In February of this year, Cellnex Telecom reached an agreement to form a fibre JV with Bouygues Telecom, adding another facet to the deep partnership between the two companies. With Cellnex providing a fully integrated end to end solution spanning towers, fibre and edge computing, the partnership - covering both fixed and mobile networks - represents one of the world’s most holistic operator-infraco agreements. TowerXchange spoke to Cellnex France’s Managing Director, Vincent Cuvillier to find out more.
TowerXchange: Please can you introduce Cellnex’ recent fibre deal with Bouygues Telecom in France.
Vincent Cuvillier, Managing Director, Cellnex France:
In February, Cellnex reached an agreement to form a new joint venture with Bouygues Telecom to develop a nationwide fibre network, investing €1bn up to 2027 to roll out up to 31,500km of fibre.
Bouygues Telecom is aiming to satisfy the growth in data usage on networks by benefiting from the roll out of a nationwide optical fiber network. With the fibre JV the aim is to connect their fixed and mobile sites, in some instances carrying out civil works to lay new ducts and in others using existing ducts that have been put in place by Orange and other players.
The nationwide network will play a central role in Bouygues Telecom fixed and mobile networks, providing fibre to the antennae (FTTA) to connect Bouygues Telecom network of mobile sites (of which up to 5,000 are within Cellnex perimeter), fibre to the office (FTTO) and connecting aggregation nodes (metropolitan and central offices, of which up to 240 are within Cellnex perimeter) (see figure one). Of the 31,500km, around half will be local backhaul networks (connecting mobile sites and metropolitan offices etc within cities and urban areas) and the other half will be made of intercity links, creating the backbone of the network.
The joint venture will invest over €1bn in this network by 2027. Of the €1bn, €600mn will be financed through external debt, Cellnex will finance €340mn through a shareholder loan with the balance being financed by the JV’s cash flows and equity. Cellnex is contributing an initial equity of €31mn, securing a 51% stake, while Bouygues Telecom contributes €30mn for a 49% stake.
The new venture, called Nexloop France, will have a 30-year master service agreement in place with Bouygues Telecom reserving 70% of the fibre capacity, the remaining 30% being leased to third parties (figure two) by Nexloop France. Cellnex will have full operational control of the joint venture and has appointed an experienced management team to run the business. Cellnex retains full economic rights of the venture (for 35 years as long as Cellnex is the majority shareholder) and will consolidate the financials of the business into its balance sheet.
Figure one: A nationwide fibre optic network covering FTTA and FTTO
Figure two: Nexloop France’s economic structure
TowerXchange: What potential do you see for the fibre JV?
Vincent Cuvillier, Managing Director, Cellnex France:
In France, there are around 200 different ISPs or CSPs providing regional, national or international fibre connectivity, all of which will be target customers to use the fibre being deployed by the joint venture. A big part of Nexloop France’s business model is focused around the FTTO (fibre to the office) market. In this space we see an addressable market of around 250k enterprises with more than ten employees, companies which the joint venture will target indirectly.
In terms of FTTA, Bouygues Telecom has a significant runway for growth, particularly when you consider the level of new sites being rolled out on top of this (Cellnex has a pipeline of over 2,000 sites for the operator in high density areas). Connecting such sites, along with the network of metropolitan offices that Cellnex is deploying for the operator, to fibre backhaul is essential in the shift towards 5G and is another key goal of the fibre JV.
TowerXchange: The deal also included the rollout of up to 90 metropolitan offices for Bouygues Telecom, adding to the network of 150 assets that Cellnex has already contracted with the operator. Please can you introduce the assets and the business model under which they will be operated?
Vincent Cuvillier, Managing Director, Cellnex France:
As you mentioned, in the recent deal, Nexloop France will be building up to 90 new metropolitan offices (which will be assets of the joint venture). This will add to the network of up to 150 offices that Cellnex will acquire or will be built under their 2018 agreement with Bouygues Telecom (which are 100% owned by Cellnex). Of the total 240 assets, 178 are new builds with 62 being existing metropolitan switching centres (MSCs) and Metropolitan Offices (MO) which Cellnex is refurbishing.
70% of the capacity of the metropolitan and central offices (in terms of space, power etc) is reserved for Bouygues Telecom with the remaining 30% available for Cellnex to address the third parties market made of fibrecos, local authorities, IT companies, and telcos. Cellnex is responsible for managing site access, power, cooling, maintenance and site upgrades (e.g. increasing the amount of energy equipment to accommodate more servers).
TowerXchange: Does the management of such assets require Cellnex to develop new skills sets?
Vincent Cuvillier, Managing Director, Cellnex France:
Whilst the management of power and active equipment may be new to Cellnex France, the Cellnex group is experienced in managing all these elements; in Spain, for example, our broadcast business requires us to manage servers and power, whilst in Italy we are managing back-up power at the tower.
On top of this, many of our team in France have a background in managing data centers and other assets. Our French subcontractors providing us with field operations on our towers in France are also providing services for data centers management, giving us a wealth of experience to manage the metropolitan offices. Finally, we also have a transitional service agreement in place with Bouygues Telecom to prime start the operations. Their expertise relative to those assets will be combined with the expertise of the Cellnex team.
TowerXchange: Covering towers, fibre and data processing capabilities, Cellnex’ partnership with Bouygues Telecom is one of the deepest relationships that TowerXchange has seen between an infraco and an operator. Do you see the potential to replicate this model with other customers in other markets?
