Cellnex Telecom SA

MAD:CLNX

Earnings Call Analysis

Solid Growth in Q1 2024 Driven by Strong Commercial Performance

In Q1 2024, the company showcased strong commercial performance, with organic revenues increasing by 7.5% and organic EBITDA after lease rising by 11.1%. The company generated free cash flow of EUR 103 million, significantly benefiting from EUR 152 million received in the French remedies process. The recurring levered free cash flow grew by 14.4%. Additionally, the company's financial strategy aims to achieve a long-term leverage target of 5x to 6x net debt to EBITDA by 2025, supported by asset disposals in France, the Nordics, and an exit from Ireland.

Solid Business Performance

The company reported a strong quarter marked by excellent commercial performance. Key indicators such as Points of Presence (POPs) increased by nearly 11% year-over-year, reflecting the company's resilience and effectiveness in execution. Organic revenues grew by 7.5%, while organic EBITDA surged by 11.1%, underscoring the firm’s robust financial health and efficient operational strategy.

Revenue and EBITDA Growth

Revenue increased by 7% compared to the same period last year, driven by organic growth initiatives in key markets like France, Italy, and Poland. Adjusted EBITDA also witnessed a 7% rise. Excluding changes in the perimeter, revenue and EBITDA saw even higher increases of 7.5% and 9%, respectively. This growth was supported by contributions from co-location and build-to-suit opportunities, particularly in Italy and Portugal.

Cash Flow Improvement

The company’s free cash flow reached EUR 103 million, a significant increase of EUR 240 million from the same quarter last year. This leap was partly due to the EUR 152 million received from the French remedies process. Going forward, free cash flow is expected to range between EUR 250 million and EUR 350 million for the year, compared to EUR 150 million in 2023. This substantial growth in cash flow is crucial for supporting future investment and deleveraging efforts.

Capital Expenditures and Efficiency Plans

The company plans to keep maintenance CapEx below 4% of total revenues and limit expansion CapEx to under EUR 500 million for the year. Total expected diluted CapEx is around EUR 1.3 billion for 2024. Efficiency measures are being actively pursued to limit the impact on cash flow, with major focus areas including IT and maintenance.

Debt and Leverage Strategy

The company is committed to a long-term leverage target of 5x to 6x net debt to EBITDA by 2025. Debt reduction efforts are in full swing, supported by the disposal of sites in France and recent exits from the Nordics and Ireland. These initiatives are expected to reduce leverage by EUR 971 million. The firm aims to maintain its investment-grade rating, which was achieved earlier than planned.

Shareholder Returns and Strategic Flexibility

The company has been exploring strategic options for its asset portfolio, with potential nonbinding offers expected soon. In light of these disposals, an early shareholder distribution, possibly in the form of a share buyback, is under consideration. However, achieving and maintaining leverage targets remains a priority.

Market Dynamics and Competitor Activity

The market landscape is evolving, with companies like Vodafone selling operations in Spain and Italy. This reshuffling opens opportunities for market consolidation and increased co-location. Market dynamics in regions like Portugal indicate continued organic growth, albeit at a normalized rate after 2024.

Future Outlook

The company is on track to meet its short- and medium-term targets, driven by ongoing business programs and strategic disposals. With a robust capital structure and well-defined growth strategy, the firm is well-positioned to navigate market challenges and enhance shareholder value.

Earnings Call Transcript 2024-Q1

[Juan Gaitan Mañoso, executive]

Good afternoon everyone. My name is Juan Gaitan, Director of Investor Relations, and I would like to thank you all for joining us today for our Q1 2024 Earnings Results Conference Call operations for delay, but we have some technical difficulties. Today, I'm joined by our CEO, Marco Patuano and our CFO, Raimon Trias with the [indiscernible] highlights of the period, and then we will open the line for your questions. As a reminder, if you wish to ask a question, please press star 5 in your keyboard. Without further ado, over to you Marco.

[Marco Emilio Patuano, executive]

Thank you, Franco. Good afternoon, everyone. Thank you so much for your time today. Sorry again for the delay. The platform is a little bit bisatoday, and we have some problem in hearing the line. So I'll start commenting on our business performance.

