Cellnex Telecom SA

MAD:CLNX

Earnings Call Transcript 2020-Q4

[Juan Jose Gaitan Mañoso, Head of Investor Relations]

Good morning, everyone. My name is Juan Gaitan, Director of Investor Relations at Cellnex, and I would like to thank you for joining us today for our Full Year 2020 Results Conference Call. As always, I'm joined by our CEO, Tobias Martinez; our CFO, José Manuel Aisa; and our Deputy CEO, Alex Mestre, who will lead today's session. Throughout our prepared remarks, we will refer to the results presentation we have shared this morning, and then we will open the line for your questions. Just before starting, let me please share with you a couple of novelties we have introduced this quarter. On our backup Excel file that we provide every quarter, you can now find a new type that summarizes all of our build-to-suit products and what is left to do so that you can keep track of our progress and update your [indiscernible] accordingly. Additionally, you might have seen in our presentation that we are providing a medium-term guidance. Cellnex has significantly grown the size of the portfolio and geographical footprint, and therefore, the business inevitably has more complexity. So we have been appropriate to provide an indication of where we see the company in the medium term when all announced transactions have been integrated and a relevant portion of our build-to-suit products have been executed. And without further ado, I will now hand over to Tobias Martinez. Please, Tobias.

[Tobias Martinez Gimeno, CEO, MD & Director]

So good morning, and thank you so much for your time today. I will start by sharing with you the main highlights of the period. First, it's about our organic growth generation in the year has been strong and consistent at that 5.5% in terms of new PoPs and existing sites and including our build-to-suit programs. We have significantly exceed our 2020 guidance, thank you to our organic growth and our strong control of cost and leases. Our revenues have increased 55% compared to last year. Our adjusted EBITDA, 72%; and our recurring leveraged free cash flow, 75%. Integration is critical for the success of our growth strategy, and this why we have developed a unique industrial model to ensure a smooth integration and to keep pace with our growth speed. As of today, we are on track operationally, and all of our integration processes are progressing in line with our expectations. We are also happy to announce today our second step in Poland. This agreement allows us to introduce the concept of the augmented TowerCo by expanding our presence in the value chains and managing, not only passive infrastructure, but also active infrastructure with the same tower economics. These capabilities will be very important in a 5G world and will strengthen our value proposition to our clients. With this transaction, we are now reaching 50% of our new pipeline of up to EUR 18 billion, which will be financed with up to EUR 7 billion of new equity. The process is on track and expected to be formally launched by the end of March. And as it has been said in the introduction we are presenting our medium-term guidance, which is underpinned by our highly visible and contracted financials. We are expecting our recurring leveraged free cash flow to reach up to EUR 2.2 billion in 2025, 3.5x our current level. In Slide #3, let me please remind that our focus is not just about M&A, but on organic growth generation, crystallizing new commercial initiatives and an excellent management of our OpEx and leases. As such, we have identified 3 key sources of organic growth: escalators, densification and synergies and efficiencies. When it comes to escalators, around 65% of our pro forma revenues are linked to CPI, with the remaining 35% linked to fixed escalators. Our organic performance has accelerated, and we are expecting it to grow more than 5% annually in the coming years, including the contribution from up to 22,000 new sites to be deployed over the next 10 years. And finally, we have both a ground lease optimization and a multi-tenant approach that allows us to attract network synergies. We are therefore presenting our 2021-2025 plan that is targeting 20,000 sites by 2025 and is expected to generate around EUR 100 million of annual savings. If we move to Slide #4, José Manuel will later provide details of our 2021 guidance, but let me please comment on our medium-term guidance. We are expecting our revenues to grow 21% annually until 2025. Our adjusted EBITDA, 24%; and our recurring leveraged free cash flow, 28%, reaching up to EUR 2.2 billion in 2025. This means reaching at that levels, 3.5x larger than today, thanks to the contribution from our visible and contracted business. If we also add the additional pipeline of opportunities in which we are currently working, recurring leveraged free cash flow per share should increase around 5x on a run rate basis when all of our deals are closed and build-to-suit programs complete. On the following slide, you can see the status of our current integration processes, which are performing as planned. In order to warrant a sustainable growth, Cellnex has identified and defined and implemented a global governance model, which bears the following characteristics: cash clearly and formally distributed between group and countries, transversal policies and tools easily adaptable to each country-specific realities, inclusive of all companies' functions throughout our different geographies, a robust and scalable company policies, procedures and processes; easy monitoring through global dashboards, which allows for KPIs tracking; and supervisory and decision-making roles and bodies at all levels and geographies. In Slides #6 and #7, let me now share some considerations regarding our ESG approach. As a company with a clear long-term view, ESG becomes an integral part of the corporate strategy involving all areas and country units. And as approved, 2020 has been the first year in which we have introduced a specific ESG component in the senior management's remuneration. To further emphasize its commitment, we have expanded the role of our Appointments and Remunerations Committee, which now includes sustainability to that the company's highest governance body can oversee our progress. Last year, our Board approved our new 2021-2025 ESG plan with 6 strategic lines that will be deployed through 92 specific actions, each of them linked to the United Nations Sustainable Development Goals. We also create ESG Management Committee that will coordinate the activities to reach these goals involving talent management, equality, cultural diversity, inclusion policies, environmental actions and climate change strategy. This includes carbon footprint reduction with an energy transition plan towards green and renewable energy. Specifically, we aim to achieve 100% of our group energy consumption green certified by 2025, with a 40% threshold in 2021. Additional best practice such as gender diversity among nonexecutive directors or their training to properly manage ESG-related topics are also paving the way for execution of our ESG agenda. The creation of The Cellnex Foundation is another important step to increase the awareness of our social impact. It implemented projects to bridge the digital divide, encourage the entrepreneurial talent or promoting stem vocations. The following slide shows how some of the main international sustainability indexes measure our ESG performance and our commitment to continuous improvement. And with this, I will now hand over to our CFO, José Manuel Aisa, who will provide more details of the period.

