Cellnex Telecom SA

MAD:CLNX

Q2-2025 Earnings Call

[Maria Carrapato, executive]

Hello. Good morning, everyone. Welcome to our first half 2025 results conference call. I'm Maria Carrapato, Head of Investor Relations. And I'd like to thank you for joining us today.

I have our CEO, Marco Patuano; and our CFO, Raimon Trias, on the call. We'll go through a brief summary of our results, and then we'll be open to take your questions after the presentation.

[Operator Instructions]. Okay, so without further ado, over to Marco.

[Marco Emilio Patuano, executive]

Thank you. Thank you, Maria. Good morning, everyone, and thank you so much for your time. I'm delighted to start with the key highlights of the first half of the year, which continues to be marked by consistent execution with solid performance across all the key metrics, reflecting our commitment with our objectives.

As a reminder, the numbers we are reporting today are impacted by our change of perimeter due to the sale of our business in Ireland and Austria. There is no contribution from Austria for 2025 and Ireland only contributed for the first 2 months.

On a comparable pro forma basis, we achieved a strong growth in the semester with revenues reaching EUR 1.958 billion and representing an organic growth of 6%. And our EBITDA after lease reaching EUR 1.163 billion, implying organic growth of 8.1%.

Our recurring leverage free cash flow per share improved by 10.2%. We are successfully delivering on our push for more profitable growth with significant improvement in efficiencies, which Raimon will give you more color shortly.

In terms of operational development, we're excited to announce the renewal of our agreement with ODIDO in the Netherlands, the milestone reinforces Cellnex's long-term industrial alliance with its clients securing the associated revenues for an additional 15 years. It reinforces our commitment to delivering reliable, sustainable infrastructure solution that support innovation and growth across the sector.

Continuing our effort, we have extended our infrastructure agreement with Telefonica to support the rollout of up to 3,000 RAN sharing Digi PoPs. This strengthens our partnership and reinforce our role in enabling fast, efficient network expansion.

From a capital structure standpoint, we've issued a 7-year EUR 750 million bond with a 3.5% coupon. Additionally, we refinanced our EUR 2.8 billion syndicated credit facility, ensuring our ability to meet future maturities and liquidity needs. I'm pleased to share with you another important development announced yesterday by S&P.

S&P threshold for Cellnex investment-grade rating have been -- become more tolerant, allowing us to have a higher debt ratio whilst maintaining the same rating. As a consequence, Cellnex has been upgraded to positive outlook. These give us materially more financial flexibility. As of today, we have not taken any decision as to how this additional flexibility could impact our capital allocation strategy. This also be conditional upon agreeing a comparable level of flexibility with Fitch.

During the second quarter, we successfully completed our share buyback program, a key initiative aligned with our capital allocation strategy. We acquired 24,064,404 owned shares, representing 3.41% of the share capital at an average price of EUR 33.24 per share. These decisive move reflects our confidence in the long-term value of the company and demonstrates our commitment to enhancing shareholder remuneration. Moreover, this action reinforces our disciplined financial strategy and capital structure optimization, while maintaining flexibility to invest in growth and value-creative opportunities.

In summary, we believe our journey today has been marked by the definition of the clear road map towards profitable growth, solid commercial, operational and financial performance, strong governance and consistent and disciplined execution. Looking ahead, we are confident in reiterating our guidance and our ability to deliver on our key strategic targets.

Moving to Slide 5. Let me start by reinforcing the foundation of our industrial value proposition, one that is clearly focused on maximizing long-term value for our shareholders, while positioning Cellnex as a trusted partner for our clients.

Our business model remains underpinned by strong fundamentals and robust free cash flow visibility. First, let me start from the strength of our MSAs. We have very long-term contracts in place with watertight all-or-nothing clause renewal mechanism, CPI-linked escalators and very limited churn concessions.

More importantly, they provide predictability of future cash flows with anchor tenants securing the vast majority being in approximately 70% of our revenues. The strength of this contractual framework has been proven over and over again and more recently, through renewals with major operators like Wind Italy, following its merger with Hutchison with the renewal of Telefonica in Spain, with the Vodafone and Hutchison merger in U.K. and with the MasOrange case in Spain.

But I would also like to stress that we have other very important renewals for several of our secondary tenant contracts. Vodafone, VMO2 in the U.K. is the so-called [indiscernible] agreement -- sorry, I had a moment of blackout in the communication. Is it fine? Yes. Okay.

Vodafone, VMO2 in the U.K., the so-called agreement [indiscernible] Iliad in France, we extended extra 10 years. Orange in France, we extended the secondary contract for another 12 years. So not only we have demonstrated that our anchor contracts are rock solid, but also the second tenant agreements in our largest markets are also long term and robust.

With these renewals and frame the importance of our industrial partnership and spirit of constructive collaboration with our customer in each market, we have successfully increased the maturity and scope of service preserving the underlying value of our contracts.

I would also like to stress that we had only 1 renewal coming up for 2030, the terms of which have been already agreed and no other major renewals until 2035. We have an important role as a key technological enabler. Our infrastructure enables the efficient use of spectrum of scarce and highly valuable resource.

We operate in a sector with very high investment requirements and our specialized operation of passive telecom infrastructure allows our customers to focus on their operations. In particular, Europe continued to lag in 5G deployment and general network investments. Against a regulatory backdrop that appears more favorable to the existing or financially stronger operators capable of supporting the level of investment required to be globally competitive. And we are strategically well positioned partner in the creation of that healthier telecom ecosystem, providing operators a neutral platform to develop the coverage, the capacity and the reliability of their network with the most rational use of resources.

A key example is the U.K. where the regulator did not oppose the VodafoneThree merger. However, it did impose significant additional investment in network improvement. We also play a key role as enabler of new market designs. As an example, we made possible for Digi to enter the Portuguese market, providing around 4,000 colocation in a record of 18 months.

After Digi was awarded spectrum in Spain, we've also enabled their expansion via network sharing agreement on Telefonica equipments and the launch of Iliad in Italy be a combination of network sharing with Wind and the building of dedicated infrastructure.

To complete the picture on long-term value orientation. As of today, we have contracted backlog of over EUR 100 billion, supporting very high free cash flow visibility. Concerns have been raised recently about our capacity to protect our revenues when we renew our contract. I stress that as of today, all, and I underline all, of our anchor agreements have been renewed maintaining the original MSA prices.