We are once again providing solid results this quarter, proving the resilience of our business model and aligning all the levels of our organization towards our public commitments. So this quarter has been marked by an excellent commercial performance and a consistent operational execution with POPs increasing close to 11% compared to last year. around 7% on POP equivalent. Just as a reminder, we are providing you both physical BOP and equivalent POP. Organic revenues excluding from our numbers, mainly the impact from change of perimeter resulting from the remedy process in France. Well, organic revenues increased 7.5%. Organic EBITDA after lease increased 11.1%, and our recurring levered free cash flow increased by 14.4%. Finally, our free cash flow reached EUR 13 million, benefiting from EUR 152 million received this quarter in the context of the second tranche of the French remedies.

So we are on track to meet all our short- and medium-term targets we have recently shared with you at the Capital Market Day. Moving to the financial strategy and capital allocation. Just a quick reminder of our priorities set out at our recent Capital Market Day and which we reiterate a long-term leverage target of between 5x and 6x net debt to EBITDA, which we believe we can achieve by 2025. Having obtained our investment-grade rating by S&P much earlier than originally planned. We confirm an unconditional commitment to maintain this credit rating level, both by S&P and Fitch.

From a leveraging perspective, we're making remarkable progress thanks to the disposal of the sites in France. Our agreement in the Nordics and our recently announced exit from Ireland. Disclosure process is on track. We presented all the documents and the relevant documents to the antitrust. And leverage will be reduced by EUR 971 million when completed and paid. Despite having already reached the full investment-grade status, we continue to assess strategic options for our portfolio of assets and we can confirm that the outsell sale process remains on track with nonbinding offers expected very soon. Please note that an early shareholder distribution in the form, for example, of the share buyback could be considered following the disposal, subject to our leverage target and our operating commitment.

Finally, as you have seen in our investor materials, we have started to report providing a more granular level of detail in terms of organic growth, business line, geography and uses of CapEx, and we hope this will allow you to better understand the performance of our key level drivers. Having said this, I will now hand over to our CFO, Raimon for is yours.

[Raimon Trias, executive]

Thank you, Marco. Good afternoon, everyone. We will now provide a few additional remarks from the bids on the financial strategy. This has been another quarter of excellent commercial performance with organic stops growing at close to 11% compared to the same period last year. Remember that we are starting to report physical to which, in our view, provide a better vocation for the addressable market in our commercial efforts.

This growth is due to the progress made on our business programs in France, Italy and Poland and co-location pops generated mainly in Italy and Portugal, with the rest of our markets showing a steady performance. Total growth linked co- locations has reached a strong 7.5% this period while gilts has grown 3%. Revenue increased 7% compared to the same period of last year. Our adjusted EBITDA also grew 7%. Our EBITDA released 39% and our recurring level free cash flow 14%. When excluding the impact from the change of perimeter that Marco mentioned, our numbers, our revenue increased 7.5%, our EBITDA 9%, and our [ EBITDAal ] 11%. If we now move to Slide 8 and 9, we are providing here as anticipated at our Capital Markets Day, our organic revenue bridge for the period as well as individual performance of our different business lines.

So as you can see, if we take our contribution to revenues from inflation, colocation and build-to-suit, our organic revenues grew 7.5% compared to the same period last year. And going into the specific performance of our business, the tower segment grows organically 6.6%. Fiber connectivity and housing services is growing and as small cells and growth 21% and broke increased 2%. [ General reclarification ] on the average revenue per tower which takes tower revenues expressed on an annual basis as per the last 12 months ended the large reporting period. Our free cash flow has reached EUR 103 million, around EUR 240 million more than the same period last year mainly due to the EUR 152 million that we have received in the context of the [indiscernible] process in France as was supported by improved recurrent asset date. Free cash flow is expected to reach between EUR 250 million and EUR 350 million this year compared to the EUR 150 million generated in 2023.

