Infrastrutture Wireless Italiane SpA

MIL:INW

Earnings Call Transcript 2021-Q3

[Operator]

Good afternoon. This is the Chorus Call Conference operator. Welcome, and thank you for joining the INWIT Third Quarter 2021 Financial Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Fabio Ruffini, Head of Investor Relations. Please go ahead, sir.

[Fabio Ruffini, executive]

Good evening, everyone. Thank you for taking the time to join us for INWIT's Third Quarter '21 results presentation. With me today are Giovanni Ferigo, our Chief Executive Officer; and Diego Galli, our Chief Financial Officer. I will begin, please allow me to draw your attention to the safe harbor statement on Page 2. We will begin with a short presentation followed by Q&A session. Over to you, Giovanni.

[Giovanni Ferigo, executive]

Thank you, Fabio, and welcome, everyone. Q3 results displayed an acceleration of all financial KPIs in line with guidance, which is confirmed. Expansion of industrial KPIs, despite some seasonality and the long administrative processes needed to build infrastructure in Italy and our ability to execute on new projects, adding additional sources of growth.

Just a few numbers. Hospitalities growing 10% year-on-year, purely in organic terms. Revenues up 6%, in organic terms. Strong EBITDA growth of over 9% and margin expansion from 65% to 67%. Leverage reduction ahead of schedule and already hitting the year-end '21 target.

Looking ahead, Q4 is expected to accelerate revenues further and pick up in terms of industrial activity with a strong increase in new sites. More in general, margin demand, commercial pipeline and a favorable external scenario allow us to look at the future with confidence. Tower are a beneficiary of digital and infrastructure investments and are key node in the digital ecosystem of the future.

Let's now move to anchor KPIs on Page 4, please. Anchor PoPs are up 9% year-on-year due to progress on the common grid and the initial benefits of the new site rollout plan. Q3 PoPs are up more than 3x year-on-year, but reflects 2 temporary factors: summer seasonality due to reduced volume of activities; lengthy approval processes in the various layers of the bureaucracy needed to develop our grid, which today don't benefit yet from the new simplification decrease.

There is a nice level of commitment by anchor to continuing optimizing and developing coverage, rolling out 5G. As a result, we expect both new sites and new ports to accelerate further in Q4. For new sites, we expect to build approximately 400 by the end of the year. Keep in mind that we are already up 3x year-on-year at more than 210.

Starting to our clients on Page 5. Q3 recorded 300 PoPs -- news PoPs with other clients or a total of plus 11% year-on-year despite no major update in the remedies process. This is thanks to progress with MNOs in towns below 55,000 inhabitants and fix or asset demand, which continues to develop well.

This is despite short-term softness in anticipation of the Italian and 1 gigabit funding, which regard -- with regard to the remedies, as you know, -- there is a pending legal appeal against the process since November 2020. At the same time, discussion around the process continues with the involvement of all parties. We are hopeful that an agreement will be found so that we can unlock the strong demand we see for our site.

We believe the remedies are a question of when, not if. the meantime, we are working to support our growth next year, assuming in line with this year and counting on several additional sources of growth. This scenario will be better should any solution be reached quickly. As we will discuss later on, 2021 has shown a step change in our quarterly rate of new PoPs, with important positive impact also in 2022 when the full P&L potential of 2021 PoPs will be realized.

Let's move to new services and DAS on next slide, Slide 6. This is another area like new sites where we are working to accelerate the business with an initial contribution in 2021 and a meaningful one in 2022. Revenues from new services increased by nearly 3x year-on-year on the back of progressive energy growth on the DAS installed base, leading up the asset operators and initial contribution in the interim period between the signing and closing of the tunnel investment projects.

We keep adding remote units and securing allocation in key verticals ahead of the next generation European funds, which have the potential to be a tailwind to advanced technology for indoor coverage. Our solution enable important use cases in fields like medicine, airport and transportation hubs. Thus, demand continues to develop favorably towards larger projects.

We provide a complex portfolio of assets and solutions in the context of private and public bids, which with returns in line with our internal threshold and not dissimilarly to macro site. Recent example of this confirming our leadership in this field are the investment indicated to highway coverage.

