we are happy these subsidiaries, these companies are so young in our perimeter. And well, let's see. I mean, this is the reason why we want to continue operating the Company, running the business, if I may say, because again, it's about efficiencies, which is very -- is on track -- already on track. But also, we have several opportunities on the top line.

So let's see, if at the future, these top lines are consolidating. And therefore, we would be in a position to think about strategically speaking, it makes sense a full disposal or not. But up to date, on the efficiency side, we are already very happy. We are on budget or target. And again, it's a question of trying to strengthen our top line as well in those countries.

[Juan Gaitan, Director, Investor Relations]

Next question comes from Andrew Lee from Goldman Sachs.

[Andrew Lee, Goldman Sachs]

Can I just -- firstly, just a follow-up to some of the comments you made earlier. You gave some useful split of that or that 7% organic growth with 3% inflation, 2.5% build-to-suit and 1.5% colocation. The balance between build-to-suit and colocation is quite different to the balance between build-to-suit and colocation in terms of your point of presence growth. Could you just talk about the outlook for the contributions to organic revenue growth for build-to-suit and colocation? I know you talked about -- thanks to Maurice's question, the point of presence, our outlook as colocation will take over and from build-to-suit. But if you could talk more about the balance of revenue growth drivers between build-to-suit and colocation over the next year or two years, that would be really helpful.

Second question was just on Slide 6. You highlight -- and we've discussed this before, but a fairly meaningful drag from -- in your words, mainly leases. Can you just give us a bit more color on the drivers of this headwind and the outlook for that headwind for the full year, if there are any changes there?

[Alex Mestre, Deputy Chief Executive Officer]

Thank you, Andrew. I would say that in the coming quarters, I mean you shouldn't expect massive changes. It is true that this -- I mean, the split in terms of KPIs, in terms of operating KPIs at least in Q1 is a stronger colocation than build-to-suit. So the picture in Q1 has been 3.6% colocation versus 3.2% build-to-suit. But also you know that the build-to-suit, they have anchor tenant economics. So every time that we build a new site for an anchor tenant in the context of our build-to-suit program, they start contributing with a radically high anchor tenant fee compared to the secondary fee. And that is also why also in terms of revenues, the contribution is stronger.

When you see a high contribution from secondary PoPs, they also come at a lower price. So I guess that there is also some dilution from a price perspective. This quarter is 1.5%. That is just volume, okay? So leaving aside the contribution from inflation and escalators. And I guess that going forward, you should be expecting similar trends, maybe something around 2%. I'm talking about colocation, maybe something a bit higher, but nothing structurally different in the coming quarters.

[Jose Manuel Aisa, Chief Financial Officer]

And in the leases -- regarding leases, I think that, as we have been discussing before, I really believe that this is an OpEx item that is going to go really well in the next quarters. So you can see this quarter, for instance, that even though there is growth compared to last year, this growth takes into account the perimeter, which is hard to take and also inflation. And you can see it's under control. So I don't think that we will have a pretty good profile for this year regarding the leases.

[Andrew Lee, Goldman Sachs]

Can I just check I understood that correctly. So I think what you're saying is that the drivers of many lease item has straight end inflation. So is that [indiscernible] impact washes away, then we're left just with inflation so that the drag from many leases reduces as a result. Is that correct?

[Jose Manuel Aisa, Chief Financial Officer]

Is that correct? Once we -- now we have a change in perimeter. Obviously, once we remove the change in perimeter, maximum, I would say, to inflation but below inflation. So I will say to you up to inflation, but I think that if you take last year, you saw that the impact of inflation on our leases was very limited. And I do expect that we will continue on that trend. We are working a lot with the cash advance. The CapEx expansion is partially devoted to this line, and we should have good news.

[Juan Gaitan, Director, Investor Relations]

Next question comes from [indiscernible].

[Unidentified Analyst]

I've got two questions, please. So firstly, you called out the contribution from RAN sharing agreements in Italy and Spain as drivers of revenue growth. Which RAN sharing agreements you're referring to? And can you quantify these tailwinds, please? And then my second question is can you give us an update on the Digi contract in Portugal? You've added a significant number of PoPs in the market. How much more is left? And do you see scope to upsize this agreement?