The auditor renewal announcement confirmed these thesis once again. Even more importantly, since it involves both the anchor and the secondary component of our business relation. We are also expanding the scope of our partnership as telecom infrastructure play an increasingly central role in European digital defense and energy strategy.

Beyond connectivity, we are actively investing in opportunity such as smart IoT solution, critical communication networks, tower used for drones, battery storage systems and many more. And we are also complementing the active network of our clients every time that a neutral host solution is more convenient and more feasible than an MNO proprietary network.

I referred to DAS and Small Cells, a growing market of specialized coverage, for instance, stadium, malls, hospital, offices, city centers with restriction and others, in which we do not compete with our clients. We offer turnkey solution to MNO and business users.

All of this is guided by a disciplined governance framework and the leadership team committed to long-term value creation. In short, Cellnex continued to deliver resilient performance focused on profitable growth backed by very high-quality and robust contracts and industrial relationship with our clients, a strategically well-positioned asset base, a transparent and disciplined governance structure and a clear strategy to deliver sustainable value for our shareholders.

We are conscious that rumors on consolidation in the French market and potential impact on us have been the cause for much speculation, much more than needed. And as such, I would like to give you some objective data points that will help you to understand the context.

Cellnex is strongly positioned to navigate any potential market consolidation in France. We operate over 26,000 PoPs -- sites and 31,000 PoPs, generating EUR 725 million in tower revenues. Our business is underpinned by long-term MSAs with SFR, Bouygues Iliad as anchor tenants with the first renewal programmed for only 2037. And Orange as a secondary tenant running until 2037, 2045 with fixed escalator 1%, 2%, ensuring stable and predictable revenues.

Importantly, all of our secondary tenant contracts have already been renewed for between 10 and 12 years. At the end of 2024, we also renewed a non-anchor contact with Iliad, Free Mobile for circa 1,700 colocation of Hivory towers. The length of the MSA is 10 years and we have an individual contract for another 12 years.

France is leader in brand sharing with 2 major frameworks, the Crozon agreement between SFR and Bouygues, a 20-year long deal covering around 65% of the population. In the case of Hivory, approximately 11,000 PoPs, more than 50% are in RAN sharing. And the so-called New Deal Mobile a government-led initiative involving all the MNOs to expand 4G, 5G in rural areas.

So in these RAN sharing areas, roughly 2/3 of the country, networks are already being deployed efficiently with minimal impact from any potential consolidation scenario. The remaining area, the so-called dense area are those where the impact of consolidation should be analyzed. They represent, roughly speaking, 1/3 of the country, and we have between 40% and 50% of our PoPs.

When looking at the various consolidation combination between MNOs, it is important to take into account that on one hand, the physical overlap between the sites, and on the other hand, the automatic increase in subscriber and data traffic after a potential combination basically. The operational ability to [ cancel a site ] post combination is lower than the pure contractual terms.

On MSAs, which account for 90% of the tower revenues include all-or-nothing clauses, a churn rate is allowed below 1%. And secondary tenants, approximately 4,700, contribute less than 10% of the revenues and have been already renewed for 10 to 12 years.

Finally, as seen in other markets like the U.K. post VodafoneThree combination often led to increased network investment, a trend that would further reinforce Cellnex role as a neutral long-term infrastructure partner, a factor that also result as a positive from the potential consolidation in trials and the resulting improved credit rating of large client.

Depending on the final outcome and how the assets are distributed among the other operator, Altice's fragile financial situation today will no longer pollute market dynamics and credit risk profile will improve. All these elements make us an unavoidable and strategically critical party in any potential market consolidation talks.

Our contract with SFR cannot be transferred in parts without our consent. And as we did in the past, we are going to give our consent, swapping some colocation flexibility for the guarantee by the new tenant that the entire portfolio assigned will be duly priced and maintained for a longer period.

We have thus far demonstrated in Spain and the U.K. recent market consolidation that we are available to support the development of a healthier MNO ecosystem, introducing some short-term operational benefit, while safeguarding and even potentially growing the value of our long-term agreements, also standing to reap benefits from potential optimization that result from MNO consolidation.

Therefore, in terms of the current environment, we support the favorable regulatory tailwinds around MNO consolidation in Europe, if they favor behavioral remedies, namely investment to improve network quality and densification in opposition to structure remedies of the previous years. Adding all up, we believe that the impact of potential consolidation scenario in France is limited with potential upside.

Move to Slide 7. Further reinforcing the health of our strategic long-term partnership in different markets across Europe and our continued efforts to enhance network infrastructure, I'm pleased to share with you 2 key renewal agreements. From July 1, Digi [ in space ] started to use the spectrum it acquired as a remedy taker of the MasOrange merger.

Within this context, Digi and Telefonica formalized a long-term network agreement. Over the next 16 years, Telefonica will provide the Digi with both RAN sharing services and roaming on its network. To support this transition and to enhance the overall network, Cellnex and Telefonica have extended their infrastructure agreement.

We will deploy 110 additional physical point of presence by Telefonica, significantly boosting their network densification and we will activate up to 3,000 RAN sharing Digi PoPs over the next years. This effort will not only increase Digi networks capability, but also reinforce our leadership position in infrastructure sharing and efficient network development.

In the Netherlands, we renewed key infrastructure agreements with ODIDO, strengthening Cellnex's position as a key partner to enable high-quality connectivity and digital transformation across the country. Our contract is renewed for 15 years. It is CPI-linked and maintains the revenues of our original agreement, ensuring long-term cash flow stability and predictability. Together, these agreements are a testament to our strategic approach to the collaborative relationship we have with our customers, focusing on long-term value creation, operational excellence and enabling our partners to thrive in an increasingly connected world.

My last chart is on ESG. Turning to our ESG progress. This is an area where we continue to lead with purpose and measurable impact. Sustainability is not just a pillar of our strategy, it is embedded in how we operate, how we grow, how we create value for the long term.

I would like to highlight a relevant milestone in our decarbonization strategy this quarter, having achieved the ISO 50001 certification for 80% of our energy use. Our efforts in responsible leadership continue to earn us global independent recognition, renewing best-in-class positions in the major ESG rankings and standing out at the forefront of the most sustainable companies in the world.

Raimon, I drink a glass of water, and I leave to you -- the floor to you. It has been a bit longer than in the past. But I think that the MNO consolidation deserved a bit more space. I hope I made clarity, but of course, I assume that more questions will come afterwards. Raimon, the floor is yours.