We are also very proud of our role in keeping the buildings hosting the G20 Summit room this past weekend with our DAS solution and coverage. In summary, Q3 results show we continue in our growth path, and they support our guidance expectation.

With this, I hand over to Diego. Thank you.

[Diego Galli, executive]

Thank you, Giovanni, and good evening to everyone. The results of the third quarter built on the positive trajectory of Q2, delivered a further step up in revenue growth and confirm our progress in profitability and cash flow generation. Organic revenue growth moved to plus 6%, up from 1.9% one year ago and 3.2% in Q1, 4.5% in Q2 2021. In purely organic terms, plus 6% growth is one of the best performances in the previously and will improve further in Q4.

Quarter after quarter, we are seeing the various sources of growth kicking in. New PoPs continue to add to the top line and further acceleration is expected in the fourth quarter. Quarter-on-quarter, we are up plus 2.3% in organic terms or about EUR 4.5 million.

Every revenue segment is up as compared with Q2. [indiscernible] and optimize their network with growth commitments for INWIT. Third-party revenues benefit from the quarterly head of the previous 2 quarters. New services are supported by DAS tenants and initial work on the tunnels. As Giovanni mentioned, new services are up nearly 3x year-on-year as weighting existing assets, both DAS and the [indiscernible]. We also keep on delivering on cost. Our focus in visible in ground leases, down 6% despite the growing asset base, pushing tower site economics higher.

Main driver of the trend is our relentless focus on the market at a local level, monitoring opportunities for renegotiation and when sensible acquisition. Therefore, EBITDA margin reached 67%, improving on a quarterly and yearly basis. Lastly, a reminder that our business model benefits from inflation to the tune of more than EUR 5 million EBITDA, every 1% increase in inflation. And it is insulated from energy cost volatility since tower site electricity consumption is a pass-through in our P&L.

In short, a solid set of financials with positive trends across all main indicators. The business is able to show a positive trend in financials despite some short-term volatility in net sales. Given the volume of new PoPs contractualized in previous quarters, we do expect 2022 will have a more stable [indiscernible].

Moving to cash flow on Slide 8. we see that cash flow generation continued to be solid in the third quarter, with cash conversion of 54% and a further step up in the direction to achieve our 2021 target. On a 9-month basis, we generated more than EUR 280 million recurring free cash flow on the back of growing profitability, structurally grow recurring CapEx and fairly neutral net working capital cycle. The cash position does not yet reflect the highway tunnel investment, the payment of which is split between Q4 of 2021 and the beginning of 2022.

From the next year, we will see also the material benefit from tax schemes, further improving cash conversion. As a reminder, we approved 2 tax schemes. The first and the most important one is unchanged. The second, based on the recent draft of the Italian budget law may have reduced positive impact to about 1/3 of the initial assumption. The IRR would remain quite positive at about 6%.

Organic cash flow generation meant a reduction in leverage of 0.3x in just one quarter, down to 5.6x at the end of September. INWIT can delever by about a leverage [indiscernible] year, creating balance sheet flexibility to the tune of more than EUR 1 billion by 2023. In the appendix to the presentation, you will find additional details on our financials, including the balance sheet.

In conclusion, Q3 recorded more than 900 new PoPs and a total PoP growth of 10% year-on-year. We have delivered robust revenue growth of plus 6%, more than 2% quarter-on-quarter, another tangible step in our growth trajectory. And we confirm growth in profitability with a 9% increase in EBITDA that are visible in growing sources of opportunity ahead of us in 2022 and next-generation new fund will be a tailwind to macro sites in DAS from 2023 onwards. Giovanni will elaborate on this in the next slide.

[Giovanni Ferigo, executive]

Okay. Thank you, Diego. So Q3 showed a further step up in growth within this industrial activity accelerating in the fourth quarter with more new sites. We can count on various sources of growth and the majority of those are contractually committed or highly visible. 2021 revenue expansion was based mainly on a few elements. Common grid, fixed [indiscernible ] assets, the initial buildup of new sites and lease-up in DAS tenancies. These trends continue to support 2022 when we also benefit from the carryover of the contract that we were started in 2021.