[Alex Mestre, Deputy Chief Executive Officer]

So well, thank you, Francesca, for the question. In relation to the first one, basically, the RAN sharing that we are referring to are mainly two, one in Spain, which is the agreement that Vodafone and Orange are having for the semi dense areas and rural areas. It's called -- name project, it's project [jumping]. And this is the revenues that we are getting basically from the PoPs that we have on Orange and also Vodafone where there is RAN sharing of the other counterparty, okay? Normally, the RAN sharing value, it is roughly 1/3 on what we would be considering a typical market price just to give you an average, if you want to factorize this sort of growth that is already, let's say, quite material that we decided to do that in front of you.

The second one is in Italy. And in Italy, as you know, recently, this has been presented an agreement between Iliad and WindTre for all the rural areas. So that's the second important RAN sharing that we are -- that announcement was in January, so it's brand new and it's also part of this RAN sharing growth that you are envisaging. So in relation to Digi, well, I think that we've been able to seize. Well, the big material tranche of physical deployment of Digi in Portugal. So clearly, the fact of being neutral or having two portfolios being able to be extremely, let's say, flexible in our value proposition to a new entrant has been, let's say, shown, let's say, a great benefit, I would say, as a second time not because we have had the similar experience in Italy when Iliad was the new entrant.

So in that sense, there are -- well, probably still based on what we've been announcing on Digi themselves may have been explaining. A big portion of the deployment has already been disclosed. It's possible that there may be still additional areas of coverage that Digi may be requiring. We understand that Digi is also looking for a potential national roaming agreement for the rural areas, which is something -- which is ongoing discussions in Portugal. But they have decided to work with their own equipment on all dense and semi dense areas. And we are the TowerCo that are supporting them.

[Juan Gaitan, Director, Investor Relations]

Next question comes from Georgios Ierodiaconou from Citi.

[Georgios Ierodiaconou, Citi]

I have 2, please. The first one is around capital allocation. And I believe you discussed a bit the possibility of developing some of your assets in smaller countries, which, I guess, will mean M&A? There's also some key encore tenants you have in certain countries that are discussing about further disposals of assets. So I'm curious how should we think about capital allocation once you monetize certain assets. I'm guessing there is quite a bit of an M&A to be done and also the timing, whether you feel you need to make disposals before committing to new projects or whether you could do the latter before any disposals?

And then the second question is just on interest costs. And I think it's very helpful the slide you show with the phasing of interest expenses. I just wanted to clarify, based on the interest cost of around EUR 111 million in 1Q, should we extrapolate that to be around EUR 136 million for the full year. I'm just curious whether that slide is indicative or a bit more accurate than these numbers can be taken for granted?

[Jose Manuel Aisa, Chief Financial Officer]

Thank you, Georgios, for the question. You are going in the right direction in EUR 320 million, EUR 340 million, I don't know where we will land depending [indiscernible] because let's remind that we have a part which is open but yes, with EUR 320 million, EUR 340 million, that would be the right number. Let's try to go through to EUR 320 million as always. And regarding your first question, if we were to dispose any kind of assets are holding in one asset, the first thing we're going to do is to get this money to pay back the debt, okay, to reduce the level of debt. We are not going to prioritize any kind of CapEx acquisition at all. So first of all, to get the investment grade and what to deliver as we have always promised to you. Once we are investment grade, listen, we will have to define two things.

First of all, the remuneration to the shareholders; and second, of course, how to manage the CapEx growth. And this CapEx growth and remuneration policy must be consistent with investment grade. Look, Georgios, you know Cellnex quite well. We have been investing along our clients during the last years, and I'm pretty sure we will continue doing so. But at the same time, meeting these requirements. And I think we can get it done. I am very positive that Cellnex can get the right balance between these three anchors; IG, remuneration and also, of course, CapEx deployment.

