Cellnex Telecom SA

MAD:CLNX

Earnings Call Transcript 2018-Q2

[Juan Jose Gaitan Mañoso, Head of Investor Relations]

Good morning, everyone. My name is Juan Gaitan, Head of Investor Relations for Cellnex, and I would like to thank you all for joining us today for our H1 2018 Results Conference Call. I'm joined today by our CEO, Tobías Martínez; and our CFO, José Aisa, who will lead today's presentation. We have [indiscernible] today's presentation, which we will refer to throughout our prepared remarks, and then we'll open the line for a Q&A session. After the session, the Investor Relations team will be at your disposal to answer any remaining questions. So now I'll hand it over to Tobías Martínez. Tobias?

[Tobias Martinez Gimeno, CEO, MD & Director]

Hello. Good morning, everyone, and thank you so much for your time today. I will start underlining the main milestone of the period. Again, a quarter of solid execution both from operational and financial point of view. We continue to deliver on organic performance, posting solid organic growth, in line with our guidance. We continue to generate a strong recurring leverage free cash flow, our main value creation metric, growing at a robust 14%. We have adopted the new accounting standard, IFRS 16. This allows us to improve our leverage ratio, but please, bear in mind that there is no impact at cash flow level. The process of looking for new growth opportunities never stops. And as a result, we are pleased to announce the acquisition of a fiber optic network in Spain that will enhance our service offering for mobile operators. As we have insisted, we maintain the ambition to play a key role in the 5G value chain, and this new transaction fits perfectly well in this strategy and complements our current portfolio of services. We have a strong pipeline of proprietary deals, and we are closely working with key partners on an investor approach to execute value-accretive projects in 2018. We are reiterating our financial outlook for the year 2018. And finally, I would stress that revenues and adjusted EBITDA grow at around 15% and 20%, respectively, as a result of our focus on operational excellence. If we move to Slide #5. It's very well known to you and shows the historical performance of our key value metrics from 2014 to 2018. And as you can see, revenues, adjusted EBITDA and recurrent leveraged free cash flow have been growing at around 20% annually. And this growth is the reason behind these metrics doubling in size in 4 years. On Slide #6, you can graphically see the result of our growth strategy and our diversification efforts, with around 70% of our revenues to be generated by telecom infrastructure services and around 60% of our adjusted EBITDA to be generated outside of Spain on a pro forma basis. We are today one of the main independent tower operators worldwide in number of sites, with presence in 6 countries and a portfolio that will consist of 28,000 sites, and the best is yet to come. I will now hand over to José Manuel Aisa, our CFO, who will provide financial details of the period.

[José Manuel Aisa Mancho]