Adding to this, new sources of growth will come onstream in 2022, including higher anchor commitment in the MSA, improving commercial trends in fixed assets, a meaningful fees time impact from the highway tunnel investments and inflation that will kick in from January. For MNOs, we if we assume a similar growth as 2021 in towns below 55,000 and no immediate resolution of the remedies, remedies is able to expand revenues broadly in line with the current 2022 expectation with a better scenario in case of quick remedies resolution.

We are also working to accelerate delivery to get the consistent increasing speed for our operational KPIs. INWIT has the best quality asset in the market with 2 anchors, a nice tenancy ratio, expanding margin and cash flow generation. Counting on multiple levels of our organic growth, we are best placed to capture digitalization and infrastructure investments. With Q4 results, we would like to invite you to our Capital Markets Day, which we will schedule between end of February and beginning of March 2022.

With this, we thank you, and we will now take your questions.

[Operator]

[Operator Instructions] The first question from the English conference call is from Roshan Ranjit with Deutsche Bank.

[Roshan Ranjit, analyst]

Great. I've got 2, please. Firstly, just on the KPI. I think you did flag under this kind of material slowdown in 50 sites added in the quarter. Can you just run through the reason for that quite big slowdown? And you previously said you expect 400 sites by the end of the year. Is that still the case? So I mean this acceleration, you're talking about quite a material acceleration on the sites for Q4?

And then does that drive the -- you previously talked about this [ cruise ] and altitude for tenants. Does that get us back up to the 1,200 tenants for Q4 as well? And lastly, just -- second question, sorry, just so I understand the acceleration in 2022. You talked about an improved -- the OLOs improving pipeline on FWA and MNOs. Are you a better scenario? So are you saying that in your FY '22 at the moment, you're not including a resolution of the Iliad situation? And if that is resolved, will we see upside to the growth? If you could just provide some details there.

[Giovanni Ferigo, executive]

Okay. Thank you. [ It's Diego ]. Starting from -- I confirm that we did the end of the year, we will release around 400 this, let me say, today, there is a lot of sites in the final phase of sectors, consider that the month -- the summer didn't help us in terms. And so we are assuming that in the Q4, we will deliver around 200 new sites. Okay. So I confirm this. It's only, let me say, a generic process that is about longer in terms of [indiscernible] we are in the path of the 400 sites to deliver.

[Diego Galli, executive]

With regards to the PoPs and the 1,500 excluding speed, in the reference point is our average -- broad average of the last few quarters, where we did achieve 1,200 per quarter. As Giovanni said, the last quarter was impacted by specifically -- on including robust seasonality. Then in order to achieve the 1,500, we will get 2 things.

One is the acceleration of new sites. So the increase of number of new sites, starting from Q4 onwards; second, we do expect stronger demand of fixed over success and Diego will elaborate a little bit more on this in a second; third is also the remedy resolution should be needed in order to take up to achieve the 1,500. Even without the revenues, we will get higher than the 1,200, considering the other 2 elements that you mentioned, among the new sites and fixed other assets.

[Giovanni Ferigo, executive]

About, let me say, the 2022, we see. Let me say, increase in demand in fixed awarded access operators about MNO, we see a stable demand of hospitality. Is it okay?

[Roshan Ranjit, analyst]

Sorry, yes, the first part, great. On the 2022, so you're saying MNO is stable so that isn't factoring in any resolution of Iliad. Is that right?

[Diego Galli, executive]

Yes. Correct. Yes. If it comes, it will be a better scenario.

[Operator]

The next question is from Andrew Lee with Goldman Sachs.

[Andrew Lee, analyst]

Just had a question on cash usage. Obviously, the revenue growth is accelerating and as you laid out in your e-mail, is bringing your net debt to EBITDA faster down than consensus expecting. And so people are trying to work out where you spend your money and you've obviously kept flexibility for now between M&A and shareholder returns. So just wondering if you could give an update on where you stand on M&A. Do you have anything in your sights that's of genuine interest? And any kind of guidance you could give us as to where that EUR 1 billion plus is going to be spent more of versus between shareholder returns and acquisitions would be really helpful.