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

Thank you, Tobias. Let me please start highlighting that we have exceeded over the metrics of our 2020 financial outlook. Adjusted EBITDA above the range provided last year, cash items below adjusted EBITDA, performing in line, and our recurring leveraged free cash flow and our organic growth, growing faster than our initial expectation. Moving to the next slide and providing a few more details. Revenues have increased 55% to EUR 1.6 billion. Our recurring leveraged free cash flow has increased 75% to EUR 610 million. Our total PoPs have increased around 60%, including the contribution from organic growth and our recent acquisitions. And if we focus on organic growth only, excluding any change of perimeter, PoPs have increased around 5.5% compared to last year, as a result of the continued network densification we are seeing across Europe. Moving now to our main financial metrics. Let me please emphasize our solid margin expansion and the fact that our recurring leveraged free cash flow is growing faster than our revenues, which is explained by our operating leverage of our business. Also in this slide, you will find that the maintenance CapEx has been stable at 3%; our interest paid, 1.5%; and our cash tax is just 2.4% of our total revenues. The company on a like-for-like basis and regarding OpEx is performing flat. So if we go to Slide #12, here, we explain our recurring leveraged free cash flow generation. You can see that the positive impact from our organic growth, including efficiencies and the gradual deployment of our build-to-suit sites is significantly reinforced by the contribution from our recent deals. This is partially offset by cash elements below adjusted EBITDA, being the payment of leases associated with new portfolio as the main contributor. Taking all these effects together, Cellnex has generated a strong recurring leveraged free cash flow growth of 75% year-on-year. Please note that 17% of this growth is coming from just pure organic. Moving to Slide 13. Here, we can see the balance sheet and the movements compared to December last year that are mainly explained by our M&A activity in the period. Increase in total assets as a result of our M&A activity and the corresponding decrease in cash, more than offset by our 2020 capital increase and debt issuance during the year. As you can see, the company has a prudent PPA policy that leads to fixed assets allocation primarily with only marginal impact on goodwill. And just a few words on our capital structure and our current liquidity position. We have more than EUR 17 billion in available liquidity, including EUR 11 billion undrawn credit lines, a strong backlog of contracted revenues at EUR 110 billion, an average debt maturity of 7 years with a highly competitive cost of 1.5%. The vast majority of our debt is fixed, around 85%, and our corporate debt give us total financial flexibility. We have no hedge, no pledge, no guarantee, no covenant. This unique combination allow us to maintain our financial flexibility in this challenging environment and provide us with a wider range of options to continue financing our growth at a very low cost of debt And very quickly on our 2021 financial outlook. We are expecting our adjusted EBITDA to grow at around of 55%, with our recurring leveraged free cash flow growing at around 50% and our organic growth above 5%, including contribution from also our BTS programs. Finally, just few words on our last transaction in Poland. Moving now to Slide 18. Here, you can see that we have reached an agreement for an acquisition of 7,000 sites in the country and a BTS program of up to 1,500 sites. As we have said earlier, this transaction allows us to enhance our industrial profile and move from a pure real estate company to a global infrastructure partner by expanding our presence in the value chain and building 5G capabilities to be shared with different clients. This can only be done by a neutral player with a strong track record providing end-to-end services under strict operational KPIs. And we believe that this expertise will be critical to crystallize further shared service in the context of 5G. Including the associated expansion CapEx, we expect to dedicate approximately EUR 2.2 billion towards this deal in a change for a portfolio that is expected to generate an adjusted EBITDA of around EUR 350 million on a run rate basis. So a compelling valuation in our view. And with double economics in terms of the same cash generation profile, inflation linked, long-term contracts, anchor tenant, neutral host model, for sure, the same expected returns. And with this, let's please open the line for your questions.

[Operator]

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

[Simon Alexander Arulraj Coles, Research Analyst]

Simon from Barclays here. I guess my first question is on the rights issue. We've obviously seen the share under pressure in the last month, and there's obviously lots of moving parts, but I'm just wondering if you had any updated thinking on the size of the rights issue, given what we've seen? And then secondly, on the augmented TowerCo, I think this is a fascinating development. Something I think you highlighted was a potential move at your CMDA number of year ago. How easy do you think this is to replicate this model in Poland into other markets across Europe? And how big an opportunity do you think this could be?

[Tobias Martinez Gimeno, CEO, MD & Director]

Thank you, Simon. On the first one, maybe José Manuel provide you some update.

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

Well, regarding the size of the right issue, we still continue thinking the same as we did at the beginning of February. We do think EUR 7 billion is an adequate figure. We have a strong pipeline of opportunities. Today, we have shared with all the market what we do think is a transformational deal as Galata was back in 2015. We are opening a new road. We are opening a very strong industrial differentiation of Cellnex compared to any other player. So therefore, we are still thinking what we thought at the moment that we presented the last time to you. EUR 7 billion is commensurated for our EUR 18 billion of pipeline, of which EUR 9 billion have already been announced to the market. Regarding the second question, I think...

[Tobias Martinez Gimeno, CEO, MD & Director]

Yes. Tobias speaking. So first of all, I think we have to underline, just to recall that RAN agreements are a fact in Europe among the different telecom operators. So radio access network is a fact today among the telecom operators. But I think the most important thing to underline today is we are executing or we are evolving our customer approach, our customer value proposition. and then to develop and to set a new role in the value chain, on the value proposition, which is the -- being the provider, not just of colocation, not just of square meters or access to the passive infrastructure. It's really partnering with our customers, taking care and managing this RAN agreement, this radio access network, we do believe, Simon, that today, it's a tipping point in the transformation of this industry. And we will see more and more projects like that in Europe. I cannot tell you where and when, but we do expect that this is an opportunity for sure, first of all, for our customers because they are doing among them. But this is also a great opportunity for us, being the long-term partner for end-to-end solutions. And therefore, we do expect a very high degree of probability in the countries where we are running already 2 anchor tenants per country because it's a natural evolution. But again, I don't know when and where. But for sure, I think all of us, we will learn a lot from this experience in Poland. I don't know if, Alex, if you want to complement the answer.