[Raimon Trias, executive]

Thank you, Marco. Good morning, everyone. I will now run through some of the main financial and operating metrics we are reporting for the period. Let me start reminding you as Marco did that our numbers this first half '25 are impacted by the change of perimeter, as we have no contribution from Austria in the year '25 and Ireland only contributed within 2 months.

This table gives you a clear comparison as where we are removing this effect on our numbers and highlighting the organic growth derived from our performance. As you can see, we continue delivering strong operating leverage. Revenues grew 6%, our EBITDA 7.3%, the EBITDAaL down 8% and our recurring levered free cash flow per share, 10%.

Let me remind you as well that our recurring levered free cash flow per share has improved not only as a result of the improvement of the recurring levered free cash flow, but also as a result of the share buyback we undertook during the first half of the year when we are -- we bought 24 million shares.

Moving to our financial performance on Slide 11. As I mentioned, our revenues increased 6% on an organic basis and the adjusted EBITDA by 7.3% compared to the same period last year. This growth has been driven by the 4 business lines we operate, and in particular, by the towers and the fiber connectivity and housing services.

Our EBITDAaL increased 8.1% on the same basis, highlighting further growth in operating leverage and enhanced profitability. As we will mention later, we have accelerated significantly versus last year, the land efficiency program, helping us improve the EBITDA.

In terms of cash flow generation, our recurring levered free cash flow amounted to EUR 832 million, with growth set to accelerate throughout the year, thanks to the normalization of cash items below EBITDAaL, as I will explain later in more detail.

As I said, the recurring levered free cash flow per share has improved 10% on the year as well.

Moving to our key operational metrics. We have added 2,223 sites in the context of our build-to-suit programs mainly in France and Poland. Our net colocations in the first 6 months reached 578, impacted by the 974 withdrawals from MasOrange in Spain, as you know, negotiated in the context of the merger.

Colocations have been well balanced by company improving our tenancy ratio to almost 1.6 -- 1.59x. As regards to our investments in efficiency to optimize our asset base and drive operational efficiency, we have undertaken a combination of land site actions, acquisition, upfront payments, contract renegotiations totaling EUR 115 million in the first half '25. This compares to the EUR 93 million we did last year. So there has been an increase of 23.7% that reflects the increased focus on land efficiency after the creation of Celland.

Moving to Slide 12. The first half of 2025 has seen another period of consistent commercial performance with PoPs growing 4% compared to the same period last year. This is explained by the net colocations contributing 1.5%. It would be 1.8% if we were to exclude the impact of the MasOrange in Spain.

As a reminder, the new contract signed with MasOrange in Spain gives our client network flexibility in the short term in exchange for a single longer contract until 2048 and additional services to be provided by the [ them ]. As per this agreement, no impact in revenues is expected until 2026, despite the churn seen in terms of PoPs this year. Nevertheless, the impact expected for '26 onwards will be compensated by new business. As discussed by Marco before, regarding consolidation, it is another example of how we have been managing the various consolidation cases to date without a long-term impact to Cellnex and the value of our contracts.

Moving to the next slide. We maintained strong organic growth at 6% year-on-year. As you will know, this is due to various factors like the price escalator and CPI from our contracts, the colocation we're undertaking on the existing sites and the new build-to-suit that we are building mainly in France and Poland.

To provide a clearer picture of our performance in the period, excluding the impact of the change of perimeter on this slide, we are providing our organic revenue bridge on a pro forma basis. Let's look at the data by business line.

As you can see on Slide 14, our tower business represents 80% of our total revenues; is growing organically at 5.2%, driven by escalators and CPI, collocations and build-to-suite. As of June 30, all price increases from the contracts have already been applied to all our customers in the year, and we have excluded, for comparison proposals, Austria and Ireland from the 2024 base.

Moving to the next slide, we can see comparable performance of our other business lines, which continue to show healthy organic growth. In fiber connectivity and housing services, revenues grew by over 20% year-on-year. A key contributor to this performance is the network project in France, which exemplifies our ability to deliver advanced fiber infrastructure tailored to high-density and high-demand settings. Thus the Small Cells and RAN saw growth of around 2.8%, by densifying networks and enhancing indoor coverage. What's driving this performance is the growing demand for smart infrastructure connectivity, particularly in high traffic environments like stadiums, such as Etihad Stadium and Riyadh Air Metropolitano; transport such as the Metro Socíété du Grand Paris; airports such as Milan Malpensa and Milan Linate; and hospitals such as Bergamo.

These deployments demonstrate our ability and technical expertise to adapt and deliver value in mission-critical scenarios. We could also add to this list, Metrocall, our joint venture within the Metro de Madrid which operates the DAS service for the MNOs in Madrid underground now developing the 5G update.

In Broadcasting, revenues increased by 2%. This cost-efficient business line operating mainly in Spain and the Netherlands continues to generate strong cash flow and offers long-term visibility, thanks to its mature and stable standard.

If we move to Slide 16, we keep improving all our cost drivers to drive efficiency. As part of the strategy set out on our Capital Markets Day and our continued focus on industrial excellence, our main efficiency ambition related to asset rationalization, cost base optimization and group-wide productivity. Again, considering pro forma numbers, the reduction in headcount is part of our broader strategy to optimize resource allocation, enhance productivity and focus on core activities.

In June, it took place the first phase of the recently announced redundancy program in Spain, which is implemented over the '25, '27 period. This plan will also result in discontinuing certain operational maintenance contracts, which have a nil or negative EBITDA contribution.

In repair, maintenance costs following the positive performance last year, we continue to see good progress in the period, representing a 1.6% decrease per tower and the evolution of our general expenses translated into a 4.4% decrease per tower. This trend reflects our continued focus on lean workflows and disciplined cost control.

Finally, on leases, we have been able to reduce cost by 1.1% per tower, reflecting good momentum on our land acquisition plan, along with rent negotiation and cash advance initiatives, which are progressing well as discussed before.

Now let's take a look at our debt maturity profile on Slide 16. We are aware that this page is updated as of today, not 30th of June. All 2025 maturities have been even repaid or refinanced. As a result, there are no remaining maturities left in '25, while we still remain with a strong cash position, circa EUR 1.6 billion.