Thank you, Tobias. Moving to Slide 8. Total PoPs have increased 23% in the period including the contribution of both organic growth and change of perimeter. We will focus on organic growth only. PoPs have increased 4%, at the top end of our medium-term guidance of 3% to 4%. Finally, DAS nodes have increased 20% year-on-year, and we believe that the experience we are gathering in the area of DAS, small cells and identification solutions will translate into significant business in the future. On Slide 9, you can see a list of the various commercial initiatives we have in place to secure future organic growth. In summary, we are levering on CommsCon credentials to deploy more projects in the area of DAS and small cells, car parks, football stadiums, transport networks. And we are doing all these in the current footprint, in the current 6 countries in which the company is present. Iliad is now generating organic growth in Italy, in line with our expectations, and we believe that we can expand these very good relationships into new markets. We are providing a new hybrid TV platform for our national customers in Spain, therefore increasing the attractiveness of DTT. And finally, we are happy to confirm that the Spanish Ministry of Economy is planning to maintain the current number of DTT multiples in the context of the second digital dividend, in line also with our expectations. You will find all the initiatives that the company is pursuing in Slide 9 and that I find very interesting. So moving to Slide 10. You can see a graphical explanation of our adjusted EBITDA performance in the period. The positive impact of organic growth and savings [indiscernible] is reinforced by the contribution of our new deals, which explains the strong adjusted EBITDA growth in the period of 20%. The dark blue column on the right represents the positive impact of the adaptation of IFRS 16 and adjusted -- at adjusted EBITDA level, reaching EUR 291 million in the period. If we move to the next slide, I will provide more details on the impact from this accounting change. Please note that this accounting change is the most important change in accountancy in the last years. And Cellnex, what it's trying to do is to be a pioneer not only in our balance sheet impact but also on managing the impacts of IFRS 16 in our clients. This is key. We are learning, and we know how being innovative and at the same time following the rule, the accounting rule as it is defined, because we do think this is going to give us competitive advantage. Finally, just about IFRS 16. And before moving to Slide 11, let me remark that IFRS 16 will allow the comparability of Cellnex with other companies in the sector and at the same time with other companies in other sectors. We will see this on Slide 11, where you can see that our recurring levered free cash flow does not change at all. But above, you can see 2 effects: adjusted EBITDA increases because leases disappear from the OpEx line; and a new line below adjusted EBITDA, payment of lease liabilities, appears that offset this effect at cash level. And finally, our net debt increases as well as a result of the capitalization of the leases. This is all consistent with the company's view before the adoption of IFRS 16 already shared with the market in previous presentations. So at the end of the day, IFRS 16 allows Cellnex to be comparable with other peers that own more land than us, and this is crucial. Now we are comparable in terms of EBITDA, in terms of EBITDA margin and in terms of net debt EBITDA. Let me now move to our recurrent levered free cash flow generation in the period on Slide 12. I would like to highlight that on the IFRS 16 our revenues rose 16% and our adjusted EBITDA by 20% and also that our EBITDA margin reaches 59%, a significant margin expansion of around 200 basis points compared to last year. I would like also -- moving now on the table. The contribution of telecom infrastructure service, coupled with a very well-managed cost base, leads to adjusted EBITDA increase of 20%, already mentioned. Maintenance CapEx is in line with our guidance. Our change in working capital is positive due to management measures implemented. Interest paid reflect our current capital structure, and taxes reflect our initiatives in place and the schedule of payments during the year. And as a result, we can present to you our growth of recurring levered free cash flow by 14% in the first 6 months of the year, which I do think is a very good news for our shareholders. Moving now to our balance sheet on Slide 13. It is important to highlight that the adoption of IFRS 16 provides a better comparability with peers because it equalized the treatment of land ownership and the management of ground leases between or among different peers in towering. Cellnex area ratio reaches 4.8x, 4.8x net debt annualized EBITDA including the full year contribution of new transactions as well as the contribution to debt and adjusted EBITDA from the adoption of IFRS 16. Compared to December 2017, our balance sheet mostly reflects the increase in debt instruments and the associated cash as well as the capitalization of leases under IFRS 16. Finally, it is important to highlight that we have a strong liquidity position of EUR 1.8 billion and a massive level of contracted revenues, backlog of EUR 16 billion or, in other words, 20 years of revenues. Now moving to Slide 14. You can see here the details of our debt and our maturities profile excluding the capitalization of leases [ we already ] explained earlier. Our debt has an average maturity of around 6 years. No material refinance is expected before 2022, and our inflation-linked revenues plus our fixed-rate debt, more than 80%, provide us with a strong protection against interest rate increase and also provide us with a very flexible financing structure. So in summary, I would emphasize a strong position of our level liquidity, contracted revenues of EUR 16 billion, no short-term refinancing required, low maturities, highly attractive terms, no pledge, no hedge, no covenant, a compelling business risk profile and no financial constraints of any kind. All of these provide us with a wide array of funding alternatives, cash generated by current operations, [indiscernible] structure and salary [indiscernible], alternatives debt instruments, debt financing or equity partners [indiscernible] level among all others. And with this, we are now available to answer any questions you may have. So let's please open the line.

[Operator]

[Operator Instructions] We have a first question from Simon Coles of Barclays.

[Simon Alexander Arulraj Coles, Research Analyst]

And the questions, I guess the first one on your fiber acquisition. We've seen Crown Castle in the U.S. investing a lot in fiber. And then I wondered if you could competitors in Europe suggest that they can increase revenue 25% if they connected with fiber? And this was all a business plan that you're envisaging for yourself? And could you remind me how many channels in Spain are connected to fiber today? Then secondly, in Italy, it looks like there's an uptick in site. Is this the [ HS ] program with Wind Tre now starting to pick up? [indiscernible] to spend a bit perhaps in the last couple of years? A competitor is flagging that they've seen a slowdown in business from Wind Tre. I was wondering if that's them focusing more on their own portfolio and the new build-to-suit plan that they have for themselves and maybe also a benefit from the Iliad rollout too? Can we expect ancillary EBITDA to potentially grow quicker than it did last year? And then finally, just a quick one on DAS. You're highlighting that you're now seeing -- every country sees some interest? Are you seeing the demand really starting to pick up from MNOs today? And are they more willing to embrace using [indiscernible] to deploy these solutions?

[Juan Jose Gaitan Mañoso, Head of Investor Relations]

Thank you, Simon. Let me maybe start with the -- with your DAS question, and then I will hand over to Alex Mestre, who's also helping us in this Q&A session. On the DAS, I would say that, as you know, we are in high demand mostly for indoor coverage. So it's now mostly focused on maybe some specific locations like football stadiums and where we see a lot of demand for mobile data in concentrated periods of time. Nothing has really changed. As you know, we acquired CommsCon a while ago, and we are leveraging on their expertise to try and replicate their business model across Europe. And we are pursuing these new opportunities in the 6 countries where we are present, but we see no acceleration. Nothing is really changing other than we are pursuing proactively different opportunities.