[Alexandre Mestre Molins, Deputy Chief Executive Officer]

Very quickly, we have 7 countries where we do have 2 anchor tenants as of today.

[Tobias Martinez Gimeno, CEO, MD & Director]

Okay.

[Alexandre Mestre Molins, Deputy Chief Executive Officer]

And there is another element, which is actually leading us towards this additional step in the value chain, which is the technological evolution. There are new technologies in the RAN areas like open RAN that will make this possibility even easier and much more logical because the electronics becomes a commodity type of service. So we're trying to be ready for that and to seize that opportunity as it happens.

[Simon Alexander Arulraj Coles, Research Analyst]

Okay. Can I ask a follow-up? Do you see this as a way of protecting yourself from consolidation, given there is hopes that maybe consolidation does come back to the European market?

[Tobias Martinez Gimeno, CEO, MD & Director]

Well, maybe, yes, Simon, I don't know. But in my opinion, this is about partnership, long-term partnership, you're right, but also customer and supplier loyalty, I mean, bidirectional loyalty and long-term agreements. So this is not just about colocation. So you are right. But at the end, we do expect that, obviously, this is an additional layer of services on top of the, let me say, the pure real estate service, and then maybe you are right. Let's see the evolution, Simon. I think we should wait for a time in order to realize if other countries and other customers are willing to also to share and to monetize this type of shedable assets.

[Operator]

We have a next question from Akhil Dattani from JPMorgan.

[Akhil Dattani, Managing Director and European Telecoms Analyst]

I've got a few, please. Firstly, just on the rights issue and your M&A comments from earlier in the call, I guess it's a big picture question. I'm just trying to understand, a month or so ago, when you announced the rights issue, it was a EUR 7 billion rights issue to fund EUR 18 billion of M&A. As you said on the call today already, you've effectively committed half that pipeline before the rights issue is done. So clearly, your execution on deal pipeline has been extremely rapid. I guess I'm just trying to see how we should think about going forward, obviously, the challenges digestion of these sorts of rights issues? So how do you think about as that pipeline evolves? Is the pace at which you're doing it, future funding needs and future pipeline? So just if you could just give us some color on how you think about how you manage those various things. The second question is on your guidance, on your midterm guidance, obviously, very helpful, you've given us some color now on where you think 2025 numbers should be. I guess I just wanted to clarify what is incorporated in that guidance. So obviously, you've rolled up all of the transactions you've announced. But can you talk us through what else is or isn't included? And I guess, specifically, I'm quite keen to understand if synergies are in them or not. And if they're not, at least, if you're not ready as yet to give any numbers to that, if you could just give us some color around that. And then the final thing was just a very quick clarification on Poland. If we look at the multiple, it's actually lower than what you paid for the Iliad transaction. Now I appreciate you've often said not to look just at headline multiples. But just if I can understand that process and just the reason for the question is that, as I'm sure you get, we get a lot of questions around the competitive nature of M&A today and the view that potentially there is more bidding intensity but yet the multiple here is low. So just interested in how those negotiations went and how we should we think about that.

[Tobias Martinez Gimeno, CEO, MD & Director]

Thank you, Akhil. Let me maybe start with the second, maybe Alex, the third one, and José Manuel will give you the first one. On the second, just to clarify that our 2025 guidance is essentially including everything that we have announced to date, including our second site in Poland. So basically, it's our traditional perimeter, plus organic growth, plus build to suit, plus everything that we have announced until today. On top of that, maybe there is an initial layer that is not in your model, which is the -- also the incremental contribution from the efficiencies program that we have announced today, okay, the EUR 100 million savings by 2025. And that is essentially all of the different blocks included here. On the -- I don't know, Akhil, if that's clear.

[Akhil Dattani, Managing Director and European Telecoms Analyst]

It is. I guess the question was just whether synergies are in there or not and how we should think about that.

[Tobias Martinez Gimeno, CEO, MD & Director]

It is included. The portion of the synergies that we have included within our EUR 100 million figure, okay? So we have made an assessment on what we can achieve in terms of optimization of current leases, but also synergies potential. This is the point that we are confirming today. Obviously, if we can do better in the future, we will provide an update. But that this is the figure that we have come up with and that we are incorporating in our figure.

[Akhil Dattani, Managing Director and European Telecoms Analyst]

That's clear.

[Tobias Martinez Gimeno, CEO, MD & Director]

On Poland, Alex?

[Alexandre Mestre Molins, Deputy Chief Executive Officer]

On Poland in relation to the multiples, as was previously mentioned, so face value versus multiple, it's not something that is always the metrics that give justice to a transaction. So contracts are important. As you realize, this project is very much like other build-to-suite projects that we've been doing. So when you look at the proceeds versus the EUR 600 million of CapEx that will be done during the coming years, it gives you a profile, which is similar to other transactions that we are doing, which are built-to-suit intensive. So this is very much the type of project, and this is the way we see it. And of course, this is fully understood by the seller, too, and we believe that we found the right partner also in order to go ahead with this transaction.