Regarding our debt management during the first half '25, we have executed the following transactions: We secured a new EUR 625 million syndicated term loans with a margin below 1% as communicated in our first quarter results. In May, we successfully completed a EUR 750 million bond issuance. Thanks to active interest rate management through the use of hedging instruments, the effective annual cost of this issuance was reduced by more than 10 basis points. The coupon of the bond is 3.5%.

Finally, in July, we refinanced our main syndicated credit facility, increasing its total amount from EUR 2.5 billion to EUR 2.8 billion. This refinancing not only extends in maturity to 2030 [indiscernible] but also includes two 1-year extension options, which could push the final maturity to July '32. It has been supported by 26 financial institutions. This is essential for maintaining and strengthening Cellnex's long-term liquidity position. We have a robust and well-structured capital trends, liquidity remains strong with more than EUR 4.7 billion of liquidity available, EUR 1.6 billion held in cash in order to cover upcoming maturities.

78% of our debt is fixed rate and short-term maturities have been proactively managed with average maturity now standing at 4.5 years and our average cost of debt of 2% is expected to increase only marginally in the next years. As Marco mentioned at the beginning, Standard & Poors just revised their outlook to positive, reflecting the improvement we have been doing over the past 2 years on our capital structure, but also the stable and predictable cash flows and higher barriers of entry of the sector.

Finally, on the last slide, we are confident in reiterating our 2025 outlook and all our public financial targets, reflecting the resilience of our business model and solid execution across all our markets.

We now remain at your disposal to answer any questions you may have.

[Marco Emilio Patuano, executive]

Thank you, Raimon. Thank you, Maria.

[Maria Carrapato, executive]

Okay. So in terms of the lineup of questions, our first question comes from Andrew Lee from Goldman Sachs. Could I ask you to pronounce your questions clearly so that we can all understand them in the room.

[Andrew Lee, analyst]

I had 2 questions. Firstly, just on the balance sheet and capital allocation. And then just secondly, if you could give us an update on the Swiss and data center potential asset disposals, where are we with those processes? On the first question on the balance sheet. You obviously mentioned the positive update from S&P. I just wondered if you could talk through a bit more color how that has affected you're thinking about your optimal gearing for now and how that thinking has evolved?

I think you've talked about a 5x to 6x kind of range of leverage that you're comfortable with is that rising now? And any kind of color you could think on how you're thinking about that would be really helpful. Also, just secondly, in terms of acquisitions or potential capital allocation, is it still right to assume that it's more likely you'll be spending money on shareholder returns than M&A?

[Marco Emilio Patuano, executive]

Yes, Andrew, thank you very much for both the questions because I think -- the first 2 hot topic of the day. Well, the update of the S&P has been a long, long, long discussion we have been having with the rating agencies, meaning that the strength of our balance sheet and the predictability of our cash flow is really remarkable. If you add the industrial -- our industrial position, the differentiation of the portfolio, if you put all in the basket, what you see is that we have more credit capacity than what was originally allowed.

Now the conversation with S&P, I make the long story short, is de facto a rating improvement, but it has not been shared as of today by Fitch. So we are having similar conversations with Fitch in order to understand where is the comfort zone of Fitch. And therefore, the entire work is not done.

What is the takeaway? The takeaway is that our strategy and our discipline has been rewarded by the rating agencies, point number one. We have more flexibility, point number two. This flexibility has to be confirmed by Fitch. So as of today, we have the flexibility only from 1 of the 2 rating agencies, and our view doesn't change.

So it's good to have more flexibility in the balance sheet. But as of today, we stay committed to our strategy, to our financial discipline and going forward, with the Board of Directors, we will understand if and how to use this financial discipline if and when agreed by both the rating agencies.

With reference to the asset rotation. Well, to say the truth, we have very little to share with you. The potential transaction, both in France and Switzerland are still in the -- on the desk of our M&A guys. So we have, as of now, nothing to share. And we will provide you, as usual, update as soon as we have reliable information.

Let me add a couple of points. We said tens of time, but I will never tired of saying it again. We are very disciplined in our approach to the capital allocation and every decision we make are based to the maximization of the shareholder value. So what I mean is we are not forced to do nothing.

We have a solid capital structure, as I said, further reported yesterday by the upgrade of S&P. We have committed to a shorter remuneration, which is not based on further disposals. So this is what we already said. We said that the original EUR 500 million have to be read as a new level of EUR 800 million. So this is nothing new. But again, this is not based on any further asset disposal. And as soon as we have more information, we will share with you.

[Maria Carrapato, executive]

Okay. So moving on to the next question. It comes from Akhil Dattani from JPMorgan.

[Akhil Dattani, analyst]

I've got 2 questions as well, please. Firstly, Marco, as you said, a helpful slide on the French market structure and what's going on. I had a couple of clarifications just to make sure that we've understood that slide properly. You've mentioned in the slides that -- I mean your comments that the variables that could be relevant would be the overlap between the anchor sites. So I wondered if maybe you could just comment on what that is and the way you think about the relevance of that. And then you also mentioned offsetting that the opportunity in the rural areas from once you have stronger players potentially seeing more investments in that.

Again, could you help us understand and quantify how you think about the scale of that? Just so we understand the puts and takes in terms of how we think about that. And then the second question was just around the asset sale process, and it's a bit of a bigger picture question rather than specific to these assets. When we stand back and look at the industry as a whole today, it feels that the last few years, public markets have derated infrastructure assets, but private markets were still paying much richer multiples. This year, that seems to be eroding a bit. If I look in the fiber space, there's not been that many transactions in towers. But look, in the fiber space, these multiples have come down.

And we saw earlier this week there was the French transaction on the Infracos between Bouygues and SFR and the implied model of that looks quite low as well. So can you just help us understand when you look at the buyers out there in the private equity world, do you think there is a bit of, let's say, tension there in terms of just where they've been paying and what's going on or do you think that, that's something we shouldn't read too much into? And I guess with that, did you look at Infracos at all or was that not an asset you cared for?

[Marco Emilio Patuano, executive]

Good. So thank you for both your questions. On the French case, it's -- you got perfectly the 2 points that I wanted to underline in the chart. So if you allow me, I'll swap the order of the answer. So I start from the rural.

As of today, the rural coverage in France is a mix of RAN sharing and colocation. So the number of duplicated towers, I mean, duplicated towers for me is you have 2 sides, 2 infra where technically speaking, with a higher colocation rate, you can serve the population with only 1 tower, okay?