And one factor that determines our ability to generate this metric is CapEx. So we believe it is important to continue giving good visibility on our different CapEx [indiscernible] . Maintenance CapEx is expected to remain below the 4% of total revenues, excluding the past-through and expansion CapEx should stay below the EUR 500 million in the year '24. Our expected diluted CapEx is around EUR 1.3 billion in the year 2024 -- not considering the remedies. Going forward, our free cash flow generation will further accelerate as we are near the end of our [indiscernible] programs. And this will underpin our rapid deleveraging and will give us the regional flexibility to improve shareholder returns, as we mentioned in the Capital Markets Day.

Moving to Slide 10, we are illustrating our commitment with our previous lease efficiency plan. Whilst underpinning the message we conveyed at the best recent Capital Markets Day in terms of the importance for us to properly manage our main cost item. So our program remains on track and we continue to actively pursue efficiency measures in order to ensure a limited impact on our cash flow from brand increases in a large perimeter. Finally, let's take a look at our debt maturities profile on Slide 12. As you can see, there are no maturities left in 2024 as they were repaid in January potential additional disposals may be partially used to repay variable debt in 2025, which today has a high consociated cost as these lines adding to Euribor and we also might consider new debt issuance at fixed cost in the short term with the same objectives. It seems that in the current environment, interest rates are likely to remain higher for longer but we have a robust and well-designed capital structure, which prevent us from assuming higher interest expenses.

As you recall, 75% of our debt is fixed, short-term maturities are already being managed. So our average cost of debt will only marginally increased in the next few years. With this, we remain now at your disposal to answer any questions. Thanks very much.

[Juan Gaitan Mañoso, executive]

First question comes from Akhil Dattani from JPMorgan. Please go ahead.

[Akhil Dattani, analyst]

Great. Yes. So I have a couple of questions is the first one is just a big picture question around share price at the moment? And I guess the question is that if we look year-to-date, it looks like interest rates are still very much on share price is trading, and it's true for the wage market universe, so the societies. I just wondered if how you think about that, what sort of does you have comfort that. If you [indiscernible] --

I guess one of the topics we get obvious between public and premarket value issue. You obviously successfully selling assets like Thailand, I know you've talked about [indiscernible] . I wonder if we think broadly, how do you think about what sort of that you pay on these market you mentioned considering maybe you can give us a bit of color, but I guess the bequest you seem to have you try to give up interest rate sensitivity. I understand the question just on the [indiscernible] this I think.

[Juan Gaitan Mañoso, executive]

Sorry, I think this is fine. I'm terribly sorry. And we are really starting to give you the -- We are, I mean we have to find the same internal issues aside the beginning of the session.

We don't -- wouldn't really know how to continue the session because that we can raise the you. I mean the connection is just horrible for able because of the provider.

But [indiscernible] for you to send me an e-mail of your -- we will try -- I mean we don't want to pass the session.

So I don't know if you guys can send me your questions, and I will try to rather questions, and we will try to answer if that's okay. Just to try to continue to this Q&A session. We are having the same in issuance connectivity on -- we really not on it as well. I hope that is the case. But in your case, when we in your questions, is just we really started to figure it's a work -- half a word ever to the lines should broken. We don't really know what's with the provider. But we are trying and it's really difficult to understand your question. I mean we haven't doing test and the line keeps breaking for everyone that is trying to participate.

Yes. If you don't mind, if you can -- yes, because your question will try to get continued recession in red. And the same to you like I feel -- and can reset your questions, so I will read your question, okay. And I think if you are still on the line, if you can please send on your -- the question are the next everyone. And we will try to do this in different way that we are trying to be respectful of your time. So we will try our best. Okay.

So thank you. Based on your email, Marco a question for you. When is the area is data buybacks if you sell Austria, 2025 or before? And of course, if you can give us a sense as to a number of piles for the Austrian process.

[Marco Emilio Patuano, executive]

Good. To be very honest with you, I think that's the answer, if we can do before 2025 is we're going to make the rest with the [indiscernible] and we will try to give full visibility to the rating agencies on the status of the process of the closing of the Irish antitrust procedure. And based on this, as soon as it was made available, we will start using the cash that should be in excess of our stricter needs for keeping under control.

In terms of betas. So please allow me to keep this a little bit confidential, but there is good interest both from industrial players and from financial players.