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

And regarding your third question, well, we -- it is true that we have already executed half of the pipeline. At the same time, I think that is pretty difficult to maintain. So in the starting of the year, we have had certain opportunities, but our pipeline is thought for the next 18 months from settlement. So yes, quick execution from these few months of the year. But I think that now fairness also is going to building up other -- well, assessing other opportunities that will take a little bit of time within these 18 months. Also, and Akhil you know very well, and Simon and all the analysts that you follow the company, you know that Cellnex is creating and in the guideline is clear cash machine, a cash machine. So at some point, step-by-step, I do think Cellnex will be more self-funded. I think that during the presentation, you have a [ plethora ] of questions. There are some slides that give you -- I mean, that give you a clear indication that -- about the capacity of the company to generate their own cash, and therefore, to have their own resources. And this coupled with a strong deleverage capacity. Akhil, please note that we are talking with a midterm horizon of 2025, in which 85% of our revenues are contractualized. So size, deleverage, cash flow generation visibility of cash flows, step-by-step, scale. Cellnex, I do think will be more capacity to fund new adventures. Now we are focusing these 18 months. There's a lot of work to do. We are presenting today a game changer for the whole industry. Again, changer does not -- it cannot be implemented from 1 day to the other. It requires a little bit of time.

[Operator]

We have a next question from Nick Delfas from Redburn.

[Nick Delfas, Research Analyst]

Quite a few questions from me, if that's okay. The first one is on inflation. I probably ought to know this, but inflation surprised in January on the upside. When exactly do you redraw the contracts for CPI each year? And how did that affect 2020? And how might it affect 2021? Second one is, are there any conversations you're having with Edizione about their holding? I gather they didn't back the last rights issue. Do you know what they're planning to do this time?And finally, dividends to minorities were quite light. How much do you expect those to ramp up in 2021, 2022 as you have those minorities in France, Switzerland, Poland? And then the final question is, the price per power in this Polish deal that Akhil was pointing out was quite cheap. And just to be clear, that includes the radios that you're buying in the transaction as well?

[Tobias Martinez Gimeno, CEO, MD & Director]

Thank you, Nick. Maybe on the last question, the answer is yes. Basically, this company manages not only passing the [ infrastructure ], but also the run equipment. So both the passive and the access side is included in the perimeter of the project. Third question, dividends to minorities, not much. Bear in mind that we do have some minority partners in some of our portfolios, but also, at the same time, we have quite significant build-to-suite commitments. So the cash generated by those projects will be used, as José Manuel was saying before, on the -- this organic cash generation will be used to fund the build-to-suit commitments. So we are not expecting dividend payments to minorities. Okay. On the first question, inflation in 2021, we are not actually including almost anything. Based on the, I would say, the macro environment in 2020, we are not including almost -- actually 0 inflation, a contribution in our 2021 guidance. And the second question is a bit tricky for us?

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

Well, we do not have visibility yet on the commitment or the willingness of our shareholders' base. Just to recall that in the last 3 capital increases, we reached almost 98.5% takeup of the existing shareholders' base. But obviously, you know very well the company is becoming bigger and bigger. So it means that maybe it's not the same. When we are issuing the fourth capital increase in the last 24 months and reaching EUR 7 billion, which is almost the same figure adding the -- of the last 3 capital increases, just to recall that totalized summarized EUR 7.7 billion. So frankly speaking, we should expect a very high degree of subscription on our shareholders' base. But well, also would be an opportunity for new shareholders because the company is becoming bigger and bigger. And I think that will be very normal behavior maybe to get opportunities for other shareholders.

[Nick Delfas, Research Analyst]

Okay. Just a couple of follow-ups then. On the inflation, does it get -- the contracts all get redrawn at the beginning of the year based on the previous year's CPI? Is that how it works?

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

That is the demonstrational mechanism, yes. Based on the national inflation in year 1, that information that we use to rebase fees in year-end plus 1.

[Nick Delfas, Research Analyst]

Okay. And the organic PoP growth of 5%, is that what you've assumed presumably until 2025, but you're actually already running at 5.5%, just to be clear on that? Is that right?

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

Exactly. With the -- I mean, obviously, depending on the further developments in terms of our 5G and everything, the more information that we will have on the newer rollout plans of our clients, more than happy to update our view. But with information we have today, we feel comfortable with this guidance.

[Nick Delfas, Research Analyst]

And just -- so this is definitely the last one. On BTS synergies, you've given the EUR 250 million figure as a CapEx synergy. Obviously, in some cases, you're not going to be needing to have a ground lease. So the EBITDA synergy is in addition to that, is that correct? And it should be quite material as a run rate basis.

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

It is included in our EUR 100 million figure. So basically, this figure includes the benefits from both processes. And again, this is based on our information today. The assessment that we have been able to do in the short term. And again, happy to update it in the future. But I mean as a concept, yes, this EUR 100 million includes both efficiencies and synergies.

[Operator]

We have the next question from Jakob Bluestone from Crédit Suisse.

[Jakob Bluestone, Research Analyst]

A couple of questions. First of all, just your stock obviously had a bit of a pullback as well. So interested in hearing your thoughts on your capital allocation in light of that. Would you consider things like buybacks, given the guidance you've given certainly looking a few years out, that's something that would be very accretive? And so just interested on how the sort of movement in your share price might impact any of your thinking on capital allocation? Secondly, in Slide 3, you very helpfully gave some color on the CPI linking of your contracts. You mentioned that the vast majority of the 65% of revenues that are CPI linked have a floor of 0%. Could you also just share with us any -- what proportion have a cap as well? Just to understand if there are any sort of ceilings that we need to think about. And yes, I'll just leave it there.

[Tobias Martinez Gimeno, CEO, MD & Director]

Thank you, Jakob. José Manuel, do you want to comment on the...