The number of duplicated assets is relatively limited. Why it's relatively limited? Because SFR and Bouygues Telecom are RAN sharing by design. And Orange, after the, let me say, the first phase of network deployment, they started using colocation more and more. They have Totem tower, they started to use colocation more and more.

We have several thousands of colocation requests from Orange in the rural areas. So it's a big market. As you know, France is more than 500,000 square kilometers. France is big. And the more you go in the deep rural, the more you feel that the -- let me say the voice coverage is okay, but the data coverage is not okay.

So in the rural, the possibility of, let me say, network rationalization, I would say that the network is fairly rational as of today. So impact, modest upside material. The problem of the upside is that the original build-to-suit criteria, so the 1 that was, let me say, an extension of an M&A transaction is not actual any longer.

And so if someone asks us to replicate the old build-to-suit agreement, well, the answer is that those agreements are not replicable anymore. In the urban areas, in the urban areas, I want to share with you -- so before talking what -- how we see France is what we see happening in Spain and in England.

So it's more moving the pieces on the chessboard than canceling. Why? Because in the dense urban areas, putting together 2 customer base, increase dramatically the capacity needs of a network. So the risk is that you have the coverage, but you cannot access to the network or you have such a crappy service and sometime in London, you have some examples that you see that the operator needs to do something.

What we see in London, for example, is a super strong acceleration of the densification by VodafoneThree. So what we assume is, on the one hand, there are the contracts. The contracts allow my client to move a limited number -- or sorry, to cancel a very limited number of PoPs. But I know that my client needs more flexibility. So I don't want to impede the flexibility of the client, as we did in Spain.

We are favoring the flexibility, but with no financial impact, not even limited with no financial impact. I think that this is going to be the case also in France. The contract is designed in this way. The secondary -- so what has been super important, possibly our fault. We did not -- we've not been loud enough in the past.

We've been working a lot on the on the secondary contract. We renewed the secondary contract for 10, 12, 15 years with Telefonica, renewed at a very long secondary contract, very long. So this is -- I hope I gave you the answer. If not, please tell me and I can deep dive for another couple of hours.

On the asset side, you're touching a very, very delicate point, which is the assets are basically the same assets. The point is did something change on the -- in the infra fund environment. So I would say that it has been tough for them to raise new funds. If you take super successful firms, they struggled to raise new funds. And therefore, in order to be more competitive, they need returns that are not the traditional infra returns.

If you -- what is the expected return on capital of an infra 3 years ago? It was a mid-high single digit. It was something 7%, 8%. Today, this return on capital is not there. So I don't think that the problem is on the quality of the assets, on the quality of the cash flow, on the predictability of the cash flow.

I think that the finger point on fragility on our business model possibly is a bit overestimating the downside risk. When I hear talking about 3%, 4% risk, I think that this is too much. So it's not about us, I think it's more about the fundraising of the private market.

[Akhil Dattani, analyst]

That's super interesting. And Marco, just on Infracos, was that an asset that you looked at as a company?

[Marco Emilio Patuano, executive]

Sorry, say it again.

[Akhil Dattani, analyst]

The Infracos transaction that Bouygues and SFR announced this week selling their towers, I just wondered if that was an asset that you looked at as a potential acquisition?

[Marco Emilio Patuano, executive]

Oh, yes, we've been looking to the asset. The problem that in France, I have a strict antitrust limitation. And then there were some specific elements that did not fit perfectly with us. So we decided to exit from the process fairly quickly because useless to spend the time and to use my resources to an asset that we were not interested in.

[Maria Carrapato, executive]

Okay. So now moving on to the next question. It comes from Andre [indiscernible] at CBS.

[Unknown Analyst]

Thank you very much for the presentation and especially the more detail that you gave us on France and other contracts. So I'm just going to stick to the theme, if I may. So just wondering, you highlight the colocation renewals for Iliad and Orange. I'm just wondering what the colocation situation is with SFR and Bouygues...

[Maria Carrapato, executive]

Andre, can I interrupt you? Could you speak maybe speak a little bit more slowly and clearly, it's a bit difficult to hear you in the room.

[Marco Emilio Patuano, executive]

It's a bit disturbed. The line is a little bit disturbed. So if you speak a little bit slowly...

[Unknown Analyst]

Okay. I was wondering on the slide on France, so you are highlighting the renewals that you've done for Iliad and Orange. I'm just wondering what the colocation situation is for the agreement with SFR and Bouygues because those are potentially even more important? And on that theme, if you can maybe expand a bit how the average secondary tenancy looks like in other markets because I think maybe not many of us were aware that some of these contracts are actually this longer that you are renewing them at these lengths? If you could talk a bit more broadly about the general secondary contract landscape.

And then second question would be in relation to the deal that Akhil was talking about with Phoenix Tower. What kind of impact are you seeing, if any, on France and Italy specifically where Phoenix has done some deals and is becoming a bit more of a weight in terms of market share. So is this having maybe an adverse impact on pricing in these markets? Any color on that would be very helpful.

[Marco Emilio Patuano, executive]

Okay. Sorry, the communication was still, let's say, mid quality. So if I don't -- if I've not understood properly, please correct me, and I'll follow up. Colocation in France was your first question. So colocation in France, we have to split 2 different concepts. One is colocation coming from RAN sharing, so colocation coming from RAN sharing is entirely SFR, Bouygues. They have these network sharing called Crozon. It works in all the countries except the high dense area. And the contract for us is fairly protective because the contract clearly says that the fee remains unchanged in case the RAN sharing agreement is not active any longer. So they wanted to integrate the network. So having a single network instead of RAN sharing, be my guest, it doesn't change a penny of my revenues.

On the secondary tenant contract, so point number one, the 3 operators that are -- that have an MSA with us, at the time of the portfolio acquisition signed very important build-to-suit agreements. So as of today, there is a significant number of sites -- individual sites, tenancy one, with most of them.

So the second tenant is something that has been used particularly by Iliad and by Orange. Iliad and Orange have quite long contracts. They are priced -- let me say, the price is a market price, let's say, approximately 50% of an anchor fee, more or less.

We are talking about 3,000, 4,000 PoPs and excluding the RAN sharing, so on top of the RAN sharing. And we agreed with them 2 things. One is the extension of the duration of our contract. As always, there is a modest respiration rate that is quite modest, well below 1%. And we agreed on a 10-year duration contract with CPI escalators, so the usual one.

