Tobias Martinez reflects on Cellnex’ 2021 and the outlook for the augmented towerco model

We have had a very good 2021. Our main achievement has been being able to demonstrate consistent organic growth, which was about 6.1%, just above 5% guidance. From a financial perspective we have also had a very strong year, generating revenues of €2.5bn, up 58% on FY 2020, with adjusted EBITDA up by 63% to almost €2bn.

 

We have continued to execute M&A, in 2021 closing growth transactions in Austria, Denmark, Ireland, Italy and Sweden (CK Hutchison), Poland (Play and Polkomtel Infrastruktura), the Netherlands (T Mobile NL Sites) and France (Hivory). We have been able to reach our short-term targets, even though we had integrated Hivory for two months, rather than the three months expected. 

 

All our metrics have been showing strong, solid and consistent growth with both M&A and organic growth important. We are on a good path, from an organic and inorganic perspective, to reach our 2025 guidance.

 

It is also important to note, from a financial perspective that 87% of our debt is at a fixed rate. This means that we are well protected against growing interest rates. 

 

Over the course of 2021, we have also been demonstrating the implementation of our long term ESG plan, which, among other successful qualifications among different sustainability indices, has made the CDP A-list for the third consecutive year. We have been paying lots of attention to gender equality and inclusion, the telecoms sector is male dominated and so we keep focusing on how to attract more women to the sector and more specifically to our company. 

Up to the end of 2021, there has been no major impact on our global supply, although there are some signals that suggest that in certain countries we could get a bottle neck over the course of this year. This is not only related to supply chain but more to slowing down of civil works. The issue looks particularly acute in the UK, whereas in France, for example, we have been able to deliver new site rollout better than expected.

 

Overall we have a great challenge in front of us. We have more than 20,000 sites to build over the course of the next six years, with particularly large build-to-suit programmes in France, Italy and the UK. It is important to continue improving our capacity to deliver such high levels of BTS.

On the “Environment” side, we are acquiring externally certified renewable electricity. Currently 40% of our electricity is from renewables, with an objective to reach 100% by 2025. Currently, with some of our customers, the power is a pass through. . That being said, both Cellnex and our customers have the same goal – to reach 100% certified renewable energy as soon as possible.

 

We are also doing a lot of work to reduce our greenhouse gas emissions. We are in good shape, but the challenge is with scope 3 emissions: it isn’t just about Cellnex but also our suppliers and the whole value chain.

 

On the social side, we are setting new objectives regarding women in management positions, plus when it comes to recruiting new staff, we are targeting 50% of new hires to be female in 2025. It isn’t just about promoting women internally, it is also about hiring new female talent. We are also focused on the appointment of foreign directors at head quarter-level. 

 

Regarding governance is where we are more advanced, we have about 45% female appointees at the board composition level. The proportion of non-executive directors on the board stands at 91% , as such, we have a very independent composition of the board. We are also trying to improve the different nationality representation at the board of directors, currently we have seven nationalities represented but are looking to increase this. 

 

We are placing more attention on improving parity across the organisation, closing the pay gap, improving gender parity in male dominated sector, placing particular attention on avoiding discrimination. 

When we talk about Eastern Europe it depends on the country, it is important to be more specific. Our direct experience in Poland has been fantastic, with young well prepared people and a positive ambition. Poland is a big country by European standards, a country in which we can develop huge projects as in France, Italy, Spain and the UK. Obviously in Poland we are going on step further than in other markets, moving into active infrastructure. The integration and the ability to grow further takes more time because we are integrating 500 people as well as taking care of Polkomtel’s radio network, but we have had a great overall experience to date.

 

There are other countries that are a potential fit with our strategy in CEE, but we’re in not in a rush and we have not set a target or a specific roadmap to expand beyond Poland. We made our first step into Poland thanks to our relationship with Iliad, but we have to be prudent and take a long-term view. Currently there is a very difficult situation in Ukraine but we are keeping a close eye on the region. 

 

We want to keep investing in Europe, but as well as expanding our footprint, we want to also consolidate our footprint in our existing markets. We have been pleased with the CMA’s decision in the UK for example [regarding the Hutchison portfolio]. The UK is a pivotal market and the deal gives us the opportunity to gain scale, without scale there isn’t the same opportunity to generate efficiencies. Efficiencies bring benefits to not only Cellnex, but also to the UK market - by definition, Cellnex is a pro-competitivee company, sharing means reducing costs for MNOs and minimizing environmental impact. Secondly, the deal allows us to consolidate our strategic alliance with Hutchison group, closing the last piece of the transaction and allowing us to work together across the continent as long term partners with industrial DNA. 

The integration is taking longer than other integrations as we did two transactions with two anchor tenants in Poland just five months’ apart, whilst also needing into integrate active equipment from Polkomtel. The integration of active equipment is very different and we are fine tuning this, but as of today we are on the timeline expected.  

 

Another important thing to take into consideration is that we are also integrating around 500 new people whilst also hiring new skills to develop our offering in the market.  The idea is not just to run the active network of a single customer, the idea is to share and develop a tower-like business model on the radio side. The procedures, the indicators and the invoicing system, for example, are completely different. It is more challenging, but we do believe the market is heading this way – towards outsourcing of RANsharing. Telecom operators are already doing RANsharing, and so it is nothing new, rather defining the role for a neutral host in RANsharing is new.

 

The outsourcing of the RAN is in part about monetization. We are the enablers of this monetization whilst also taking care of further investments in the network. Secondly it is about putting in place a neutral player who can set a framework to provide certainty and a non-discriminatory service, which is very important when sharing networks - it is more sensitive for MNOs to share active than passive networks. An independent neutral player can also set an asymmetrical service, something that is not possible in a joint venture. Should one MNO want better capacity of better service, we can provide it.

 

Evolving to this takes time and we always said that 2022 would be a consolidation year, ensuring that we put ourselves in a good position to expand this kind of service. We have been having a very good experience in Poland and delivering a sound customer experience is the best tool to convince other customers to outsource their RAN.

It is an evolution in progress. We are having discussions with other telecom operators who want first to learn about the Polish experience, then they want to understand if it makes sense for them in their own markets and what it means in terms of monetisation, service, SLAs, quality control, etcetera. It is an evolution and you cannot move from one mindset to another overnight. 

 

The interest is there, we are doing some work for specific customers, being more specific on what it means for them beyond the Polish experience. The Polish experience is the starting point, they want to understand the reasons why the deal has happened and what the benefits are. The main benefits are that it’s about having a neutral host taking care of and removing the capex, whilst having the same staff running the network transferred to Cellnex. It is about reducing further requirements in terms of capex and reducing the operational expenses of running a network. When you are sharing, you are in a position to reduce expenditure– it is a win-win-win benefit for the three parties

 

The questions, the interest and the curiosity are there – we are just working at the customer pace. It is not a process or an evolution that should be rushed.