[Juan Gaitan Mañoso, executive]

Thank you, Marco. I'm coming back to Akhil's question, which I have received. So the surprise of tower companies in developed world, they have been down 10%. How do you think about what you can do to recouple this interest a sensitivity to accelerate profit asset sales? And if so, what assets in you sell and why and what else can you do beyond that?

[Marco Emilio Patuano, executive]

Well, everybody knows that our share price is so linked to the interest rate. So there is a big question, by the way. We are making regression analysis if we are linked -- more linked to the U.S. dollar bond or to the bond, some euro-denominated interest. It's unclear because basically, it's unproven. Normally, it wouldn't be a problem because Europe follows euro rates -- follow U.S. dollar rates, but it's unproven. And if in any moment, decoupling between the euro rates and the Fed rates.

We are honestly very curious to see if being all our revenues in Europe and being most of our -- almost everything euro-denominated. It's important to understand then what we can do? But we are still fairly sensitive to leverage. So we have to continue, we have to perform. We have to make the process to straight to your questions. Yes, we are assessing our portfolio. As we said at the Capital Market Day, making a portfolio assessment is not a one on a time event. So we are doing periodically. There are business lines that we are asking ourselves if they can contribute or if they are giving us the return on invested capital long term that we expected. And this is something that we are analyzing in this moment.

You know me well, Akhil, I prefer to do the things well one at a time. So in this moment, we are making the process Austria is not a mystery that we are looking to the evolution of Poland. The evolution of Poland that is, we have a potential opportunity to consolidate the active market in Poland. If this would be the case, it would be appropriate for us to welcome Eco investor who can work with us. This can turn into some capital repatriation. So there is -- there are many projects. So we are working our strategy department and our finance plan and working together on this.

[Juan Gaitan Mañoso, executive]

Thank you, Marco. And I give second question was around the ramp if you can give us an update on our progress and how do you think about what we will be spending this year and midterm online acquisition.

[Marco Emilio Patuano, executive]

The progress is fine. So we are creating the land what we are thinking, by the way, we confirm that the [ Lemco ] will be a Spanish entity because our tax due diligence was okay. So Spain is fully efficient for placing the men -- we are trying to -- started to evaluate if it could be update to transfer existing portfolios into the newly created Lanco or not. This depends very much on from the tax efficiency of this process.

So in terms of how much we are willing to spend to-- Raimon?

[Raimon Trias, executive]

Yes, for this year, we are looking more or less in terms of land acquisition, around EUR 115 million, EUR 120 million -- and as you know, we also have the efficiency CapEx, but more of it will be around EUR 60 million.

[Marco Emilio Patuano, executive]

So this is the very base case. As you know, I never made a mystery that would like to increase this number. But when you start increasing your volumes, it's important also to have the machine working appropriately. So I would be very happy if we can increase this number by 40%, 50%, but I think it's not real estate that you should expect more than this.

[Juan Gaitan Mañoso, executive]

I have one follow-up from radio on the item. When do you expect the IDT trust to complete the process and the cash to coming

[Marco Emilio Patuano, executive]

It's very much depending there a couple of factors. One, depends if the process will go to Phase II or if it is going to be close to Phase I. So let's need optimistic. So let's make the worst gate scenario. The worst case scenario, it goes to Phase II. And if it goes to Phase 2 should be run year-end max beginning of the next year. So a process should last a Phase II process that should last a sort of 9 months we filed in March. So should drive us to the year-end and more or less. So this is the worst case of the Phase II.

[Juan Gaitan Mañoso, executive]

We have a question from Patrick from makes -- are we seeing any sign of Portugal organic growth slowing because today, we have a new entrant, which is -- and wondering how long we should be expecting this outsized growth to continue.

[Marco Emilio Patuano, executive]

Well, in this moment, we have still some part of the request to be delivered. So we have another portion of this organic growth to come. But we assume that it's mostly a 2024 portfolio. And then it will tend to normalize in terms of growth because the program of [ BG ] possibly will be completed in Portugal.

