CEO predicts consolidation among Europe’s six biggest towercos by 2027
Cellnex’s CEO, Marco Patuano, has told Reuters that the company is speeding up sales of assets to gain investment-grade rating by mid 2024. This means reducing its borrowing to less than six times its core earnings.
This goal is part of the strategy as it shifts the business from lightning-fast acquisition to consolidation and maturation. Much of the expansion in the tower sector was fuelled by debt when inflation was low and money cheap, and operators were looking to offload their tower estates to reduce debt.
Cellnex’s is perhaps the exemplar of this model, with its extraordinary rise beginning in 2015 to own 310,000 towers in Europe at the start of the year.
Capex swallowing cash
Patuano, who became CEO in June, said he expects cash generation would accelerate in two or three years’ time, when capital expenditure (capex) commitments reduce and assets are mature enough to generate higher returns. He added that currently, capex is absorbing all the cash generated by the firm, but in 2027, “[we’ll be] generating a lot of cash”.
He thinks that by that time, there will have been consolidation among Europe’s six largest European towercos and resurrected the idea of bidding for Deutsche Telekom’s unit, GD Towers. Cellnex pulled out of a bid for DT’s towers in 2022.
Investment not off the table
Cellnex is considering disposing of its tower estates in Austria and Ireland in their entirety, Reuters cites valuation by Kepler Cheuvreux suggesting the businesses could be worth €1.05 billion and €1.41 billion respectively.
On the other hand, Cellnex plans to invest about €150 million in acquiring the land on which its towers sit and increasing value to shareholders through dividends and share buyback.
“If you invest in infrastructure, you’re not looking for growth without yield, you’re looking at yield with a decent growth, which is better than the inflation,” Patuano told Reuters.
Earlier this month, Cellnex surprised the market by selling the private 4G and 5G business it acquired in 2020 to Boldyn Networks. The price was not disclosed.