One of the key things in CapEx deployment and what we are seeing in these first steps in this new Next Chapter is that there are many CapEx programs that could come in the future, but that build-to-suit driven which means that we do not deploy all the CapEx upfront, okay? So we signed something today, maybe and we deploy CapEx in a commensurate way with all the things we were saying and also the delevering profile of the Company, as we said to you back in November '22.

[Juan Gaitan, Director, Investor Relations]

Thank you. Next question comes from [indiscernible] from SocieteGenerale.

[Unidentified Analyst]

I have a couple of questions on the disposals and your capital allocation. The first one, a follow-up from the answer Tobias gave to the first question today. So your preference is still for monetizing a minority stakes rather than selling [indiscernible] asset. But considering this one, it's instrumental for your improvements on the credit ratings. If you can share with us what the credit agency thinks about. You sell minority stakes, vis-a-vis the issue upstreaming cash into servicing your debt. And following up on that one, you said that you want to have a go first on -- to check if you can extract all the synergies available on the portfolio you acquired over time before you consider selling assets.

But can we focus on a couple of markets, especially Austria? In Austria, you bought as a larger package from Hutchinson. And now you have three players and all the three players almost have their own TowerCo. So it's, I don't know where you can extract the synergy in terms of growing the tenancy ratios. So what's the strategic option available in Austria? Could you do something like you did in Netherlands with Deutsche Telekom, if you can expand on that?

And the third one it's on the energy cost. Energy cost has been a big way on your clients. Now you're trying to combine BTS in France. But none of your clients were very interested unless they can share on the potential value creation saving on ground leases. Have you find any more interest more recently considering that the increase on energy basically makes it more difficult for them to run a single -- maintain on a single tower. If you can expand on that?

[Jose Manuel Aisa, Chief Financial Officer]

Alexandre, do you want to comment on the first one?

[Alex Mestre, Deputy Chief Executive Officer]

Well, in -- maybe I was just, okay, fine. Listen, there is some big question here. [Ottavio], one of the key things we have to look for is that there is no subordination in the debt at the HoldCo level. This is key. So we cannot, for instance, dispose a company, let's call it, a big country in the group that cash upstream a lot of money to the Cellnex HoldCo because in this case, we would be running the risk of jeopardizing of subordinating the debt at the level of Cellnex Telecom sale. However, having said that, it is possible to sell a minority shareholding in one of these big companies of the group and do not create subordination, okay? So this is one criteria that we have to keep in mind, as we have said before.

Having said that, if we were to do other kind of transaction in smaller countries, we sell a minority stake. And as Tobias is saying, I'm pretty sure we will not subordinate. And maybe in the future, we could -- if we are not able to create our value, we could dispose the whole asset in the long term. So minority stake does not mean that Cellnex is again selling, disposing all the assets in the future. I think it's a step in a good direction, which is investment grade. Let's see how much we have to do in that way.

[Tobias Martinez, Chief Executive Officer]

Yes. But in the right condition for the right valuation and if we do not foresee additional value creation. So let's see, is a path. It's a journey in a way. So you were referring about Austria or other opportunities. Well, you are right, three telecom operators, three TowerCos, let's see what happens. But well, in any case, we are strengthening as much as possible our efficiency. It's about how to deliver the services, how to operate. And don't forget that Austria means Hutchinson. So we are delivering 100% of the passive infrastructures to Hutchinson in Europe. And therefore, Austria is not on a stand-alone basis country, if I may say. It's part of the portfolio of assets of our largest customer as well. So we have to factorize different dimensions as Jose Manuel said about the subordination of the debt and other parameters that we have to consider. So open to improve this kind of efficiencies and synergies in all of the countries and -- but well, assessing properly in every country, in every opportunity.

[Unidentified Company Representative]

And in relation to the last one, [Ottavio], I think it's a very interesting question. So the intention to share build-to-suits or to avoid building a build-to-suit because we have a second portfolio in one country, and we avoid that construction. Of course, this is one of our top priorities of our management in the countries -- in those countries where we have two or three anchors, and we are working heavily on that. But basically, what we are saving here is not energy but on ground lease, which is not a minor issue. However, where there is an important saving of energy for the operators is not because they may be having a motorization of passive equipment in one tower but active. When two operators are sharing one passive infrastructure, but still they have two equipment, the energy is 2x.