[Tobias Martinez Gimeno, CEO, MD & Director]

Yes. Maybe just to -- I'm Tobias Martinez. Maybe to add some comments on [indiscernible] And again, it's maybe to reinforce the idea that we do not expect a big demand from outdoor coverage. At least up to day, we do not have any rationale behind of that. It is the reason why we maintain our expectations on indoor coverage. This is very important to underline again. So this is a very clear path for growth on 5G after our interaction with the MNOs. So obviously, we are looking for 2022, 2021, and maybe outdoor coverage will grow more than expected. But up to date, our expectation remains in the same trends that we did before. So Alex can you cover the others?

[Alexandre Mestre Molins, Global Business MD & GM of Global]

Yes. On the first question in relation to the fiber to the tower. Here there are basically 2 elements that we believe are, let's say, triggering that need. On one side, it is 5G deployment, which is something that will require the additional capacity that will be distributed from each one of our site will require better backhauling to the tower. That's one element. And the second is the topology of the site. So when we look at the topology of the site, probably the areas with more than, let's say, needs of coverage are requiring that, specifically, rooftops. As you know, we are active on rooftop deployment, especially on the [indiscernible] work in France, and this is potentially requiring fiber on the coming years when looking at the 5G needs. As of now, the level of fiber -- and I think your question was specifically in relation to Spain, we decided this is a recent acquisition that we are announcing, and there was some detail on Page 22. The fiber, which is not very high in terms of introduction on our side, belongs in those cases where exist to our clients. And we are having agreements on helping our clients to commercialize it, but it's not -- let me put it like that, yet our fiber. With this recent acquisition, we are starting to becoming more active on that field. We, as you will perceive also in some of the slides at the end of the presentation, we see this acquisition, as in the past it was CommsCon, that was the platform that was helping us to understand a new segment of products that potentially step by step could be deployed in other regions. And that's basically the rationale that it is behind this recent acquisition in the fiber domain.

[Simon Alexander Arulraj Coles, Research Analyst]

And my last question on Italy.

[Alexandre Mestre Molins, Global Business MD & GM of Global]

The second question I understand was related to Italy and how is actually the demand of Iliad performing. What we can say is that there is high activity on our operational teams on deploying points of presence for Iliad, very much in line on the previous guidance that we've already been sharing with you guys. So in that sense, we are delivering. Technically wise, the things are already in [ run ] rate -- let's say, the type of relationship with the technical things of our client. And we are in line on what we're expecting.

[Operator]

The next question is from Giles Thorne of Jefferies.

[Giles Thorne, Equity Analyst]

I have 3 questions please. The first one, just coming back to the fiber acquisition, and it's a clarification I suppose. The Crown Castle fiber strategy has been to buy dark fiber with the anticipation of deploying small cell networks on top of it. It doesn't sound like that is the strategy you will be pursuing because you can confirm that? And secondly, the multiple that you pay for that asset is obviously quite low. And that seems to be because Altice actually only has a concession to operate fiber. It doesn't actually own the fiber itself. Have you negotiated any option to buy the spectrum -- not the spectrum -- buy the fiber, the expiry of the current concession in 2031? And then finally -- we've now finally seen KKR take a major step forward in its European ambitions, finally pursuing an asset beyond Telxius. It will be interesting to hear your thoughts on how you would like to see market structure evolve in European towers over the medium and long term. And I suppose my question is would you prefer to be a potentially regulated monopoly or a lighter regulated oligopoly with a couple of comparably scaled peers? Hopefully that makes sense.

[Juan Jose Gaitan Mañoso, Head of Investor Relations]

Thank you. Alex will start with the initial 2 questions from fiber, and then Tobias will elaborate on your last one.

[Alexandre Mestre Molins, Global Business MD & GM of Global]

Yes. So you are correct. I think most of our sales of most of our peers when looking at the fiber we are approaching it from that strategic angle on how the additional capacity is going to be required and how we will deliver these backhauling to our site in the future. So clearly, the natural extension on our value chain, that comes immediately after the pure site co-location. This is the basic element. It has a second element which is for us quite important. When you have fiber, you are -- and sometimes, we even joke around that the fiber is like the root of a site. Why? Because it makes and sticks the tree, which is antenna, closer to the site and the commercialization capacity and the long-term partnership that you can establish with our clients is logically longer, and you have this additional step that it helps you to create this loyalty with your partner. So strategically wise, maybe it's not exactly the same as Crown Castle as you were potentially suggesting, but it's not differing very much. In that sense, we are looking for that fiber. But in some cases, we are finding as well that some of the clients are thinking on potentially having connectivity. And this is where we are also getting that know-how with that recent acquisition. Concerning that acquisition, you're right. The multiple being shown on Page 22 is an interesting one in comparison to other transactions. But you are right also pointing that there is a concession there, and this concession is ending on 2031. Potentially, the client we have there and the concessions there being public entity may require future deployments that will be a part of potential future discussions that we may have concerning the final date. But as of today, the final date is 2031, and this is being reflected on the multiple that we have paid.