[Giovanni Ferigo, executive]

Okay. We confirm -- I confirm the strategy that we shared with you until today in the sense that we are studying about some little M&A in others and businesses for something, let me say, you, okay, could be something that we will discuss in the Market Day in February when we will do a meeting. Okay.

[Diego Galli, executive]

Yes. And as Giovanni said, we are consistent with what we discussed and presented in November last year, where we keep on creating flexibility. It will achieve a material amount in 2023 that could be used for inorganic moves or if not -- there are no options with adequate returns, then we will consider additional shareholder remuneration. So the 2 options are still both on the table. Clearly, this is a topic we will deepen discuss a little bit more the next update of the strategy.

[Operator]

Next question is from Simon Coles with Barclays.

[Simon Coles, analyst]

I just wanted to dive into the comment around 2/3 of the revenue growth next year is committed. And per your answer earlier, it sounds like some of that is just assuming that other tenants or other MNOs or SWAs continue at the same rate as this year. If we were to exclude those, should we think that basically half of the revenue growth expected next year is already committed? Is that the right sort of mass to be thinking about? Just trying to get a better sort of grip on what you're trying to communicate with that comment.

[Diego Galli, executive]

Actually, the 2/3 are the reflection of -- that do not include the new tenants with third parties and does not include the development on the Small Cell and DAS. And so it's basically coming from the carryover from this year, which is going to be material because in 2021, we did not benefit from any significant carryover from 2020. 2022 will be different and we will see the benefit of the 3,000 new tenants done in 2021, which did have a benefit in terms of revenue in the current fiscal year, less than, let me say, 50% of the full year impact. We will see the full year impact next year. We will see also the benefit of inflation, and we will see also the strong benefit of increase in the committed -- strictly committed contractually committed with the MSA, which is -- as a significant step up, reflecting the acceleration and the increase in delivery of new sites.

[Simon Coles, analyst]

Okay. That's very clear. And then just one quickly on working capital. I think you said there was some comments I didn't quite catch, but it's been neutral so far this year. Should we expect a neutral for the full year? Just trying to check there's no funnies in free cash flow in the fourth quarter?

[Diego Galli, executive]

Yes. The yes, broadly, we do expect, in general, on average, a neutral, slightly positive net working capital for Q4. We do expect a positive a reflection of some actions we are putting in place.

[Operator]

Next question is from Samuel McHugh with Exane.

[Samuel McHugh, analyst]

Just 2 questions, if I can. Firstly, on the MFA commitments. I think in the slides, it says that the commitments in 2022 are greater than 2021. I just wanted to clarify exactly what that meant. Do you mean incremental revenue commitments next year are greater than those in 2021? Or are you're just talking about the carryover that you just mentioned in terms of the extra revenues? And then secondly, on the new services, and obviously a huge acceleration. Is there any benefit from the Vodafone assets already? Or is that a 3x step-up all organic?

[Diego Galli, executive]

Yes. So 2 different things on the growth for next year. One is the pure carryover of tenants that we have done, I think in the current fiscal year, which will display full year to fully impact the full revenues for the 12 months next year. With regards to the MSA. Yes, in the MSA, there is a significant step-up in the committed revenues, which again, is a reflection of the demand and the deployment plans for the operators implying requiring additional sites. If -- the third point is about net revenues. Yes, in the quarter, we did have an impact already in early but from [indiscernible] lower than EUR 1 million. From the next quarter, we will see the full impact of tunnels. And we will see also some other initiative, actually. So the step-up of this current quarter, achieving the EUR 6 million revenues that we are very pleased with will continue. So we will see another step up in the next quarter as a result of the acceleration, additional focus we put on the realization of new location. But even more than that, as we said, is waiting and maximizing the revenues on the existing assets.

[Operator]

The next question is from Fabio Pavan with Mediobanca.