Vincent Cuvillier, Managing Director, Cellnex France:
We have a very deep partnership in place with Bouygues Telecom, managing infrastructure from the core to the edge and in both the fixed and mobile space. The partnership was initiated back in 2016 with the acquisition of 500 towers from Bouygues Telecom and has since grown, with Cellnex demonstrating the know-how and the capacity to adapt to Bouygues Telecom’s stringent requirements. France is a very competitive market for operators and Cellnex has been able to support Bouygues Telecom in meeting their needs in the face of this.
There is also an organisational reason as to why the depth of partnership has come about. Bouygues Telecom has a single network team responsible for managing both the fixed and mobile networks, with the head of rollout responsible for both sides of the business. As such, it made sense for Bouygues to find a partner which could support them on both the fixed and mobile side, providing a fully integrated end to end solution. Historically the two networks were managed by two different teams (and this is still the case for many operators) but with the surge of 5G, the backhaul of the wireless network requires a powerful fixed architecture. The two networks are converging. To have a fully operational 5G network you need mobile sites, data centres and fibre all connected.
In terms of whether we see the potential to replicate this deep partnership model with other MNOs in other markets, absolutely! Whilst the partnership with Bouygues Telecom is the most holistic, covering many pieces of the 5G ecosystem, it serves as an example of what could be done with any of our other partners in the eight markets in which Cellnex operates. We work with our clients to support them with their infrastructure requirements in whichever direction they wish to follow and see the provision of an integrated infrastructure solution, from smaller examples such as the Athletico Madrid and Manchester City stadiums to country wide initiatives such as with Bouygues Telecom in France as the future. Our appetite, ability and readiness to follow the Bouygues Telecom model in other markets is very much there.
TowerXchange: Looking back at the French market, what growth opportunities do you see for Cellnex as a whole?
Vincent Cuvillier, Managing Director, Cellnex France:
To set some context on the status of the market, the President of ARCEP has said that the 5G spectrum auction should take place at the end of September with different opinions from the MNOs on the matter.
In terms of growth opportunities, rural coverage both in terms of meeting regulatory obligations and meeting increased customer demand is one key area. Cellnex already has the largest built-to-suit programme in France, with plans to add up to 4,000 sites for Iliad and Bouygues Telecom by 2025 but we expect this figure to increase. On top of new build, we are focused on commercialising the former Iliad sites, leasing them up to third parties
In addition to the macro towers, fibre and metropolitan/central offices business, Cellnex is diversifying into two additional areas, namely indoor coverage solutions and private networks (in France, entities other than MNOs are allowed access to spectrum in the 2.6GHz band). We see big opportunities for Cellnex in this area, particularly multi-tenanted buildings where thousands of employees are on multiple networks. The enterprise business units of mobile network operators have struggled to address this market which is better suited to the neutral host model. Cellnex has extensive experience in developing indoor networks for customers in Spain and Italy and so is well placed to play a key role in this space. When it comes to private networks we are also learning from our Spanish colleagues and are having preliminary discussions in the French market and so see this as providing growth in the medium to longer term.
TowerXchange: How do you anticipate each of the different service lines contributing to your business?
Vincent Cuvillier, Managing Director, Cellnex France:
To give you an idea of proportions, in France we have committed over €5bn in capex (around €3bn with Bouygues Telecom and €2bn with Iliad), €1bn of which towards fibre, €500mn towards metropolitan and central offices and the balance towards towers; as such towers remain the most significant part of our business in the country - we are an infraco company but with two thirds of our French business in towers.
In France we have committed over €5bn in capex (around €3bn with Bouygues Telecom and €2bn with Iliad), €1bn of which towards fibre, €500mn towards metropolitan and central offices and the balance towards towers; as such towers remain the most significant part of our business in the country - we are an infraco company but with two thirds of our French business in towers
In terms of how that translates across our European operations, when all our current commitments are realised across all the eight markets in which we operate, on a run rate basis France is expected to contribute 35% of Cellnex’ annual EBITDA making it our largest market. Obviously as Cellnex continues to grow, and more partnership agreements are signed this figure will change but in today’s figures, Cellnex’s French operations are on track to contribute over a third of the Group’s EBITDA.
Bouygues Telecom and Cellnex’ history of infrastructure deals in France
Nov 2012
Bouygues Telecom sells 85% stake in 2,166 towers to Antin’s FPS Towers for €185mn
Sept 2015
Antin’s FPS Towers acquires Bouygues Telecom remaining 15% stake (FPS since acquired by ATC Europe)
July 2016
Bouygues Telecom sells 500 towers to Cellnex for €147mn in two tranches - read more
Feb 2017
Bouygues Telecom sells 1,800 (primarily rooftop) sites to Cellnex for €500mn and agrees 1,200 site BTS
July 2017
Bouygues Telecom sells 600 towers to Cellnex for €170mn
Dec 2018
Agreement signed for Cellnex to build up to 88 new central and metropolitan offices for Bouygues Telecom, committing €250mn over five-year period
Feb 2019
Cellnex and Bouygues Telecom reach agreement for Cellnex to buy up to 62 existing central and metropolitan offices
May 2019
Cellnex acquires 70% interest in 5,700 Free (Iliad) sites plus signs BTS agreement for up to 2,500 sites - read more
Feb 2020
Cellnex and Bouygues Telecom create fibre JV with plans to invest €1bn up to 2027. Agreement also includes the deployment of up to 90 new metropolitan offices up to 2027
Mar 2020
Bouygues Telecom forms JV with Phoenix Tower International to build up to 4,000 new sites in less dense areas - read more