[Juan Gaitan Mañoso, executive]

I have 3 questions from Jacob with it of most have been covered because you're has seen about Portia, Poland has already incurred by Marco and also our acquisition strategy, but may incrementally in for the Austrian processes. Maybe if we might be expecting a lower price because of fewer natural basis as -- so at expectations or --

[Marco Emilio Patuano, executive]

You have to consider that in nylon, we got ones a very good price because the buyer had also industrial synergies, which, by the way, drove us to the antitrust filing that we're making. So we don't expect -- given the fact that the ocean market is much more consolidated than the Irish market, which was more [ segmented. ] We don't expect significant possibility that existing tower operators can successfully bid and pass through a antitrust process in Austria. It would be quite complex.

And these drive our base case to a more prudent valuation. And then, let's say, -- so we will see.

[Juan Gaitan Mañoso, executive]

Perfect. So we have questions from Luigi Minverva from HSBC, discussing about the POP execution in Italy at the slowing the progress, but is not sustainable. What can we expect for POPs I mean going forward in the coming quarters and also in Spain, where is the impact on the [ MasMovil-Orange ] committers any potential in business coming from in [indiscernible]

[Marco Emilio Patuano, executive]

So let's start from Italy. Well, the Italian delivery is mostly linked to a run sharing program that one of our core client win 3 has put in place with another MNO. This is, again, this [ 2024 ] project. It's fairly material in numbers, as you saw, but it's mostly 2024 project. And then it will go to natural densification as you can imagine.

Spain, well, the Spanish case is super interesting. So on the mass orange creation is raising the many questions from the network standpoint because there are at least 2 factors that have to be considered. Factor #1 is that the network quality, so please don't take as being offensive with anyone. The network quality of [ MasMovil ] was not at the standard of the metro warrant. But on the other side of the network to warrant is not capable to receive the entire customer base of [indiscernible] So what is clear is that mass Orange should make a fairly I don't want to say complicated but sell big projects of network redesign.

In doing this, we are talking with the Marine CTO in order to understand how we can support them in making efficiency in the periphery of the network where the network can be optimized, possibly, there are [indiscernible] antenna, both from MasMovil and Orange and it's not necessarily both but to densify the network where the density of the clients is higher. In these -- there is a big question mark. You know that Orange had a run sharing with Vodafone in the so-called jumping network. The territory of Spain was divided in 2 areas. Let's make a proxy the cost line was covered by Orange with the exception of Catalonia, and Catalonia and the inner land was covered by Vodafone with their network. So also Vodafone pass through a change of control or better is passing through a change of control. And so the future evolution of this joint venture is in a delicate moment because of all the changes at the proprietary level. Once again, we have a very strong MFA. Everybody knows, our client know, we know also what we want to do as we are doing in other countries is not to defended the revenues by the strength of the contract, but we want to defend the revenues because our clients are happy.

DG, it's unclear what DG is going to do. What is -- [ almost sure ] is that there are 2 parts that I'm not sure. One is that they are not going to make a nationwide network. So the vast majority of the converge will be through an cherry. And the second is that in order to keep the fragrances, they have to use the frequencies, otherwise, they lose the frequency. So this means that they have to do -- they will do some brand sharing and some new in placement. As you know, we have a very easy channel of conversation with DG. So we are discussing with them as far as -- the only thing I can tell you is that -- the final decision has been made by our clients, but we are very happy to support them in negative work at convenient conditions for everybody.

[Juan Gaitan Mañoso, executive]

We also -- it is also asking about efficiencies if the [indiscernible] was we operated with the market if we are thinking about additional efficiencies around operations. We have quantified any potential scope and in which countries we could operate better what we already have?

[Marco Emilio Patuano, executive]

Yes, we are working on areas. Just to mention some maintenance is an area of work. IT is IT is very important because some processes can be significantly improved by automatization, which not only drives down the personal cost but makes the entire process leaner. So we have parted from the big countries as normal. In this moment, the 4 countries that we have under scrutiny are in this order, France, England, Italy, Spain. So those are the countries where we are started concrete analysis in order to understand if we can do matter. And it's important because those countries have many points of similarities.

So solutions that can work in Italy, possibly works also in Spain and in France so we can replicate -- can replicate the best solution. Are we going to point have -- we quantified? Yes, it's something that Raimon is in the process. So we are working for 2024 numbers are relatively small, as you can easily imagine. But it can be an upside on our plan going forward.