[Fabio Pavan, analyst]

Two questions. The first one is on the recovery plan. I was wondering if you start starting having some visibility on the projects in the pipeline on the timing on how you as a company will be eventually involved in these plans. And the second one is on the remedy. I guess we appreciated -- you continue to see extremely confident on the fact that an agreement will be found. I was just wondering if you have some visibility on the timing and eventually what could be the next step that we should bear in mind?

[Giovanni Ferigo, executive]

Thank you, Fabio. Okay, starting from Remedy. Okay. No major update is over the past few months, no news. It's very difficult for me to share a deadline today. We know that the negotiations and the legal processes have been going. We are not a part, the parties or Vodafone team and Iliad. So we, let me say, only can, let me say, listen, what is happening. Do we know that the next formal step will be hearing with all the parties involved, but no date today has been set.

But let me underline that we manage the time effect of the remedies in our P&L in 2021 as the results have demonstrate, we are working on the value sources of growth that we begin to support the 2022 and to close 2021, in line with our guidance. So let me say this is important. But as Diego said, if the team of the remedies will be solved is -- let me say, happy problem for us, okay, because this permit to do it to increase the team of PoPs of third parties. Regarding the Europe next generation Europe funds, let me say, a perfect tailwind to our business. Let me say that they improve the investment cycle in wireless infrastructure and macro sites, speeding up the development of DAS for the indoor coverage.

Let me say, the team are in practice in Italy. 5G plan, Italy, the 1-giga plan with the fixed wired access operator is -- I think that everyone of you read the delivery of us with the fixed wired assets -- let me say, solution gaining the margin a bit for the final customer. Industry 4.0, always with DAS, special courage trains, healthcare, medicine, tourism, university. And so let me say, we are ready which are the way to access to the far -- probably it will be the core for tenders. And we will take part in competitive building processes or through public-private partnership by seeing agreement with a public institution of promoting some specific projects. When that is the question. Okay, the fee tenders are coming now. And we are involved in the beginning of 2022. And for us, the initial benefits for our [indiscernible] -- I think in the second part of 2022.

[Operator]

The next question is from Georgios Ierodiaconou with Citi.

[Georgios Ierodiaconou, analyst]

Just the color of client games, please. I appreciate you've already made a lot of comments about 2022 guidance and how much of it is contracted. Do you just giving us an idea about the inflation aspect of it? I mean we are close to the end of the year. Can you perhaps give us an indication of what kind of inflation assumption you're putting in there versus what you had last year, if that's something you can share? My second question is around the use of proceeds and also other opportunities to grow. And I was wondering whether you are at all considering either early or perhaps a bit more advanced stages of thinking of how you could expand the services you provide for your anchor tenants. Perhaps even take control of some of the radio equipment that they share. Is that something you are considering? Have there been any discussions on this? Or any something for the midterm.

[Giovanni Ferigo, executive]

Yes, let me start from inflation. The mechanism of inflation is basically that starting on 1st of January, we apply the inflation, the average inflation of the previous year. This is the basic mechanism for the MSA. So again, first of January 2022, we would apply -- increase the prices based on the average inflation of 2021. As a reminder, on the MSAs, the contracts are 100% inflation linked with 0 -- with no cap and [indiscernible]. The -- with the other contracts with other customers, generally, they are 75% inflation, inflation rate. So as shared, 1% inflation for us is a positive benefit of EUR 5 million at EBITDA level, without counting the fact that, honestly, on lease cost, we have also the opportunity to offset some of the inflation.

[Diego Galli, executive]

Okay. about -- let me say a few equipment. Okay, starting from the fact that small cell and thus are active agreement. We have, let's say, radio designing department, it's the company that is perfectly, let me say, filled with the designing and maintaining the active equipment. So with the arrival of the open LAN architects are not in the, let me say, Tier 1 or Tier 2 in Europe today is not yet but we are ready to manage this new infrastructure. And optimizing all the -- let me say, on field infrastructure that the mobile operator will install and must manage. So let me say, it's only a team of time, but from a technical point of view, from a process view, from -- let me say, [indiscernible], we are ready and we really -- personally, I'm very excited to start with this new frontier of the TowerCo.