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

Yes. No, I -- both seems to be me as well. You are talking about buybacks, now we are maybe in a different mood, which is we need the support of our investors in order to execute a big pipeline. We do have beautiful opportunities as one of them being the game changer that we are presenting to all of you today. That differentiates Cellnex and the capacity of Cellnex to generate value for our shareholders. This is an important game changer. So we are now more on other mood, okay? So this is the first thing. Also, regarding inflation, I think that in Slide 26, you can see a very detailed, well, a very detailed slide that explains the indexation of our revenues. So yes, we could say to you that more or less and I don't not want to make a mistake. But in 2025, I will say to you that between 1/2 and 2/3 of our revenues have a cap in inflation. This is what we say. And this cap being circa, broadly speaking, please, 3%.

[Jakob Bluestone, Research Analyst]

If I can just ask a follow-up on Page 4 as well, where you've got the increase in your free cash flow per share going up sort of 5x post the execution of the full M&A pipeline. Can you maybe just explain how you get to that number? And specifically also, I mean, you obviously include the shares being issued to Hutch. Are you effectively saying that you do not assume any further shares being issued to any sellers, if I understand that correctly?

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

Yes. Your understanding is right and is represented in footnote #4. And in order to get to that figure, it's very simple. You get the guidance 2025. And then apart from the guidance, there is some M&A to be executed at the multiples. You can take in the -- our last prospectus, we were very clear in the multiple that we have paid in the past on average on a run rate basis. So you have the EUR 2,200 million guidance recurring free cash flow for 2025. Then you have to add this EUR 9 billion with the multiples that we have been paying in the last 2 years, that on a run rate, we are talking about 15x on a run rate. So you add these 2 figures, EUR 2,012 million, plus EUR 900 million divided by 15 million due to one adjustment to get to recurring free cash flows, which more or less tends to be 85% of this EUR 9 billion divided by 15 million, multiply by 85%, gives you the recurring free cash flow. You add that, and then you have to consider that the gap between 2025 and the run rate for the EUR 2,200 million, okay? So a little bit of more growth for the first EUR 2,200 million. You divide that by the number of shares, and you get that -- this EUR 6 per share easily. Juan will give you further detail by -- much better than me.

[Juan Jose Gaitan Mañoso, Head of Investor Relations]

No, just one minor clarification. Number of shares in terms of the denominator. So basically, we are assuming the current number of shares plus the contribution in shares to Hutchinson, plus this capital increase that we are aiming to execute. No further issues in the future.

[Operator]

Our next question is from Sam McHugh from Exane BNP Paribas.

[Samuel McHugh, Analyst of Telecom Operators]

Thank you for all the extra detail today, number one. And then secondly, I want to ask about Poland first. I wondered what you perceive to be the risks in taking on this active component and the active layer? I wonder if there's any Huawei exposure in Polsat. And just kind of maybe a bit more detail on what you're worried about, just be interested. And then secondly, how soon do you think you could begin to execute on facilitating the RAN sharing in Poland? Is this something that you think you could ramp up relatively quickly? And then the second -- or third question, sorry, is on the second retenant on build to suit. I think it's interesting, you flagged that you expect secondary tenants to actually pay more on B sites than other sites. Does that still apply where you're harmonizing the build-to-suit programs between operators? It seems like that might be a bit optimistic for us to think that would be the case on those sites, too.

[Juan Jose Gaitan Mañoso, Head of Investor Relations]

Thank you, Sam. Maybe I will start with -- or I will try with the third one because I'm not sure we got that. I mean bear in mind that we have a number of our build-to-suit models in place. So maybe clients have preferred to concentrate the value in the consolidation and then less value on the build-to-suit program, and that means also at the same time, a lower associated fee. Whereas in some other cases, for example, the Hutchison deal is a contrary, no? So with maybe a much higher [ coordinant ] fee on the build-to-suit sites. It is -- you will see a bit of everything. I mean, it is difficult for us to give you an indication on what should be the future performance because it is to data based on the many, I would say, many build-to-suit products that we have in place, you can find a bit of everything. I'm not sure, Sam, if I'm answering you.

[Samuel McHugh, Analyst of Telecom Operators]

Why don't we follow-up another time, Juan? Let's move on to next one. We can talk about later.

[Alexandre Mestre Molins, Deputy Chief Executive Officer]

Yes, yes. So happy to take the first 2 in relation to the RAN sharing. So RAN sharing, here, we are not inventing the wheel at all. We are just operating something which is already on the market for many years. So the exposure to technology, it is something that was already previously something that was shared among the 2 operators. Now there is an enabler that potentially can help for this to happen in a more efficient and quicker way. And this is where we would become this RAN sharing operator. Then in relation to your question of Polkomtel being as exposed to Huawei. As of today, this is none. So there is no immediate impact in relation to that element, if that will be your question. There is a FAQ at the end of the presentation, and what we try to explain there is that the technological decision, vendor decisions are led by the anchor logically, and we follow and we put on the table our thinking around that. But it is always the vendor decision taken by the first anchor, who is taking that opportunity. And on those countries where there are already RAN sharing going on, the normal way that MNOs split the responsibilities is by geographical areas, if one takes their responsibility. So the model that we are intending to test with this first transaction could be perfectly applicable to all those already RAN sharing agreements which are on place. So when you try to envisage how far we could go on that, do not think that because there is already a RAN sharing agreement, there is no possibility for this augmented TowerCo to have a role. It would work perfectly as well.

[Samuel McHugh, Analyst of Telecom Operators]

And so can you take on responsibility for the RAN sharing at half of the country? Or do you need the permission of the secondary MNO as well?

[Tobias Martinez Gimeno, CEO, MD & Director]

Can you repeat the question, please?

[Samuel McHugh, Analyst of Telecom Operators]

Yes. So theoretically, if your -- if you take on responsibility for the RAN sharing for one of the MNOs in half of the country, does the second MNO have to give you that approval to take on that responsibility, if they were the kind of -- they weren't managing it in that half of the country, if that follows?