[Juan Gaitan Mañoso, executive]

Perfect. And the last question from Luigi coming to Poste and the potential proceeds -- how are we thinking the trade-offs between share buyback or a special dividend or deleveraging?

[Marco Emilio Patuano, executive]

Well, if it is true that higher for longer is the rule of the game. It seems that there is a very little that can be a share buyback in this more in terms of value creation. If the share price stays depressed because I think that from the oral perspective, -- you see that we are performing very good. We are accelerating on every front. We are making honestly, I'm very happy of the response of the entire company.

So the share price is better dominated by this financial component. So I would say we have not to forget that we have to deliver because our sensitivity to interest rates remain high. But in this moment, I would say that market conditions seems to give a more likelihood to share buyback than other use of resources.

[Juan Gaitan Mañoso, executive]

We have one question from Roshan Ranjit from Deutsche bank. You may recall that our capital makes were improving the deferred payment associated with Comtel, our first transaction in Portugal. As seasonal that in order to make that more comparable with the method already used by credit agencies. Is the potential that we also have to include the Nordic cooption.

[Marco Emilio Patuano, executive]

No. Sorry, I cannot add anything. The answer is short, but it's this steadier.

[Juan Gaitan Mañoso, executive]

We have 2 questions from Georgios Ierodiaconou from Citi. Other options beyond Austria that you consider or interest expressed by other parties? Or will we see likely the last major disposal at this point?

[Marco Emilio Patuano, executive]

As I told you before, I can't call it a disposal, but we are actively working on Poland. And I don't know what you think, but Poland is [ weak ] So it's a big operation with a huge perspective forward-looking, both in terms of passing infrastructure because Poland should be more densified, not under densified. There is a quite significant lack of coverage when you go out of the major cities.

And there is the one component, both in terms of existing relation with [indiscernible] and the possibility of having a partnership with [indiscernible] play. So this is a big project is something that we're looking at. Is there interest? Yes, there is interest. So we are working with some counterparty who could be focused on this. We are looking to other possibilities, but since it's still on our debt, I would prefer not to enter into the details.

We are looking to -- we are -- I think we demonstrated fairly consistently that we are open-minded in rotating our invested capital every time the industrial strategy meets with the financial strategy. So yes, we are working more on other projects, but please allow us to keep in the kitchen.

[Juan Gaitan Mañoso, executive]

Perfect. We have 2 questions from Uzman Ghazi from Berenberg. Would you do a buyback before getting to your lease target by [indiscernible]? And the second 1 is -- can you give us some insights into the return on capital employed by starting by country that you mentioned, if that has started internally.

[Marco Emilio Patuano, executive]

The answer to your first question is my commitment is to stay investment grade. Then if I have a great opportunity to buy back shares and to stay investment grade, not staying in 5 to 6, but staying investment grade, the [indiscernible] will take it because at this price -- so we -- just today, we announced that board members are going to buy shares.

So at this price, we should buy shares. We should buy more shares. So my strong commitment and the commitment of the Board and the entire management team is it has been so painful to go back to investment grade. We want to stay investment grade. But if going to 5% to 6%, takes me 6 months more Okay. It takes me 6 months more, but we will take the opportunity so that we will be -- we will see on the floor.

Sorry, can you repeat the second question

[Juan Gaitan Mañoso, executive]

TSS is our internal exercise on retonal employed by country, how that

[Marco Emilio Patuano, executive]

Yes, we -- it's a very interesting exercise because what is very clear is that countries where our deployment project is more mature, have a very nice return on invested capital. Let me say, Italy, Spain, the Netherlands, so the countries with good market where the tenancy ratio is already -- we already had time to push the tenancy ratio up it's evident that the return on invested capital is already well above our weighted average cost of capital.

There are countries that are still a work in progress, the worst entrant of the work products in our case is France. We are still working a lot of BTS. We are working on fiber. Nobody is asking out of why the fiber is increased 25%. It's increased 25% because finally, the invested capital starts to turn into revenues. So this is very good. but France asks for more time. So it's so evident, the more the project is mature, the more we are doing good in terms of return on invested capital.