[Georgios Ierodiaconou, analyst]

If I could ask a last one on the first question. Is it possible to give us a figure on integration of what the inflation rate you expect will be used for next year based on where we are today? And also, if you ask, was it last year just for us to get an understanding on what's the [indiscernible] here. Is it 0.5%? Is it 1%? Is it more than 1%? Just to get a bit of a feel.

[Fabio Ruffini, executive]

Georgios, this is Fabio. Can you please rephrase because the line was a bit not clear. So are you asking about inflation assumptions for next year or...

[Georgios Ierodiaconou, analyst]

Yes. Whether you can be a bit more precise as to what are the kind of expectations we should have based on the fact that in less than 2 months, a year will be over and versus what you used in 2021? Just to get an idea of what is the step up we may see in '22 versus '21?

[Giovanni Ferigo, executive]

So just to confirm, Georgios, you mean specifically for inflation, right?

[Georgios Ierodiaconou, analyst]

Yes, for inflation, whether internationally, we see in '21 on to the '22 contracts, is it 1% difference or what?

[Giovanni Ferigo, executive]

Yes. Yes, 2020 inflation was basically 0. So there was no impact on prices in 2021. The current year inflation in 2021, which then will apply to 2022 prices is -- in the last numbers were related to September, it was about 1.5% average of the year. So now we will see the next couple of months, it will be a little bit higher than the average, but let me say, broadly now 1.5%.

[Operator]

The next question is from Stefano Gamberini with Equita SIM.

[Stefano Gamberini, analyst]

Two questions from my side. The first deal of regarding this trend of -- sorry, the 2022 revenues, which is 2/3 already committed. What is the reference of this growth? Are you referring to the consensus, which is around 9% or EUR 855 million revenues in 2020? So the second topic is, if this figure is correct, this means that you still need EUR 20 million, EUR 25 million to reach 2022 consensus revenue. So how you can get it? What I mean is considering the 6 period -- 6 months period to -- between the collection and the revenues. What is the trend in new collection that you expect next year to reach this target? And the second question regarding the 2023 targets. You confirm that also in this case, these targets, which means a further 9% growth in revenues. What are the main drivers that you see in 2023, considering the delays in MNOs, new collection during 2021, considering also the low visibility on small sales from -- in 2023. So what are the main drivers in your view for getting this target of growth in 2023.

[Giovanni Ferigo, executive]

Thank you for the questions. The first answer is very short, it's yes. The answer is yes. That's the reference, of course, is the consensus. To the second question is that also on the remaining bit, on the remaining 1/3 of the 30% that we have not defined as committed, yes, there is a high degree of visibility. And let me say for sure on, at least, half of it though is not supported from, say, contractual commitment or is not already in the pocket. So the 2/3 that we did mention are -- yes, are in the pocket for different reasons, either contractually committed with the [indiscernible] committed with MSA or already coming from the run rate, or coming from inflation or coming from commercial contracts signed now, that which will such as the tunnel, which again will deploy full impact next year. Just to reiterate also, the remaining 30% has a high degree of flexibility. So where there is still a commercial effort is probably on 15% of the staff. This does not mean that we can write these numbers today in the sense that the operational machine to -- will provide a very significant increase in volumes and delivery. And that's what takes to your third question, that is basically the growth engine, which will become more relevant in the next 2 years is basically the construction of new sites with the additional tenants on those. You may remember from our industrial plan that we have in the plan, 2,400 new sites, of which 1,800 in -- by 2023. So that's where we will see an acceleration of delivery and acceleration of tenants and acceleration of revenues.

We are also very quite positive on the development of special coverage. So -- and as we mentioned, that are evolving with 2 large projects on special and the example of tenants and on the highways is giving us, for sure, material impact on revenue, but also is opening -- has opened a stream of opportunities, which on Small Cell and DAS and new services is having boost. On MNOs, at the end, yes, this year, we are not delivering in line with what we would have liked. But anyway, we are talking about so far in the last quarters of 1,000 new and new tenants, which has brought the growth to 11% year-on-year growth. So it will stay like this and maybe can be -- to be better for 2 reasons. First, fixed for success. Actually, we do expect stronger demand, and it's also visible just reading the press from key operators and the media from the key operator fixed or success operators. Also, we -- then if the remedies process will improve, that will be on top to the other growth engines. Sorry for the long answer, I hope it was helpful.