[Alexandre Mestre Molins, Deputy Chief Executive Officer]

Well, unclear because this is something that is depending on the existing potential relationship among the players today, but what would make a lot of sense is that we would take both.

[Operator]

Our next question is from Ottavio Adorisio Donio from Societe Generale.

[Ottavio Adorisio, Equity analyst]

You already provided a lot of details, so I will probably ask a few things a bit sort of broad picture. First one, it's a follow-up from actually the last call. You talked about the ability to extract synergies from all the deals you have been announcing over the last 12 months, and one of this is actually to combine the BTS and the legacy. And a lot depends on the nature of the contracts you have. I think I remember it was Tobias who mentioned that synergies are much easier to extract when you got MSA. So we're just wondering, given the portfolio you have, you give a lot of breakdown in terms of inflation, much linked to inflation, much are not to escalators. Could you just give a bit of a breakdown how much of the revenues you have are actually linked to MSA or much of the acquisition you have done over the last 12, 24 months, and therefore, it's easier to extract synergies to combine portfolio and how much would be probably so easy? The second one is basically a follow-up on guidance. You state that there is not any sort of expectation in inflation for the '21 guidance, but also you provide midterm guidance on '25. So I was just wondering if there is any expectation or any of the guidance you provide, does it reflect any expectation for inflation over that period? And because there's a lot of material, I didn't really see if you also had an assumption of ForEx, considering how you have significant exposure to Polish zloty, the Swiss franc and the pound. Because that is exactly something that should be taken into account, particularly for the Polish zloty. And the third is -- that's [indiscernible] from a comment from a CEO of Orange recently. If there's something missing anytime you announce the deal, if you start mostly with a deal, never really with a very few exceptions, agree with an incumbent, or at least with a #2 like Vodafone. So I was just wondering, what is the resistance? Pretty surprised the CEO of Orange really mentioned you by name as a sort of hoping that none of the other incumbents sell tower to you. So I was just wondering, what's the resistance they have? It's the fact that you never agree an initial term that is lower than 15, 20 years? It's any other terms of the contracts that they found difficult to digest? The prices? I would be really interested to hear how negotiation goes whenever you talk to them vis-à-vis all the deals you complete with the other operators.

[Juan Jose Gaitan Mañoso, Head of Investor Relations]

Thank you, Ottavio. On the first question about our proportion of a contract that have MSA. I would say that the vast majority of our largest contracts are actually MSA. I mean, for example, with Hutchinson, Hutchison deal encompassing 6 countries, that is an MSA, with win in Italy with Bouygues Telecom; in France, those are MSAs. To finish with you this one in Poland as well, of course, that is also an MSA. So I would say that the majority of them, we don't have the figure. So let me -- let us come back to you on that, but I would say that the majority of our revenues are coming from contracts that are MSA compared to MLAs. So bear in mind, Ottavio, maybe a clarification that an MLA does not make a synergy impossible. I mean, obviously -- I mean, it is true that this possibility is embedded in the contract if it's an MSA. But obviously, under an MLA, if we can find an interesting angle for both parties, that can also be done, okay? So it's not a hurdle. It is not impossible. In terms of inflation assumption until 2025, we are, I would say, assuming like 1% roughly on our inflation-linked contracts. And then on top of that, obviously, the contribution from fixed escalators that we also have in our contracts. ForEx, we are projecting the current situation, okay? Any deviation compared to our view, we will provide that, but we are assuming something very simple something constant. And finally on incumbents. No, Tobias?

[Tobias Martinez Gimeno, CEO, MD & Director]

No. Yes, yes, yes. I take the -- I think it's not about any company-related matter. I mean it's about, I think the strategy is about when you are looking for a minority stake or when you are in a position to sell down a majority stake. This is the key question. When you are looking for a minority monetization, it's a different story. It's a different project. It's -- in fact, we do believe that we are not competing with controlled tower cost companies by telecom operators. We are not competing in the organic growth, maybe we are competing in some local countries in some local markets. But this is not a company-related matter. I mean it's the same with other, let me say, independent tower costs. So I think this is the big question mark, and then when you are not in a position to sell down majority. So you are taking one road and we are in the other road. We are not able to maximize returns, efficiencies, growth, being a minority shareholder. It's not possible. And we do believe to be clear on this value proposition since the very beginning. But it doesn't mean that we are not in a position to cooperate in a country-by-country basis in order to extrapolate, to maximize the operational synergies or efficiencies. So I mean, in fact, we are delivering services to Orange in Spain and in France. But -- well, if some telecom operators understand that for them, it's much better to keep the control of those assets, full respect, but we do believe that this is not the best way to obtain or to extract the maximum value of this opportunity. But again, maybe it's a process. Maybe in 2 or 3 or 4 years from now, the situation maybe could be different. I don't know. But again, I think the quick question is not about a company related. It's about if you want to give the control of the assets to a third party or not. And I think this is the big question mark.

[Operator]

We have a next question from Emmet Kelly from Morgan Stanley.

[Emmet Bryan Kelly, Head of European Telecoms Research]

I've got 2 questions, please. The first question is just looking a little bit deeper into your lease-saving programs. Obviously, leases are going to be a very big cost. In your previous presentation, you mentioned the Galata leases were down by 20% over 6 years. Can you maybe say how you did that, whether it was buying freehold land or it's paying upfront on a multiyear basis? And can you maybe just say like what the efficiency ratio is here? Because I noticed in the presentation, you said no incremental CapEx. So how should we think about that expansion CapEx number going forward? Is a lot of that going to be dedicated towards lease efficiency? And what else is that CapEx spent on? And just the second question is, Tobias, just in the past, you've always emphasized how you prefer to expand in existing markets. Is that still the case? Just the reason I ask is just looking at Alex's presentation that he gave last week for TowerXchange, there was quite a few kind of new markets in there, whether it was the Baltics or Central Europe. So any kind of flavor you could give us on where the future expansion is and maybe say a few words, if you could, about the pipeline with Deutsche Telekom potentially?