We have agreed with them. We have a pipe of further colocation requirements, which depends mostly on permitting. So the bottleneck today is represented by the permitting. So on the pricing of the secondaries, I think I gave you the answer. If I understood well, the second part of your question was again on the deal of the Crozon tower. Is it correct?

[Unknown Analyst]

Yes. How it impacts...

[Marco Emilio Patuano, executive]

Yes. So I think that the company who went for the -- so let me make one step back. The tower market in France is pretty fragmented. And so if you take the number of pay tower players, it's Cellnex, Totem, Phoenix, TDF, American Tower and there was Crozon and there was -- it's way too fragmented. So the fact that the market, the tower market that go in the direction of the consolidation, it's a net positive for the French tower market because you avoided to have marginal operators who tend to act irrationally in order to get more scale.

Tower business is a scale business. So if you don't get scale at the end, you do something to get the scale, which can be something not good for the market because you can start touching the prices in a rational way. So we have limitations in acquiring big portfolios.

When we made the last acquisition, the antitrust gave us remedies that ended with the sale of several thousand towers, approximately 3,000 towers, which is the base of the Phoenix Tower portfolio. So if you ask me, is 3,000 towers an optimal sizing for getting the scale? The answer is no.

But with 3,000 towers, you don't get all the benefit of the scale. So it's absolutely natural that you have, on one side, a market too fragmented; on the other side, someone with good funding capacity who wants to get more scale. So I think that what happened is natural. The market goes towards a more consolidated tower market, which means a more rational tower market, which is good. And it was a portfolio too big for us for entering without another nightmare of you buy 10 sites and you have to sell 5. So my team in France has so many things to do that I don't want them to be in this. I hope Andre, I answered your questions.

[Unknown Analyst]

If I may, maybe more directly on the SFR and Bouygues situation? So obviously, there are 2 MSAs. There is the network sharing but then what is the exposure to, say, less protected trade secondary finances, if any?

[Marco Emilio Patuano, executive]

The -- yes, we have 2 MSAs because we have 2 MSA, one with SFR and one with Bouygues. But the 2 MSA on the RAN sharing component are cloning the clause one the other. So believe me, it's even less than modest of the potential. If the consolidation is -- on the network is Bouygues with the SFR, I open a bottle of champagne.

[Maria Carrapato, executive]

So thanks for your question. So moving on to the next question. It comes from Rohit Modi from Citi. Rohit, if I could ask if you could also place your question clearly so that we can understand in the room.

[Rohit Modi, analyst]

Sure. Two questions from my side. One is a follow-up on the French consolidation. You mentioned about limited impact from the French consolidation, does that mean that the limitation from the agreement, you're ready to let go some of the revenue or that's a combination of some of the revenue that is already at risk when consolidation happens as well as some of the revenue might let go for a higher duration? Second question is around the capital structure. And I understand you mentioned that it remains as it is. But I'm just trying to understand what happens if sale and French tower sale doesn't happen and you have a bandwidth from S&P, but you still need Fitch -- approval from Fitch, if Fitch doesn't give approval, is there any change in terms of your shareholder returns for next year?

[Marco Emilio Patuano, executive]

Cool. I leave to the CFO the capital structure because otherwise, I don't understand why you pay the salary. And I take the one on the France.

Well, I always refer to limited impact. When I speak about France, I would say that my base case is no impact, okay? This is my base case. Why I'm so positive? Well, point number one, the quality of the contracts we have. Same as we did in Spain; in Spain, we traded operational flexibility with 2 things, with revenue stability and contract duration.

Now in France, to say the truth, contract duration -- contracts are fairly long, very long, well beyond 2040. So I'm not particularly worried. But what is important to me is that since it is -- the contracts are all-or-nothing, what we don't want is the fragmentation of the contracts.

So do you want to split the content? Okay, it aggregates to an existing contract with a total all-or-nothing at the renewal date, which means that before you had 11,000, 12,000, okay, you buy a portfolio of 5, fantastic; at the renewal, we will discuss about all-or-nothing of 16,000.

This is the point -- that is, by the way, what we discussed with MasOrange, and it's rational. It's a win-win. So my base case, Rohit, is that we have this case, I'm pretty confident what is important is, I think, that everybody understands that you cannot discuss about in-market consolidation without having at the table such an important player as Cellnex, who is a partner of choice of 3 out of 4 of the players in the country. So this is where we stand. Raimon?

[Raimon Trias, executive]

So on the capital structure, Rohit, if you recall, when we had our Capital Markets Day in March '24, we committed to various things. The first one was to be investment grade. It is something that we already said before that date, but we achieved on that date. We committed to be 5x to 6x levered. Being investment grade meant being below 7x with Fitch, below 7x with S&P.

And we also committed to start shareholder remuneration in the year '26 with a EUR 500 million dividend. What has changed since then until today? What has changed is that S&P yesterday because of the improved tenure, they have given us more flexibility. But Fitch as of today remains exactly the same. They have not changed anything on their side.

We remain with a limit of 7x. This means that to be within the 7x, we still need to be between our 5x and 6x. This is not changing for today. Our commitment to be investment grade has not changed. We will remain exactly the same. And from a shareholder remuneration that has been a big change.

So as you know, we had the EUR 500 million starting in '26. And what we have done is accelerating this shareholder remuneration. We moved shareholder remuneration from '26 to '25 by doing a share buyback, a size of EUR 800 million. And what we committed as well is that for the year '26, the shareholder remuneration between dividends and share buybacks will not be below the EUR 800 million that we committed.

Different divestments of Switzerland or France do not change that picture. This means that what we have committed, the same like we did in the Capital Markets Day, each without further disposals or other inorganic things. This means that the EUR 800 million committed for the year '26 remains whatever happens with the 2 transactions of France and Switzerland. If the transaction were to happen, we will reconsider them the shareholder remuneration for the year '26, but the rest is not changing.

[Maria Carrapato, executive]

Okay. Sorry, just in the interest of time, we've still got quite a long list questions, and it's -- we're already getting close to lunch time. So what I suggest is, we limit the amount of questions to 2 without follow-ups. And then obviously, the IR team and the management team are available afterwards if we need to -- if you need further detail.

So we'll move on to the next question, which comes from Nick Lyall from Berenberg.