[Stefano Gamberini, analyst]

Just a quick clarification on this. You said the remedies are the second important novelty that we are waiting for. So in order to be more confident on 2022 revenue target, when we could expect the -- an acceleration on remedies? End of this year, beginning of next year?

[Diego Galli, executive]

Yes. So set was not completely clear. I was -- I said it was the second out of the last topic. Yes. So in the [ said text ] that Giovanni explained very clearly in the presentation, we are working on a '22 scenario. Actually, the '22 scenario is based on the multiple growth engines, assuming MNOs in line with this year. If the remedies process will have a quick resolution than it will be -- we will have a better scenario. So we'll be good news on top of the base scenario. In terms of visibility, again, Giovanni, said a few minutes ago, that is difficult to have visibility in this moment. So as Giovanni said, we think there will be a solution. So it's not a question if, it's a question of when.

[Giovanni Ferigo, executive]

Let me say, as Diego said, we are waiting. But meantime, we are developing different sources of growth and revenues to permit to be confident in 2022 results.

[Operator]

The next question is from Abhilash Mohapatra with Berenberg.

[Abhilash Mohapatra, analyst]

[indiscernible] ask a question and back to the presentation so far. I just wanted to go back to your point around fixed wireless access, please. In the presentation, you called out -- specifically call out visibility on the commercial pipeline, and you also sort of mentioned sort of releases from some of the operators in the market. I was just wondering if you could give us a bit more color here, I guess [indiscernible] part of [indiscernible] so if you could give us some additional color here, what you're seeing in terms of demand, the clients that will be quite helpful.

[Giovanni Ferigo, executive]

Let me say, fixed or [ all access ] operator are, let me say, very [ propositive ] in the Italian market. As I said many times, there are 4 actors very important for us that are asking -- to us, hospitalities. They announced with some very important press release, the target of the next years in terms of gaining the super wide area of the country. So we are ready to host them with our solution. And this is an important pillar for the 2022 results.

[Operator]

The next question is from Luigi Minerva with HSBC.

[Luigi Minerva, analyst]

The first one is on the slowdown in the new PoPs from the anchor tenants in Q3. Can you just go back and give us more details on the reasons why they've slowed down and whether we should expect the same in Q4 and what can trigger a change?

Secondly, on the remedies, I'm just wondering under what circumstances can the European Commission eventually intervene and impose a solution? And also how -- whether there is a kind of ultimate date where eventually, they have to intervene and impose a solution. And lastly, a more general question on -- I was wondering what is -- what are you observing from these -- from your customers in terms of their approach to open run in the Italian market? And perhaps if you can comment on how do you think open run can affect your business model.

[Giovanni Ferigo, executive]

Thank you, Luigi. Okay. Good. Okay. It's the consequence of the sites that are arriving with some of delays. As I said, we did the end of the year, we will deliver around 400 new sites because the -- when you say bureaucracy, the -- let me say, simplification decree finally has not been, let's say, obsessed and let me say, making progress by the municipalities we are fighting with them. And so we did the end of the year, we think, to give some good news in terms of the hospitalities for the core tenants. The second one is about the remedies will be the cohort of Luxcel that will improve the decision to the commission. Always the concept is -- it's not a team of -- a team of when the time of [indiscernible] of Luxcel is out of our -- let me say, provisional team or when you say, to know something about.