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

Thank you, Emmet. On the leases, I would say that the -- we're talking about the specific Galata case. It is that we have done some acquisition of land. And also, this is something that we are contemplating more and more today. But historically, not a lot. I would say that the most efficient tools that we have been using is a straight renegotiation. Bear in mind also the estate under which we inherit these contracts. I mean we don't only acquire assets. We don't only create a contract with an anchor tenant. But in many cases, we also inherit a lot of space that is coming from the mobile operators. So it is after the transaction that we have the opportunity to optimize that ground lease space. So in many cases, it has been a straight renegotiation, approaching the landlord and get better terms. And also, in some cases, something that we've seen is very powerful is the concept of the cash advance. So we pay upfront a number of years in exchange of some years or maybe a longer right-of-use beyond the initial investment with a similar return, similar average saving, but it is to that -- in that case, we needed to present some cash upfront. For the new towers that we are now including in this new perimeter, I would say that the strategy will be exactly the same. Also, we will be targeting very similar savings. That will very much depend on the specific dynamics of the market. Maybe 4 years ago, we were mostly based in Spain and Italy. Now we have now a multi-country operation, so we will also find different realities. But the target is quite consistent with what we have been achieving in the past. When we say incremental CapEx, it is -- we refer to non-incremental CapEx beyond we are already estimating in terms of expansion CapEx, okay? So basically, that the idea here is that we are not giving the idea that we'd require more CapEx beyond what we are already expecting, okay? So this 8%, 9% on total revenues as expansion CapEx, that should be more than enough to achieve these expected savings.

[Tobias Martinez Gimeno, CEO, MD & Director]

Well, your question about the existing markets, well, I think it's very important to reach certain degree of market share in every country. I mean, Europe is not a single market. It's not a single market, means that we have to reach certain degree of market share in the 12 countries where we are today, 12 countries. So this is the reason why, for us, it's so important to reach certain level of assets because it's when we are in a position to extrapolate, to maximize the efficiencies and synergies as well. The second important thing is the company is also devoted to develop customer relationship beyond of a just pure monetization of the existing passive infrastructure. And I think today, we are presenting to you the project in Poland, which is completely different. But again, for us, we do believe we have a lot of room for improvement to develop our portfolio of services with the existing customers in the 12 countries where we are today. We're keeping the same strategy of maintaining our priorities in Europe and the existing countries where we are today. Obviously, Emmet, that we would be happy to find the right opportunities in new countries like Germany. But if not, well, we have a lot of opportunities in front of us. We are running almost 125,000 sites in the 12 countries where we are today. We have the opportunities maybe to replicate this opportunity we are presenting today in Poland, in other countries where we are running to anchor tenants. So I think the landscape or the pipeline of opportunities in front of us is huge and extremely, extremely attractive in terms of financial rationales. And therefore, we are not, let me say, obsessed in order to enter in Germany or in other new countries. So obviously, we will like to be there. But we want to be there, if it makes sense for us. If not, we will try to do it. But again, I think in the main principles of our strategy about geographies and services. We remain in the same position with very clear and very simple priority. It's current countries and to maximize our customer relationship. For us, it's very important to develop our customer relationship in every country.

[Operator]

Our next question is from Luigi Minerva from HSBC.

[Luigi Minerva, Senior Analyst]

I just wanted to follow up on a couple of points you mentioned. So firstly, you've given us very helpfully the long-term guidance, and I appreciate the comments from José Manuel about the company becoming self-funding. I was just wondering whether on a medium to long-term perspective, you continue to see Cellnex as an M&A story? Or whether at some point you think distributing the dividends to your shareholders can become an important pillar in your equity story? The second question is about -- yes, just following up on the comments you made on Ottavio's question about the approach from incumbents. And I was wondering whether a solution where you would have joint control with one of the incumbents, could be a way to convince them that it's more acceptable to make business with you? I'm conscious that joint control comes without consolidation often. So that's probably an obstacle for you. And then lastly, just to have an update on when do you plan to close the remaining transactions from the Hutchison deal?

[Tobias Martinez Gimeno, CEO, MD & Director]

Thank you, Luigi. On the -- I'm sorry, can you please...

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

The first one, it was about dividend, so dividends, M&A policy.

[Tobias Martinez Gimeno, CEO, MD & Director]

Just -- sorry, just to clarify your third question, Luigi, sorry.

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

Okay. Sorry.

[Luigi Minerva, Senior Analyst]

The third question is the closing of the remaining transactions from the Hutchison deal. What is the timing there?

[Tobias Martinez Gimeno, CEO, MD & Director]

Absolutely. Sorry. Italy should be the end of 2021. And as we said, in the market announcement of the Hutchison transaction, we are expecting U.K. to be closed in 2022, okay? So far, no changes versus our initial estimate. On the -- maybe coming back to the first question.

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

Well, we know we are fully devoted to deploy the -- sorry. Today, Luigi, we are fully devoted in raising the equity and to be able to execute this EUR 18, 1-8, billion of pipeline. Then we have to integrate those companies. We have to make it work. And then we do think that today, we are starting a new -- is a new game changer. So I think that still there are some growth ahead of us for Cellnex in terms of unlocking a lot of value for our shareholders coming from towering in Europe, not towering -- not only from a pure real estate angle, but also from a pure service angle and also different infrastructure angle. So I think that, that can come later, dividends, but we are still in our, I think, just being 5-, 6-year-old, some growth ahead of us before answering that question. And maybe, Alex, you can...