[Tobias Martinez Gimeno, CEO, MD & Director]

Well, let me cover your question about KKR and maybe relate it with the evolution of the structure of our market. Today -- at least at today, KKR is not competing with us or we are not competing with KKR because they are pursuing different type of projects, different type of customers than strategic investors like us or other peers like us. I mean, if you see -- if you could see the type of transactions that KKR is tackling are minority stakes, pure financial investments. We need to get the control of the controllization of the company not just for accounting purposes. It's a question of roles. We are industrial. We have an industrial role. We have to develop our value creation through the industrial skills. Third, we have a lot of experience on the -- in Europe on the operations. So this is a completely different value proposition, and this is the reason why Telxius or Altice doesn't fit with Cellnex strategy. But I suppose that doesn't fit as well for the other strategy tower cost -- like American Towers or Comcast or other players, so at least up to date. We'll see what happens in the future. But I do not consider that we were competing. We'll see we'll compete at certain opportunities but not up to date.

[Giles Thorne, Equity Analyst]

My question wasn't really about the competitive threat from KKR-backed tower strategy. My question was really about at this point in time there is only really Cellnex that has pan-European ambitions to be a true industrial partner telcos. And KKR has taken a step towards that, but yes, they are a financial investor. But in your conversations with the commission in Brussels, do they have ever raise the idea that -- the fact that you would be the monopoly provider of passive infrastructure is an issue to them? And does that ever make you think that you would like to see another Cellnex-like peer that could diminish those concerns of the commission?

[Tobias Martinez Gimeno, CEO, MD & Director]

No. Not at all. No any issue about concentration because you will find other players in Europe. That is a question of different profile, different approach of the value proposition of financial sponsors or strategic sponsors like us. Again, KKR it's executing minority stakes projects, and this is not our strategy. It doesn't fit with our strategy, does it? We cannot be a minority shareholder. We have to develop our industrial role. This is a must. But no constraints in terms of regulations or something like that. It's just a question that the customer is keen in the meaning of -- to decide who or which type of partnership they would like. So this is just a question of different type of projects. And believe me, we didn't yet compete with them.

[Operator]

The next question is from Ottavio Adorisio of Societe Generale.

[Ottavio Adorisio, Equity analyst]

Let me just start first on the IFRS 16. You basically -- something that you already mentioned in the previous presentation. So I'm not surprised there. What's surprising is that your capitalization rate is 2.6x. The one that the agency used when they assessed your credit rating at 7.7, at least from Fitch. Now I believe that probably the credit agency didn't have all the information you provided to your own auditors. So my question is that, are you currently engaging with credit agencies on that? Do you reckon that could basically lead to reviewing about your gearings as they calculate themselves? And on that one, in the past you basically mentioned quite a few times the cap to your gearing at 6.5x, beyond which you don't want to use your balance sheet. Today, with the IFRS 16, you've gone from 5.5 to 4.8. So my question is that, is the 6.5 standing? Or are you going to review that one? The second one it's basically following on the previous answer. You basically mentioned about KKR having a quite different business model from yours. I would actually say it's very complementary to yours. They're looking for minority financial stakes. You're looking for control in industrial [ rationale ]. So my question is that, considering that at some stage you're going to exhaust your balance sheet room in terms of how much gearing you can put, what stopped you for actually partnering with KKR and, basically, pursue future transaction together? American Tower already do with PGGM in Europe. So I was just wondering how it would work with you and KKR or if you've already been talking to one another. And the very last one, it's on the provision. This quarter, you used significant portions of the EUR 55 million you provisioned last quarter. So that means that the headcount -- or the savings from headcount restructuring you were basically thinking to achieve by 2020 could be cut earlier than that?