However, if they share the equipment, the savings on energy, it's not 50%, but could be around 30%. So that's why we believe that most likely the next wave, and we are already perceiving that by all those RAN sharing agreements or outsourcing of the active equipment is going to be in order to save energy, to share more the active equipment. But not triggered by the passive motorization. So it's probably the next way that we will be seeing among MNOs.

[Juan Gaitan, Director, Investor Relations]

Next question comes from Emmet Kelly from Morgan Stanley.

[Emmet Kelly, Morgan Stanley]

Yes. Thank you very much, Juan, and good morning, everybody. Just two questions from my side as well, please. First question is on the U.K. So it's now, I think, five months since you took control of the asset. Can you maybe just say a few words about your early experience of the assets? And maybe any updates you might have on the electronics communication code in the U.K. and how that could maybe drive some cost savings in the future?

And the second question is a little bit of a follow-up from what [Ottavio] was asking. It's on build-to-suit. You've now been building new towers for many years. I think you started in France. Can you maybe just say a few words about the success you're having on adding second tenants on those newly built sites over the last few years? Are you beginning to see more demand after adding tenants on a newly constructed sites?

[Unidentified Company Representative]

Sure. So let me start by the last one, Emmet. Well, the advantage of having all those massive programs, I think it's twofold. First of one, understanding where the tower has to be built. And yes, it is true that we are building towers with two tenants from exceptional, okay? And this is a trend that it's increasing. It's not massive, of course, but it's the advantage of having those projects in those countries where we have to anchor or more.

The second element on this build-to-suit is avoiding to build the tower, okay? And this is because we have another program from another client that we can say building one tower instead of building two or we have a legacy. And this is the type of projects that -- well, I think we've been discussing in the past, it takes sometimes in order to consolidate our positions and the build-to-suit program, et cetera. And this is the type of projects that we expect to share with you in the coming months in relation to that, that we are actually saving ground leases because of the fact that we do not actually build, but we co-locate a new tenant on one of the existing towers, but having to preserve the economical equation that it was at the very beginning -- at the inception of the build-to-suit agreement with the clients. So as you can imagine, it's not an easy discussion, but we are very well advanced on this type of discussions. So I think it's both elements are going in the positive way.

Yes. On the U.K. Well, certainly, on the U.K., the closing is very, very recent. And we -- you know the structure, which is this economic benefit agreement. We are just trying to understand, let's say, how the implementation of this difficult scheme is going to happen, the contract itself allows for adjustment mechanisms. And we are on the very initial phases of that process that we will keep you posted on that.

Secondly, on the [coat]. Well, the coat is advancing on this agreement that I was just referring to. The coat benefits are already implemented in the agreement as we expect now that MBNL performs also the implementation of the coat in the same way as we do outside of the perimeter of the EBA, and it is a very valid way to create value. Well, honestly, it's the best one in all Europe in terms of being in a position for the telecom infrastructure operators that we own an electronic apparatus, this is called the coat itself, in order to, let's say, have a reasonable pricing on the ground leases. So it's progressing very, very well in that sense.

[Juan Gaitan, Director, Investor Relations]

Next question comes from Luigi Minerva from HSBC.

[Luigi Minerva, HSBC]

Before asking my question, just a word of thank you to Tobias. I presume it's your last call as CEO of Cellnex. So thanks for everything we've learned over the years from you.

My question is about regulation. And it's about the European Commission Gigabit Infrastructure Act. Now my understanding is that one significant change coming from the proposal from the European Commission is the inclusion of TowerCos in the scope of the regulation. So potentially, a network operator could ask the TowerCo to grant access to the infrastructure on fair and reasonable terms and conditions including prices. And the risk is that this may eventually lead to regulated prices in case of this agreement or similar. So my question is, well, how tangible you see this risk? And what are you doing as an operator or as an industry to avoid regulation on prices?