[Alexandre Mestre Molins, Deputy Chief Executive Officer]

Yes, in relation how to approach incumbents. So we intend to see ourselves as a customer-centric company. And also, we are creative on the closures. We are flexible. However, there is some sort of red lines that we believe we should not be crossing, and one of them is neutrality. All those projects that, for instance, the one we have just announced today requires the concept of neutrality at the core of our positioning. And having a co-control with an incumbent, probably it's not the flavor that we want to show to the rest of the players in one market because the concept of sharing, having an incumbent with 50% in a co-control, it's not, at least we believe, the best way to embrace the rest of the players of the market.

[Operator]

We have a next question from Abhilash Mohapatra from Berenberg.

[Abhilash Mohapatra, Analyst]

Thanks again for the increased disclosure today. A couple of questions from me. Firstly, just a clarification on the sort of cost savings and efficiencies plan, the target by 2025. Can I just ask on the network synergies side, what kind of countries, what kind of markets does this 2025 time frame take into consideration? And should we see that as the end of the road? Or do you see scope for savings beyond 2025 as well? And then maybe just a sort of broader question on M&A multiples. I appreciate your point that you don't really think that looking at headline multiples is necessarily the way to do this. But given the compression you have seen in tower multiples in recent months, does that somehow reflect in your transaction -- in your discussions with -- for future transactions?

[Tobias Martinez Gimeno, CEO, MD & Director]

Thank you, Abhilash. Maybe the first one, Alex?

[Alexandre Mestre Molins, Deputy Chief Executive Officer]

Yes, happy to take it. So on the deck, there is one slide, Page 29, where we intend to illustrate generically which is the type of synergies that we can extract. So when we are thinking on taking into the perimeter of the synergies, the built to suit, this should be done prior, the build-to-suit is done. And as you know, our build-to-suit plans go beyond 2025. So there is an area where we need to probably focus on those build-to-suit prior to be deployed in order to capture those synergies. However, on the legacy against legacy, even though a build to suit is done, always, this will remain. So it is not something that we believe is having a hard time in 2025. It is a running process that we believe we will continue optimizing and something that potentially today, it's not foreseen possible, maybe in the future will be possible. So it is an in-depth analysis that we are just starting to do in those 7 countries where we do have 2 anchors.

[Juan Jose Gaitan Mañoso, Head of Investor Relations]

And José Manuel, on the first question?

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

Well, the multiple question, again, we are a long-term investor. For us, what is key is to somehow to meet our IRR thresholds, and you know that our IRR threshold is low double digit. This means that at least 10%. I think that this transaction meets also this requirement. I would not like to go beyond that. It's something that multiple just is a way to measure this. But at the same time, there are other elements that have to be considered. This is a very good transaction for both parties, a win-win agreement that's going to extract a lot of value for Cyfrowy and also for Cellnex.

[Operator]

Ladies and gentlemen, we will be taking our final question from Fernando Cordero from Banco Santander.

[Fernando Cordero Barreira, Equity Analyst]

The first one is a detailed one on the guidance 2025, and just to understand which is the tax assumption in terms of cash tax rate that you are making. And just if you can give us, let's say, some kind of long-term outlook for your cash tax rate.And the second question is on the augmented tower concept, which is fascinating, I have to recognize. And in that sense, I would like to understand, at which extent a potential secondary tenant may as well as in your passive infrastructure model as a [indiscernible] peak, can a secondary tenant share repeat coverage service or radio service in the segmented TowerCo model? And also in that sense, at which extent this is more profitable as secondary tenant over a passive infrastructure service or over an active infrastructure service?

[Juan Jose Gaitan Mañoso, Head of Investor Relations]

Thank you, Fernando. On taxes, maybe José Manuel?

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

Yes. No, no problem. No, look, Fernando. I think that in the presentation, if we go quickly to Slide #11, I believe that the cash tax year is 2.4%, okay, on revenues. And also in the slide, I think 15, we are giving to you the highlight that 3% on revenues for 2021. So if I were to project Cellnex, I would use this 3% on revenues. What I do think that is sustainable, and I'm fully, I mean, secured on this, really sure about this, I would like to -- so I suggest you to go through the slides that talk about tax, which are at the end of the deck, number 32 and 33. I do have -- we have built up industrial tax angle. We are a neutral company. As a neutral company, we have the flexibility to develop research and development, industrial, patent box. We have also BTS programs that allow us to gain full tax deductible of the -- of a portion of the consideration to be paid to the seller. You know that we foster asset deals in front of share deals. So it's somehow several initiatives, all of them fully compliant with European standards law, fully compliant with the good tax practices that allow us to reduce this cash tax. So it's not a result of, let's say, casualty. It's a result of a thorough assessment country-by-country and following a very clear M&A criteria and also funding. So I do feel comfortable that use this 3% until 2025, and you will get in a easy way, but I think you -- tenants will pay on a cash tax basis. So Alex, maybe...

[Alexandre Mestre Molins, Deputy Chief Executive Officer]

Yes. So Fernando, yes, it's cherry pickable, and it's cherry pickable twofold: it's side-by-side and frequency-by-frequency. So it seems the spectrum being used around this model is the one of the third party brings on the table. There is not a specific need of a special coordination other than the very basic ones. So it could define a zone. It could define a population segment as normally MNOs are doing among themselves. And it can also cherrypick one band. They could do it only on 5G, for instance, or the contrary, they could do it in 2G and 3G. So in that sense, what we believe is that the portfolio of new services that we can now offer that value proposition is productive and will make the potential thing on the make-or-rent concept on their side. So that will be against the CapEx. So probably, it will allow to even evolve the model that we have now envisaged, but it is very, very flexible.

[Juan Jose Gaitan Mañoso, Head of Investor Relations]

And I think that we have reached the end of the presentation. Thank you so much for your time. Thank you so much for your question, and have a great weekend. Thank you so much. Bye-bye. Take care.

[Tobias Martinez Gimeno, CEO, MD & Director]

Bye.