[Juan Jose Gaitan Mañoso, Head of Investor Relations]

Thank you, Ottavio, for the question. Now regarding your 2 first questions are very -- both of them are very linked, now, because at the end of the day rating assessment and the net debt EBITDA somehow are linked. So let's go to IFRS 16 and rating assessment. So of course, I mean, we have a very open dialogue with the rating agencies, and we have been sharing with them all our work. And I think, and as all we know the Canadian system, initially this kind of changes seen in their methodologies it's nothing that can happen from one day to the other. This takes time. And also it takes time from us to explain the details, to explain the concepts. IFRS 16 is going to be something very important to the financial ecosystem, which is that the net debt EBITDA -- the EBITDA margins are going to be more comparable than before. And therefore, it is my feeling that adjustments that rating agencies tend to execute should be reviewed under the impact of IFRS 16. So if your question is yes or no, I would say to you my view is not yet. But I'm pretty sure that [ Ternsis ] is in a very well position to obtain a very good outcome of this discussion on a very good outcome of the implementation of IFRS 16. Please note that IFRS 16 as of June 2018 will be mandatory for all the companies. Therefore, it will be very difficult to track the information, will be very difficult to do adjustments for everyone. IFRS 16 has a lot of -- it's taking into account a lot of information from the companies, much more information that can be obtained from rating agencies and from any investor within the [indiscernible] accounts. So here, there are several details that will have to be assessed by rating agencies. By the way, one of them is -- has opened a paper, a discussion paper. And we are working the discussion paper, which is public, so that we can give our views and, obviously, to share the benefits of IFRS 16. You're talking about the 6.5x net debt EBITDA. Well, again, it's linked to the previous one. It's not white or black. It's just a question of explaining to the financial community that the standard for the net debt EBITDA are in the process of being changed. So as long as the different stakeholders understand these changes, as long as IFRS 16 is implemented, I do think that we've seen the same rating. We've seen the same parameters. We should have more leverage capacity. This is my view. But again, we early adopters. We are working in the very right direction. We have to go step by step. And as soon as we get more good outcome, we will share with you. But please, there are something very important here, Ottavio, we have to -- it's also about -- not it's -- our capacity of leverage is not only a ratio. It is our business risk profile. And as you can see, quarter after quarter, our business risk profile is improving. Our business risk profile is more diversified, and this is also very helpful. So it's not only IFRS 16. It's [ rather cost ] and business risk profile. So...

[Tobias Martinez Gimeno, CEO, MD & Director]

In the KKR, you're right, Ottavio. We have a very complementary business models, approach, so why not? You'll never know. We are open to consider any collaboration with someone that could be complementary with us. So nothing up today. I have to be very, very clear with you. But nothing against of this type of cooperations, investments or whatever.

[Operator]

The next question is from Emmet Kelly of Morgan Stanley.

[Emmet Bryan Kelly, Head of European Telecoms Research]

Like everyone else, I have 3 questions as well. First question is relating to the press release that came out yesterday, and I see you've decided to separate the roles of CEO and Chairman. Now I know it's very early days, Tobias, but I'm just wondering what benefits do you believe Mr. Patuano can bring to Cellnex as the new Chairman of the company? The second question relates to the Dutch market. And you've obviously -- it's been a very active market for you over the last couple of years with Protelindo, with Shere and also with Alticom. And can you say are there any more targets out there you believe you can target in the Dutch towers market? And then lastly, just a big picture question. There's quite a few towers JVs in Europe. I'm thinking of infraco in France, the JV between Bouygues and SFR. There's also a couple of JVs here where I'm sitting in the U.K. And there's another big JV, of course, in Poland between Orange and T-Mobile. I guess these JVs look attractive to you because there's 2 tenants per tower. But on the other side, perhaps negotiating with 2 shareholders can be a little bit more complicated. Can you say a few words about where and what the potential is for Cellnex to maybe penetrate this JV market over time?

[Tobias Martinez Gimeno, CEO, MD & Director]

Good morning, Emmett. Tobias. Well, first question about governance. Because when we talk about this type of issues, we have to talk about governance. First of all, I would like to underline that for me, personally speaking as the CEO of the company, I'm a firm believer of the 2 roles. I mean, in terms of governance, I like very much to keep the independency between the board and the executive directors and the executive senior team, and this is the reason why I am supportive of this structure in terms of governance. And I got to the Chairman of the Board and CEO because we were handling, if I may say, the way the transition from Abertis to this new shareholder like Edizione Holding. Second important thing for me is that Edizione Holding has a very firm and strong commitment with the strategy and the equity story of growth of Cellnex. So this fits extremely, extremely very well for the execution of our strategy. And the third one is not just related with legal entities like Edizione Holding or Cellnex. It's related with individuals. As you said before, we are talking about Marco Patuano as an individual. Marco Patuano is a very, very reputed and very experienced at senior management. He was CFO. He was CEO. He knows very well our industry. And therefore, the board -- but I have to -- I would like to understand myself. We have been very supportive on this appointment because taking into consideration these 3 main principles made a lot of sense to keep this governance that we had since our IPO, having a Non-Executive Chairman of the Board and a CEO, because we and I understand that this is the best for the project. This is the best for the governance of the company, and this is the best for clarity in front of you, in front of the investors. And that's it, anything else behind of that. So I'm very happy. Personally speaking, I would like to tell you very, very -- in a transparent way, I'm very happy with that because, again, we really believe that this is the best for the company. This is the best for the future. Second question about the Dutch market, and maybe Alex could help me, but you know that our anchor customer today is KPN. We are following the evolution on the transition on the KPN management team. And you know that, well, T-Mobile and Tele2 are under a potential, let me put on that way, merge process. Therefore, I have to say, first of all, the Netherlands remains the strategy for us. And therefore, we are pursuing all the evolution, all the opportunities on the Netherlands. So it means that keep on our priorities, on our top priorities, but we have to find the right opportunity. I don't know. Alex, do you want to add something more?