The [ fifth one ] is about [indiscernible] okay, Vodafone and team announced the -- first, let me say, appliance of this new technology, not a result of architecture, okay? We are collaborating with them in Italy. And as I said, we are ready. In our -- let me say, plan, we didn't consider this new, let me say, branch of revenues because, let me say, is something that must be, let me say, touchable at the moment, if not. But we are really -- our business plan is another opportunity of revenues because it's another type of contract that we will define with core tenants because there will be a team of designing, a team of maintenance, a team of installation. But in this moment, they are doing it. And so, let me say, another interesting opportunity in this enlarging our competencies and our responsibilities. Finally, the TowerCos with the open end architecture will be, let me say, the lord of all the field management equipment for the mobile operator that will be, let me say, very concentrated in the multiple data center. This is after 2025, '26, probably. But we will start probably for the next year, okay?

[Operator]

The next question is from Giorgio Tavolini with Intermonte.

[Giorgio Tavolini, analyst]

I was wondering if you could provide any update on the electronic limit revision in Italy since this topic seems completely disappeared from the political agenda. And the second one on -- a follow-up on the remedies. You said this is a matter more than when than if. But assuming our case scenario or in addition to the remedies would be an opportunity for you to enter a build-to-suit program we had in order to support and accommodated their demand. And the third question is on the tax scheme. Diego was mentioning the new budget law, the draft budget law for 2022. I didn't understand completely if you expect to pay higher subsidies tax on the second scheme in order to keep the same tax benefit. So what are the main changes to the second schemes?

[Giovanni Ferigo, executive]

Okay. Starting from electromagnetic limits. Okay, it's [indiscernible] rational will move to support 5G deployment quickly and efficiently. This is some core modem data, okay? I have no recent update, okay? But personally, I think that it is not part of the question, but I have no visibility on the political processes. But potentially, in these days, it would be something new in the Competition Law in Italian [ diseño de lentes ] [indiscernible] that today, [indiscernible] is delivering, which will follow with a discussion process in the parliament. So let me say, probably in the first half '22. This is the first. The second is about remedies.

[Giorgio Tavolini, analyst]

If you have the opportunity to enter build-to-suit program, we really had externally. I mean, not completely related to the remedy is not an opportunity to speed up their demand?

[Giovanni Ferigo, executive]

Yes. Okay. Sorry. Yes, to all our customer, we propose to build the dedicated site with [ Area ] 2. They are evaluating our proposal. They are today, they -- let me say, deliver new sites with other, let me say, TowerCo, but they not interested in our proposition and why not. We are available to deliver new sites for every mobile or fixed wireless company in Italy.

[Diego Galli, executive]

The third is about tax, the tax, the current -- the original scheme was 3% advance payment with benefit in 18 years. The current proposal is 3% and it is spreading in 50 years, that will reduce to 1/3 of the MPD, which is our preferred -- as of today, preferred scenario. The alternative one to be -- the upfront payment of 60% for a gain benefit in 18 years. So I mean, we will keep on considering and looking at the final option. But for now, we would say that the 3% in 50 years is probably the best case. Let me also remind that the other scheme we have in place is the 16% above payment with benefits years that will be 5 years, that will remain unchanged and will generate more than EUR 110 million benefit on recurring free cash flow for the next 5 years per year.

[Operator]

The next question is from Ben Rickett with New Street Research.

[Ben Rickett, analyst]

Just wondering what we should expect in terms of updated guidance at the Capital Markets Day. Will you just be giving 2022 guidance? Or can we expect you also to upgrade -- to update your midterm guidance looking further out, that would be helpful.

[Giovanni Ferigo, executive]

So the spirit is a regular update as part of the normal company cycle in terms of planning and then according the market -- updating the market accordingly. Probably, we will extend also the time duration. And again, as part of the normal level, will extend by one year, the visibility as part of the normal cycle. And -- so the structure and the framework is the one that we already shared. We will go deeper and we will provide those update considering the impact of next generation new funds. We will cover more into detail, something that we are discussing internally such as the capital, the capital allocation. So since November 2020, I mean, February, that will be fixed quarter so more than one year. So we think it's good practice, and we are keen to provide a regular, regular update. Nothing more than that.

[Operator]

Gentlemen, there are no more questions registered at this time.

[Giovanni Ferigo, executive]

Thank you very much for connecting.

[Diego Galli, executive]

Thank you.

[Operator]

Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones. Thank you.