Cellnex is Cellnex again. After the decision to withdraw from the process of purchasing Deutsche Telekom’s towers, the company is once again focusing on its growth strategies from its current position as the leading European telecommunications infrastructure operator.
The company has numerous projects underway with a committed investment of 7,500 million euros in the coming years to deploy another 25,000 sites with its clients, and expand its current portfolio, which is around 130,000 towers. The densification of the network, for the development of 5G, is key.
In addition, the company has already pointed to the promotion of projects based on the augmented tower model, which include segments linked to infrastructure such as fiber to connect sites, or data centers. Cellnex has already taken an important step by including in its contract with the Polish Polkomtel Infrastruktura, the management of part of the active infrastructure, beyond the irons, and trusts in an explosion of these activities with other operators.
According to Santander, the telcos are still willing to sell assets to expand the capex for 5G and the tower companies are the natural partner, both in terms of assets from new sites, fiber to the antennas, small cells and edge computing centers.
The company does not rule out new growth operations. The investment bank Kepler said yesterday that Cellnex has opportunities to expand its portfolio with SFR and Bouygyes towers in France; with Vodafone-Ziggo in the Netherlands, with BT; options in the Baltic countries and Scandinavia; Deutsche Telekom towers in various Eastern European markets; or with Telekom Austria.
Cellnex’s strategy has always focused on having at least two anchor clients in each country, which provide more options for expanding synergies between networks.
In this sense, JP Morgan expects Cellnex to use its firepower of 9,000 million euros, captured in the 2021 capital increase (Santander places this amount at 7,000 million), to seek new opportunities such as infrastructure deployment agreements. The bank rejects that, without acquisitions, the success story of the Cellnex share “is dead”. “Cellnex offers a high, attractive and predictable forecast of sustainable growth in the next decade,” says the firm.
In addition, JP Morgan points out that the group led by Tobías Martínez has the capacity to reduce leverage quickly, to go from 6.9 times EBITDA today to less than twice in 2030; and paves the way for an improvement in forecasts for 2023, together with an increase in shareholder remuneration in the medium term. In this sense, Cellnex could distribute around 15,000 million euros in dividends between 2023 and 2030, which is equivalent to around 51% of its current market capitalization.
Santander, on the other hand, does not expect the purchase of own shares to be one of Cellnex’s priorities, and points out that the company cannot rule out tactical acquisitions. According to the bank, growth is still a priority, above shareholder remuneration.
In turn, Cellnex has among its strategic lines infrastructures linked to mobility, especially railway lines and roads: London-Brighton in the United Kingdom, ProRail in the Netherlands, the Madrid metro with Metrocall: the Barcelona metro; two metro lines with the Paris SGP; the subways of Milan, Genoa and Brescia in Italy; and the 5GMed cross-border corridor project, between Spain and France.
Cellnex has maintained its growth forecasts for 2022 and 2025. At the shareholders’ meeting last spring, Tobías Martínez recalled that, for this year, revenues will be around 3,500 million euros, with an EBITDA of 2,700 million. By 2025, it forecasts revenue of 4.3 billion, with an annual growth rate of 13%, between 2021 and 2025.
Stock Market Relief
Purchase. Cellnex’s decision to exit the purchase process for the Deutsche Telekom towers has been a relief for its shares. On Tuesday, they rose 5.6% and returned to recover the level of 40 euros. In the last month, they have risen 15%, although, since January, they have dropped 19%. The investors had penalized the impact that the acquisition of the sites could have on the company. Under the plans, Cellnex had offered Deutsche Telekom to remain in its tower subsidiary, in addition to delivering 10% of the capital of the Spanish company itself.
Debt. Deutsche Telekom has opted for a financial partner rather than an industrial partner, to attract the largest possible funds (the operation is around 18,000 million euros), with which to reduce debt, which is around 136,000 million. At press time, the Brookfield consortium, which has been a partner in the Cellnex process, and DigitalBridge, seemed to have taken the lead against KKR.
Future. Cellnex does not lose sight of the German market in the future. In the past, operators such as SFR or Telefónica gave entry to their infrastructure subsidiaries, Hivory and Telxius, to KKR, but years later, the fund left and the companies passed into the hands of network companies.
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