[Alexandre Mestre Molins, Global Business MD & GM of Global]

Certainly. Let's say this merge process is freezing a little bit at our activity, especially with those 2 players. However, as we, let's say, briefly mentioned on Page 9, we've been certified by the regional government for being a certified Dutch supplier. So this is one of the first elements that we are intending to do on those countries where we have basic service. We are, let's say, expanding our portfolio with the rest of services we have. So this certification by the regional government for being Cellnex a Dutch supplier, we are out of the shelf, let's say, partner it is good outcome on this line. There was a third question. I can take it, Tobias if you want, on the JV. I think it is important, Emmett, to realize that many of those JVs are basically active sharing agreements, active equipment-sharing agreements with -- among MNOs. For instance, you mentioned infraco in France. So actually, in our portfolio of towers in France, we have infraco as a customer. Why? Because the 2 MNOs who are the members of that JV are having the ownership of the active equipment but not the passive infrastructure. So I would say, many -- probably most of these JVs around Europe are not taking into consideration the passive infrastructure, which is still remaining at each one MNO's balance sheet. So clearly, it's the first step for the MNOs on sharing. Clearly, also now we said we believe with the future 5G requirements and CapEx way, more sharing will come, and it is in the good direction in order, let's say, to put Cellnex value on the table.

[Operator]

The next question is from Jonathan Dann of RBC.

[Jonathan Dann]

I have 2 questions. The first one is back on Spain and Italy. I think Simon flagged the number of sites that expanded in both markets. Is there some small acquisitions you've done? Or could you help us sort of -- if any of the small acquisitions or the follow-on from the MásMóvil acquisitions in the previous quarters? Or is that part of either new build for someone in Spain and similarly Wind in Italy? And then on the PoPs in Italy, is it right to think that Iliad is now -- will start adding around 100 PoPs every quarter? Will we start to see a sort of reliable Iliad that get coming in? And then my second question was on football stadiums. I mean, ballpark, how much revenue would one stadium generate per annum?

[Juan Jose Gaitan Mañoso, Head of Investor Relations]

Thank you. Thank you, Jon. Maybe starting with the, I think, with last one. Pricing is difficult. [indiscernible] for us is more like an output of the project. As you know, we basically every -- like on a new project, we work on assessing the investment required, then what the cost associated with managing that project for the duration of the contract with customers. Then we flag our [ acquisition ] criteria, and then we come up with a price we need to offer to our customers for the use of that service. So I guess that it depends on the priorities. It's very difficult for us to provide you with a guidance on revenue per project. Spain, Italy, the answer is, it's actually a combination of very small acquisitions and then some build to suit. So I would say it's going to be in both cases 60% small acquisitions and the remaining 40% new build. And last question on Iliad. It is fantastic news that we are seeing some activity coming -- already coming from -- integrated from them. But having said that, we're going to extrapolate this quarter on the remaining part of the year. As you already know, under the single agreement we have signed with them, there is no complement on volumes. There's no exclusivity. So somehow we will continue working with them, and let's see how we end the year.

[Jonathan Dann]

Can I ask a follow-up. On the DAS project, how competitive are they? Are you sort of building up the pricing on a sort of single-digits return or sort of teens type returns?

[José Manuel Aisa Mancho]

It's very similar to our remaining criteria. So it's low teens actually. But in this case, what we target is at least 10% unlevered IRR, when we analyze these sort of projects.

[Operator]

The next question is from Henrik Herbst of Crédit Suisse.

[Henrik Herbst, Research Analyst]

I have 2 questions. Firstly on -- just going back to the fiber acquisition you made, trying to understand that a little bit better. In terms of -- I still didn't really understand what you see the main sort of use of it. Is it -- basically, are you more interested in local assets type fiber assets? Or is it more sort of backhaul to the tower I guess or more so you can connect small cells in more urban areas? And then do you think you can charge extra for connecting your sites to fiber? Or is it more a way to attract new tenants? And then secondly, I just want to follow up on your acquisitions in France and Switzerland. You've now had towers in these markets for a while. Can you maybe talk a little bit about things that sort of surprised you? I think in Switzerland it was a little bit unclear in terms of how many towers you could actually add new -- more tenants on given the electromagnetic emission regulation. So maybe an update in terms of what you're seeing there in terms of demand, et cetera.