[Nicholas Lyall, analyst]

Can I just ask one about the rental levels, please? I'm assuming that the SFR rents for the urban sites that we're talking about are high. So could you just talk about the risk that the rentals are higher in averages in France and how you offset some of that? And also, how much control do you have over the timing of the revenue impact and the short-term impact versus longer-term gains, for example. Could you talk to the risk of that as well, please?

[Marco Emilio Patuano, executive]

Yes. Well, the topic of the prices in France is no issue. So the prices are fairly aligned in France, which is -- it's the market, it's the dynamic of the market. And in France, it's super interesting because prices are further aligned and the number of operators are many, the tower operators are many.

So it means that there is a market and a market price, different object more or less the same price, which is okay because you -- you have not an incentive to move because you have to trade between different price expectations. But as I told you, it's a super good example because the French tower market is possibly the most fragmented in Europe and prices are not that different.

So I don't expect the pricing to be a particular issue in France if a structural change in the market happens. By the way, everybody considers that the structural change happens tomorrow, which I honestly have to say that it -- it's not that obvious, okay?

So we are just discussing about a case of possible potential scenario and you all know that the transaction is monster big and monster complex and nobody asked to do the French govern what they think about, so it's -- but okay, let's go on. So how do we think short term versus long term?

I think that the short term in case of a redesign, the short term is a lot of activity for gaining efficiency via rationalization. What I mean is if you are for you efficiency can be -- I get the same quality they spend less or I spend the same, again, more quality. So in an integration, especially given the behavioral remedies that the authority are adding to the authorization or putting for the authorization, this is very valuable for a CTO.

What we see both in U.K. and in Spain is that after a while, and I would say less than 1 year, much shorter than what we believed, the same CTO come to us and say, "Hey, guys, the pure rationalization is not enough." Why? Because you put together 2 customer bases that are normally very different, with, for example, when you take Spain, MasOrange -- MASMOVIL and Orange were very different characteristics of the clients in terms of age, in terms of mobility, in terms of data consumption, in terms of benefits.

And so when you have to serve a more complex customer base, you need more. So our experience is, request number one is, flexibility, which drives efficiency. In a relatively short period of time is a much deeper analysis on the short-term needs and then we work on long term, which is 5G penetration, more data, et cetera.

So the long term doesn't change. What is surprising us positively is that we thought that the short-term cannibalization would have been higher than what is really. And the two cases, Spain and U.K., are a test case. I would say, it's not theory, it's test case. By the way, the theory was convinced it was worse than the reality. I hope answered, Nick?

[Nicholas Lyall, analyst]

No, that's great.

[Marco Emilio Patuano, executive]

Thank you.

[Maria Carrapato, executive]

Okay. So now moving on to Fernando Cordero from Banco Santander.

[Fernando Cordero, analyst]

Two questions. The first one is on the secondary tenant contracts. In that sense, I agree with you, Marco, that you have been also vocal on your strategy on renewing the secondary tenant contracts. You have explained the situation in France. But I would like to understand which is in your current approach when renewing those secondary tenant contracts? For example, we have one big in Italy with Iliad and so on. So to understand, again, which is your strategy for renewing the secondary tenant contracts? And the second question is, I would say, more in detail, but related one of, let's say, the potential optionalities in the sector, which is RAN-as-a-service. I would like to understand why in Poland in the second quarter we have seen a quarter-on-quarter decrease in RAN-as-a-service revenues, particularly considering that this is the, I would say, the test of concept of this business line?

[Marco Emilio Patuano, executive]

Yes. The Zegona case is paramount for understanding why the secondary tenant contracts are important. Now the Spanish case is one clear example of testing the robustness of an MSA contract. How I look at the secondary tenant for me is an anchor contract differently from the U.S., an anchor contract is made within an industrial component and with the financial. So the industrial component is what you price in the secondary tenant and the financial component is what is priced in the anchor contract. So it's not true that I can -- and this is, by the way, the reason why market by market, if you look at how different tower operators price the secondary tenant, yes, there are marginal difference because in operations, you can be better or worse.

But by the way, a larger operator is more efficient than a smaller operator. And so we have good pricing capacity. So our strategy is we don't compete on secondary tenant on price. What we do is we compete on service. We are -- my Chief Operating Officer, has prepared a deck of SLAs that we ensure to the client, which are top of the industry.

We are pricing rationally. So the way, again, is to have good contracts with good quality depending on the case, there are tower adaptation that we can absorb, but we can agree with the client that they will pay for and this will also influence the price, if I have to absorb the adaptation cost possible it's higher. So that's it. Poland?

[Raimon Trias, executive]

On the other topic, Fernando, on Poland, the deviation that you have is not coming from the RAN-as-a-service per se. It's coming from the lower DAS activity. You know that we have DAS both as a service but also as trading. And last year, Poland had more activity on trading, this year is less activity on trading. If you want later on with the IR team, you can get further details so that you can try to understand the variances.

[Marco Emilio Patuano, executive]

But I hope it's clear what is the difference between a trading activity...

[Raimon Trias, executive]

I mean when we talk about trading or DAS-as-a-service, DAS-as-a-service is when we do execute the CapEx so you have long-term revenues coming from the contract where you are charging not only for the assets, but also for the service that we give to them in terms of maintenance and the management of the tool, et cetera. And in the case of the DAS-as-a-trading, what we do is we buy themselves as a trading activity. So you have the cost going through the P&L, not as a CapEx. And then we just invoice a lower amount going forward that is linked to the maintenance of...

[Marco Emilio Patuano, executive]

Yes. We make an engineering activity for a client.

[Raimon Trias, executive]

So that's a difference. But in terms of the numbers, you can check later on with the team if you want.

[Maria Carrapato, executive]

Okay. So now moving on to Roshan from Deutsche.

[Roshan Ranjit, analyst]

I've got 2 questions, please. Firstly, just on France, a very quick follow-up. Whilst we've clearly seen how the situation evolves, I think some of the operators have said discussions are taking place. Have you already been involved in these discussions at this stage? And a lot of talk has been around the top line implications. France remains the one market where you have the biggest build-to-suit, is this where you can really, at this stage, look to combine this build-to-suit something which you've talked about before? So rather than just having the top line benefit, you've clearly got the material benefit at the OpEx level and those high tenancies. And second question, more operational on the LandCo, I think previously, you were running at around 900 site actions a quarter. Whilst you've given the absolute spend, are we still looking at that 900 level or how many of the pricing dynamics changed there?