[Tobias Martinez, Chief Executive Officer]

Thank you, Luigi, and thank you for your kind words. It's also my pleasure. Let's talk about this GIA, Gigabyte Infrastructure Act. When we talk about regulation, we are talking about access, which means a wholesale regulation, not a retail price regulation, which is very important. So we have to -- if we are included in this GIA Act, it means that we have to provide access, but in the other way around, we can ask access at the wholesale price at reasonable prices, which is nothing to be with the final price to the MNO. This is very important because for the telecom infrastructure companies, well, you know that it depends on the country, but at the European level, would be very, very useful in order to provide reasonable access to public assets or to ask even to other TowerCos wholesale access.

But at the end of the day, the key question is, who is managing who, let me say, if I may, owns the customer. So the regulation is trying also to avoid to build additional towers duplicating for free without a writing contract with an MNO and then trying to avoid the duplication of towers in our European countries. So I think that overall, it's helping. This is, I think, a very soft regulation because we are having the same regulation in the broadcasting. We have a lot of experience dealing with this kind of regulation and it's helping in order, again, to provide access at reasonable prices, but price means wholesale access to other telecom infrastructure companies, nothing to be with the final price.

And second one, also to provide, let me say, or to facilitate the 5G rollout at reasonable prices on the ground lease contracts, you know what I mean. So again, I think that the parcels, the rooftops, the ground lease are also part of our core assets, are part of our sites. So all in all, makes sense, avoiding duplications. It's a benefit for all of us. It's a benefit in terms of ESG. It's a benefit in terms of municipalities -- in terms of condominiums, in terms of municipalities, but also in terms to reuse the existing infrastructure as much as possible in transparent conditions and reasonable prices. This is the summary in terms of the GIA just to tell you that I am running the discussions, thanks to the Chairman, Chief of the European Wireless Infrastructure Association, in which Cellnex is the Chairman and well, myself, I'm the Chairman and therefore, I can tell you that I am leading these discussions with the European regulator.

[Juan Gaitan, Director, Investor Relations]

Thank you, Luigi. And the last question comes from Fernando Abril-Martorell from Alantra.

[Fernando Abril-Martorell, Alantra]

I have one quick question, is with regards to the operating leverage. So -- and correct me if I'm wrong, but if we exclude the pass through -- the energy pass throughs, revenues and EBITDA have grown by roughly 15% both. So no operating leverage. And based on the sales breakdown that you have provided, which is, by the way, very helpful. There was a 1.5% colocation growth rate and inflation was 3%. And you've mentioned that OpEx is growing below inflation. So I don't know what are the moving parts from this no operating leverage in this Q1? And what do you expect operating leverage to be in the next few quarters?

[Jose Manuel Aisa, Chief Financial Officer]

Thank you, Fernando, for your question. And yes, you are right in your estimation, but please take into account the footnote #2 of Page #5 that says that when we are talking as always, and this has been always the criteria that we take into account leases in this estimation, okay? So a lease that represents a big part of the total somehow OpEx-based when we do this calculation of CPI impact.

Having said that, let me tell you that you are right, that this first quarter, we have the same growth more or less in terms of revenues than OpEx. There has been a change in the perimeter. We do expect that during the next quarter, we will change this trend. I'm pretty sure that at the end of the year, the EBITDA margin will be more than full year '22 EBITDA margin. So it's a question of integration of the Company as you get in this case and now step by step to be able to obtain, again, the operating leverage that Cellnex has always shown. So it's a progress of time.

[Juan Gaitan, Director, Investor Relations]

Thank you so much. And with this, we have reached the end of the session. And thank you so much for your attention and your time today. Please, Tobias, do you want to?

[Tobias Martinez, Chief Executive Officer]

No. I would like to thank you all. It's my last results presentation. It has been a pleasure, but I do believe that we will keep in contact in life because you never know. And I love this market, this industry and I love this company. So thank you all. Thank you all because it has been a pleasure for me. I was learning a lot from you, and I wish you all the very best in your professional and personal life. All my best wishes.

[Juan Gaitan, Director, Investor Relations]

Thank you so much. Thank you Tobias.