There is a good correlation with healthy the health of the market. So the healthier markets with higher ARPU support better the possibility for the tower operators to have good returns. Thank you.

[Juan Gaitan Mañoso, executive]

We have received 3 questions from Ondrej Cabejsek from UBS. I really can see that most of them have been covered. If not prescreen [indiscernible] , but I think that is a new one within our quest I is now a shareholder in Tele2 media leg to towers. This is an opportunity to consolidate [indiscernible]

[Marco Emilio Patuano, executive]

Well, we never -- we didn't start talking to today when we talk with Elite we are talking about other countries, existing countries -- in particular, [ price ] Poland are the main argument we are of our conversation. It's a matter of fact that Elia is standing open minded vis-a-vis passive infrastructure. But please don't forget that the market structure in Sweden is terribly complicated because there are several joint ventures that have been created in the time between different operators and unwinding the joint venture is always a fairly complicated exercise.

So the short answer is, did you already start talking? No, we didn't. Do you think that ED can be open-minded nor by the are? Do you think that Sweden is going to be an easy exercise to unwind all the joint venture? No, I don't think so. So we will keep monitoring, but I don't see something happening very much in short term. So short term, I think that there is not so many channels to consolidate.

[Juan Gaitan Mañoso, executive]

Another potential ratio opportunities, Fernando Abril-Martorell for Alantra is asking considering how fragmented is our core market is in Spain, what role we would like to play.

[Marco Emilio Patuano, executive]

We will consolidate Spain's a matter of fact. I don't think that the is as for the question is when and how. Obviously, American Tower invested a very significant amount in Spain in the acquisition of the tower from Telefonica. So my base case is that American Tower will be a long-term player. And we are here since ever.

And so -- this is our home market, and we know it very well. But I think that you are right. I think that the Spanish market is 4 tower operators. And in a while, there would be more tower price than operators, which means that this is something that possibly is going the rate to happen. Then I ask myself if this will be a game of combination for a game of someone exit from the market. I don't exclude that it could be a combination gain.

[Juan Gaitan Mañoso, executive]

We have 3 questions from Ottavio Adorisio from Berstein. First one is the majority of the growth CapEx is driven by power CapEx as seemed to reinforce still in our recognition will be a great grid for the tower spot in [indiscernible] years, how many have been upgraded to support potencies and how many still needs to be upgraded and by which time frame was.

[Marco Emilio Patuano, executive]

Well, we started making the upgrade the sort of, let's say, mostly a couple of years ago. If you go back to 3 years ago, a possibility when it started, the numbers were relatively modest. And then it started in -- 2 years ago, which means 2021, 2022 and 2023 as has been an important year.

So -- the account is fairly simple because using a big average number let's say that reinforcing the tower can close to more or less between EUR 25,000 and EUR 30,000. So 1,000 towers is EUR 25 million. So it means that in a busy year, we make 10,000 towers. Now it's not true that all the towers that need to be reinforced. The newly built were already by design and multi-tenant in their configuration.

Well, it's true that some of the new equipments are a bit heavier, a bit bigger, but let's say that we consider that something between and 2/3 of the tower portfolio for sure, will require reinforcement in case of multi-tenancy. And the rest, it would be very much case by case. So to make a nonstory short, what do I expect? I expect that this number will decrease. It will not disappear. It will plateau in a number that possibly means a sort of 3,000, 4,000, 5,000 towers per year as a plateau.

And the speed of going there depends very much on the speed of our success in increasing the tenancy rate. So if we are very good in increasing the tenancy rate without front sharing, it means that 2 out of 3, you have to make something on the tower. So hope I gave you the drivers of your thinking.

[Juan Gaitan Mañoso, executive]

And to final quick question from Octavio. Any updates that we can provide on the CIL contract -- and also coming back to Austria, if maybe a JV with an existing tower for would be an option to be considered similar to what we did in the site in Austria, if we can consider a JV venture with an existing tower

[Marco Emilio Patuano, executive]

Okay. The first question is -- the contract is on the table of a very kind gentlemen who seems to have a little bit of problem with the pencil. So the contract, we've been working -- the contract is basically designed and defined agreed on other terms. And so we are just waiting our counterparties, our clients to sign. So it's very advanced.