[Marco Emilio Patuano, executive]

Okay. In France, we had a separate conversation with all our clients, including SFR. But as far as we know, there is not a common table, so we cannot be invited to a table that is not there. So what we told to everyone and the answer we got from everybody is that the day that this table will be up and running operationally, of course, we are an important element.

You were mentioning the build-to-suit, well, of course, the build-to-suit should be understood, but the build-to-suit if you do, you do, if you don't have the CapEx, then you can allocate the CapEx to other things. So the build-to-suit per se are a good business. As of today, making a big average, let's say, that is like buying the towers at 15x, so it's a good business. But I don't want to build a useless towers. So if my client doesn't want, I save the CapEx and use differently or I give the CapEx back to my CFO, who is happy like a baby.

[Raimon Trias, executive]

So on the land, if I may, it is true that until last quarter, we were reporting the number of actions we put. On this quarter, you have seen more focus on the value of the action because it makes more sense to look at the value. We will come back if you needed to put the number of actions. Number of actions have increased slightly. We have done in the first half of the year, 1,900 approx, a bit less, but 1,900. I think the first quarter, we were below the 900, what it means that you have increased a little bit, but it's still not significant. But you have seen that also the value of the actions have been a bit higher. So we have increased the land activity by 23%, reaching EUR 115 million in this first half of the year.

[Marco Emilio Patuano, executive]

Yes. What we can add is that average price has not changed. So the PBT of the land aggregator is not hurting us in terms of return that we can get from the acquisition or long-term renegotiation of the contracts. And very importantly, we are finally lending to a more wide scenario in France and allow me to stop here.

[Maria Carrapato, executive]

Okay. So now moving on to Ottavio Adorisio at Bernstein.

[Ottavio Adorisio, analyst]

For the benefit of time, let me ask a straight question on numbers. The first one is, if you can give us a bit more granularity about the agreements you announced today with [indiscernible] and Digi, you didn't make any change to guidance. So I suppose that other the contracts are negligible or is back-end loaded. The other one on the numbers is on the CapEx. The bulk of the growth CapEx still inside adaptation. Now from memory, it's a lot to do from upgrading some of the towers you bought to multi-tenancy. So if you can provide an update on the ratio of your tower portfolio that's already been upgraded to multi-tenancy? And what's the current upgrade pace you are going at the moment?

[Marco Emilio Patuano, executive]

Okay. I answer the first. So the Digi case, the RAN sharing fee is a demultiplicator of a second tenant fee because you don't have the physical assets, so you don't use the space and the electromagnetic -- so you're using by capacity to host in terms of potential revenues, but we are not using physical space. It's a plan that is why we didn't change it because of the activation of the 3,000 RAN sharing would take, I would say, something between 2 and 3 years.

But this is -- the total contract value is not negligible is 3 digits. So it's not negligible, the total contract value. But the rollout infrastructure have the pain point, Ottavio, that between the moment you agree and the moment you executed, there is quite some engineering to do and some bottleneck also with the equipment providers that have to do activity, you have to change the software where you have to do things, but it will take a little bit of time. But the total contract value is not negligible.

On the second, I leave it to...

[Raimon Trias, executive]

On the second question, as you clearly expressed, we have in the CapEx is tower expansion CapEx that includes the fact of reinforcing the towers in order to have multitenant towers. As you know, when we bought some of the portfolios of towers, some of the towers were not prepared to hold multi-tenants, that's why we are having to do...

[Marco Emilio Patuano, executive]

Can I expand on this because I think it's important. Please consider that in Europe, most of the towers have been built by the operator themselves for hosting their equipment in a 2G, 3G environment. So when you take the tower, the oldie one, the oldest one, you don't have a big must that can -- you can put an elephant on it. It was a relative thin animal that was able to resist 50, 60, 70 kilos. Now if dual tenant 5G were hanging at 30 meters, we're hanging a tonne with approximately 15 square meters of wind effect. So you have to imagine that in a windy day, you have to avoid that your tower goes 3 miles away because it starts flying, which is what's happened in Portugal 2 months or 3 months ago, a windstorm took 7 of our tower and moved nicely sort of 200 meters away. Thanks, God, we did not kill anyone.

So this is very technical that comes from the origin of the industry in Europe. And we are doing not because we like it but because in order to make the colocation, you have some technical activity that has to be performed. Sorry to have jumped in...

[Raimon Trias, executive]

I think super clear. And then it depends very much on the country. There are countries that have already done most of the works that need to be done, others are still needing to do. So it depends very much on the country. If you want, again, with IR team, we can give you more color on a country-by-country basis, where we believe it will be heading over the next years.

[Marco Emilio Patuano, executive]

Yes. Correct.

[Maria Carrapato, executive]

Okay. So I think that's it. I don't think we have anybody else...

[Marco Emilio Patuano, executive]

Sorry to interrupt, but I thought there was James.

[Maria Carrapato, executive]

Okay. No, so yes, we do. So the last question comes from James Ratzer. So James, you have the last question before for us in lunch, so -- and the holidays. So please go ahead.

[James Ratzer, analyst]

I'll be brief. I was just doing a little back-of-the-envelope calculation, Marco, on what you were saying about the Digi RAN-sharing agreement to make it a 3-digit value over 8 years, that would seem to imply that you're getting about EUR 6,000 per site from Digi RAN sharing? Is that around the right ballpark that you can get?

[Marco Emilio Patuano, executive]

Sorry, I'm really sorry, James. We don't enter in the details of the contract because it's covered by NDA. But there is a little point, the -- when we calculate the total contract value, the duration of the contract has several clauses of automatic renewal. So you should imagine that this contract -- and they have an agreement with Telefonica of 15 years.

So a good part of our contract, there is a part of the contract with a shorter duration and a part of the contract with a longer duration to be compliant with the terms that Digi has with Telefonica. So it's you should review slightly on the envelope, you should review slightly the duration of the contract. I hope I gave you an hint.

[James Ratzer, analyst]

Yes. Have a great summer break.

[Marco Emilio Patuano, executive]

Okay. Thank you, James.

[Maria Carrapato, executive]

Okay. So we've come to the end of the questions. As always, the team is here to follow up on any specifics that you'd like to cover. If not, have a wonderful holiday and look forward to speaking summer.

[Raimon Trias, executive]

Thanks, everyone.

[Marco Emilio Patuano, executive]

Thank you. Thank you. Have a good holidays.