[Tobias Martinez Gimeno, CEO, MD & Director]

Maybe I will try to answer on the second part of your first question. Maybe Alex will try and elaborate from our strategic point of view. The answer is yes. I mean, yes on both sides. There is -- I mean we're investing in fiber, investing in fiber backhauling. It is a way of making our existing portfolio of assets more attractive to our existing customers but also, of course. [indiscernible] that any incremental investment from our site, that will translate into an incremental fee from our customers. So I would say that both things should be covered by this new fiber strategy. Alex?

[Alexandre Mestre Molins, Global Business MD & GM of Global]

Yes. In relation to the potential future topology that we could envisage for a telecom operator, I would not say only mobile network operator, a telecom operator with a converged network, what we will see is that besides the capillarity that our sites may provide they will need to communicate those towers with what they call metropolitan offices or central offices. Those are small data centers like mobile Edge computing would be the type of service that probably would be within a metropolitan office that will require the connectivity -- fiber connectivity from those small data centers to the final sites that today we are having. So the propositions that we believe we could do to our partners and even some of the propositions that we are having from some of our partners to analyze this, what and how we could be helpful on providing this connectivity and also on this type of small data centers. This is all this debate that some of the -- our peers in the U.S., as someone who mentioned before, Crown Castle, are already very much into. So the fact of charging, clearly, yes. So there is a CapEx being deployed. Always, there is a return in terms of a fee being captured by the customer. In relation to Switzerland, yes. We've shared, let's say, after the transaction with it, some of the uncertainties that were around in Switzerland. One of them was the radio spectrum limitations that at the time of the acquisition we were -- and some of you already asked about this potential limitation, and we always say this is twofold, no, because on one side the tenancy ratio maybe it's constrained a little bit. But then since you cannot put a lot of prediction on a single tower, you need more towers. So there is also pros and cons around that. In relation to that specific radiation limitation, the situation is that it has not changed. The regulation remains as it was and clearly is one of the elements that the MNOs, globally, in Switzerland are putting on the table on the discussions, and it is public on the future 5G options that are considering with the Swiss government or whether if this should be changed or not.

[Tobias Martinez Gimeno, CEO, MD & Director]

And there was the second part of the question pertaining to the demand in France, how we see.

[José Manuel Aisa Mancho]

Demand in?

[Tobias Martinez Gimeno, CEO, MD & Director]

Demand in France. Let me try and answer, and maybe, Alex, you can complement. Well, I guess at this stage we are still focusing on the integration of the [indiscernible] assets that we need to get transferred [indiscernible] and also on the construction side of the agreement. We were positively surprised by the level of demand we saw the morning we announced that transaction. And a few months after that, we managed to sign a -- came to agreement with Iliad. The reality is that, that demand has not been translated into organic growth, into incremental PoPs yet, but we are very excited about the prospects. Nothing has really changed during the last weeks or months. We are still very optimistic about the prospects in the French market.

[Operator]

The next question is from Fernando Cordero of Banco Santander.

[Fernando Cordero Barreira, Equity Analyst]

Starting with one of the comments that you have made on the organic growth levers and you have been talking about management services as an additional way to post to your organic growth. But I also would like to -- first, I would like to understand what is your approach in that sense and which are the type of client that you're looking for these kind of services? And the second comment related with this, which it tend -- because we are also seeing other tower companies offering this kind of management or consultancy services to financial investors. And I want to understand these management services are potentially reducing your competitive advantage as an industrial partner [ were ] looking for inorganic growth. The second question is related with the Spanish tower market. In that sense, there are [indiscernible] in the market since the spinoff almost 1.5 years, and I would like to know what are your views on their activity in the Spanish market. At the end of the day, you said Italy is one of the 2 largest tower markets for you right now. And the last question is related with the broadcasting business and at which [ end ] the development of the LOVEStv platform is basically the implementation of the hybrid TV standards. And [ I understand ] these new platform may change your current economics on the broadcasting businesses.

[Tobias Martinez Gimeno, CEO, MD & Director]

Thank you, Fernando. Maybe we can start with the last one on LOVEStv.