And on Austria, well, our plan A, you know that. But as you know very well that we never make a sale for a nonaccretive price. So if by any chance, which doesn't seem to be the case. But if by any chance, we end with the price, which is not going to be accretive we will start catching the head. For the time being, we are not looking for [indiscernible]

[Unknown Executive]

Okay. We have one question from Fabio Pavan from Mediobanca. Any impact from the announcement between Band and Triton in Italy. And also, would you be tended to say that this impact is maybe lower numbers. At the same time, more as the industry got report higher infringements in.

[Marco Emilio Patuano, executive]

The impact on that is between modest and new. So it's two operators that make a lot of sense what they did. Unfortunately, what they did is not making the market much healthier. So I think that the second part of your question for us is a bit optimistic that the market with this deal -- with the Swisscom Vodafone deal could be considered repaired.

I think that the market will continue to have 4 big guys in the same room, and they have to try to accommodate all of them in the same room. It's clear that the rate position of Vodafone now, which was very good on mobile and not as performing not as good in the fix has improved. Same vice versa for [indiscernible] , very good in the fix, not so performing on the mobile. So the combo makes a very powerful player in Italy. But the guy in the room remain 4.

[Juan Gaitan Mañoso, executive]

We have one question from MSK from Aasta. Vodafone is selling their operations in Spain and Italy. And the question is that's the fact that these 2 businesses will be under new number that 1 for any opportunities to some extent?

[Marco Emilio Patuano, executive]

Well, in Italy, I think that -- but the limit for Salmex in Italy is the trust. But the tenant market is in our -- in the infra is two player market sell as an in with combined, I think we have 95% of the market. So the possibility of of doing more. Yes, it's very much possible that the Swisscom Voda can look for some densification using also our site and not only the Inwit side. It is possible, but I wouldn't say that this will change the dynamic of the market.

In Spain, I'm extremely curious because the disposal in Spain, is very different. In Italy, they sold to an industrial player in Spain, the partner is a very smart polite. So it is possible then and I hear, yes, I go to the point that Fabio was making 12th ago, it's possible that the artitude of the new owner of the previous Vodafone asset could be not the same. Traditionally, Swisscom is fairly capital intense, and the declaration of the buyer in Spain made was for rationalization, optimization and savings. So it seems that the two approach are not really the same.

[Juan Gaitan Mañoso, executive]

And also, when do you expect to see 5G a somatic driver in our top line organic growth on [indiscernible] bottleneck? Are we seeing more deployment of --

[Marco Emilio Patuano, executive]

We said very clearly that fiber to the site for us, it's something interesting, but we don't see a massive scale. So it will be -- of course, we are happy to make it if the conditions are okay, but we're not going to bring the fiber 20 kilometers a part dimerization -- so ultimately, we are talking about a sort of 5,000 additional sites that we see as eligible to fiber projects directly deliver by Cellnex. Even if I'm wrong by 100%, it's not first what I want to tell you is not going to be massive deployment.

Is it this a bottleneck for 5G? Yes and no because the new high-performance redialing for the coring part quite good. and progressively more and more efficient in terms of energy consumption. So I think calling -- yes, it's -- of course, it's something extremely important for the 5G deployment. But I don't think it's a really, really bottleneck. I think that the health of the market is the real bottleneck. If you look at the market with the most advanced 5G penetration, most of them are 3 player market. Switzerland, Netherlands of the prepaid markets.

If we go to markets where there are 4 players, it's taken more time and -- but it will arrive. I think that these are I don't know how to apologize. Believe me, it's incredibly embarrassing to us. But ultimately, possibly, we cover the --

[Juan Gaitan Mañoso, executive]

We've been productive. Thank you so much for your flexibility and for your questions. I want to really how to recover the majority of the questions that you have send us. So that if that has not been the case, obviously, the IR team will get a disposable to continue catching up and providing you with more oppotunity. Thank you very much.

[Marco Emilio Patuano, executive]

Thank you very much.

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