[José Manuel Aisa Mancho]

Sure. So [ Ox ] TV, for those of you who may understand Spanish, means lo ves TV, you see TV. So it is a game on the wording of the service. This is a service that -- your question, Fernando, was it would change the economics of broadcasting service this year? No. However, what we are doing with this service is providing the needed level of technical features that a linear platform like it is the terrestrial television [indiscernible] is not having. So the TV sets, as of today, are all connected TV sets, which potentially could have this sort of hybrid linear, nonlinear experience for the viewer. What we are doing is -- and free of charge, which is very important. What we are doing is putting together all the nonlinear content of the broadcasting TV stations on a single platform that you can navigate without any set-top box, just with a remote control and playing with the teletext buttons on the remote control, the red button kind of experience, and changing from linear to nonlinear. And we believe that this is a great achievement like other features, like 4k. We do also have 4k ultrahigh-definition transmissions in Spain in pilot mode. So all those elements, which other platforms may be having, we are always intending that also the DTT platform is having. So this means that the sustainability of the platform probably with these additional highly appreciated services may remain. So in the long term, probably the answer to your question, it is yes, that this will help digitally the sustainability of the platform.

[Juan Jose Gaitan Mañoso, Head of Investor Relations]

Well, regarding the management service which was your first, I think, question. Listen, we -- first of all, all the approaches we are having are based in pure industrial role. And in those projects in which we can somehow, as you were suggesting at the end of your question, building to further upside. So we do not mind to be involved in equity if it makes sense from a pure industrial perspective. We are -- we have been working with issues with this from, I would say to you, 1 year ago, discarding or disregarding some options and [ considering ] others. We will only do this if this creates value for our shareholders and can open new markets to us. Otherwise, I'm afraid we will not proceed.

[Tobias Martinez Gimeno, CEO, MD & Director]

And the last one on [indiscernible]. I mean, well, nothing new. I think they are delivering services to -- mainly to Telefonica, as you can imagine, and nothing new.

[Juan Jose Gaitan Mañoso, Head of Investor Relations]

The feasibility of next steps on Spain or in other countries I cannot tell you anything else. Very sorry about that but...

[Fernando Cordero Barreira, Equity Analyst]

No. The reason of my question is because it was just announcing in Telefonica earnings that they have won some co-location contract in the Spanish market. I just would like to know or understand this change in the market dynamics or not or. At the end of the day, you're seeing the same organic growth profile for the Spanish market as for some a few years ago.

[Tobias Martinez Gimeno, CEO, MD & Director]

Yes. We can confirm the same guidance on our Spanish growth strategy, and that it -- no changes. We are not seeing any change on how we are generating organic growth. So everything remains the same.

[Operator]

The last question is from Luigi Minerva of HSBC.

[Luigi Minerva, Senior Analyst]

The first one is just going back to the governance side. And I know the EBIT change in ownership, but I was wondering if you can maybe elaborate more and what's the difference now to your strategy now that Edizione Holding has taken over from Abertis. One key difference that I can see is that they seem to be committed to contribute with extra capital for new opportunities. But I was also wondering whether it may also mean a stronger focus on the Italian market compared to more European opportunities. And then my second question is just more specific, and it's about multitenant small cells. What -- the developments you're seeing from the manufacturers? And what's the timing that you can see?

[Tobias Martinez Gimeno, CEO, MD & Director]

Well, regarding the change of the government is nothing changed on our strategy. Our strategy remains the same as before. So Edizione Holding did their own job on the due diligence. I understand that they know very well the story of Cellnex, and therefore, they found a bright opportunity to invest. So our main priority remains our 6 existing countries, no specific for Italy or Spain or other countries. It's just value driven, our priority. And well, maybe, we are incorporating Marco Patuano who knows very well the sector, the industry. And maybe this is the difference between our previous shareholder. We have had strong support from Abertis, and we do expect to be strong support from Edizione Holding because they are completely aware that this is a growth story, and therefore, we have the full commitment of our major holder in order to work with the company. So -- but again, just value driven, it's our tactic and the meaning of the execution of our strategy.

[Alexandre Mestre Molins, Global Business MD & GM of Global]

In relation to the multitenant small cells, certainly is not a product, but it is a strong push by the vendors. However, we, logically, do have an interest on it. And part of our, let's say, 5G preparation, piloting plan, we do have a trial with one vendor in the holistic growth of [indiscernible] in order to test with 2 MNOs those multitenant small cells. So we are intending to push a little bit the vendors market and also show that there is clearly a market for sharing the small cells as well. So we are there, but it's just pure R&D experimentation as of now.

[Luigi Minerva, Senior Analyst]

So you think 2019 is -- for commercial viability is doable? Or is it premature?

[Tobias Martinez Gimeno, CEO, MD & Director]

It is premature. We don't see yet that element of multitenant in small cells for 2019 based on the information that we are having.

[Alexandre Mestre Molins, Global Business MD & GM of Global]

We expect more vendors, however, into that.

[Operator]

This concludes today's question-and-answer session. I hand back for closing remarks.

[Juan Jose Gaitan Mañoso, Head of Investor Relations]

Thank you so much. We have now reached the end of the session. I would like to thank you all for your time today. And as always, the Investor Relations team will be at your disposal to answer any of your remaining questions. Thank you so much. Have a great weekend. Bye-bye.