Cellnex, in advanced negotiations to buy the Hutchison towers in Europe for 10 billion

Cellnex Telecom is a Spanish wireless telecommunications infrastructure and services company

Cellnex Telecom is a Spanish wireless telecommunications infrastructure and services company.

Cellnex confirmed today, following the announcement by CK Hutchison Holdings Limited, that it is in advanced discussions with the Asian group in order to explore strategic collaboration scenarios between both companies, including the potential acquisition of certain infrastructure assets and the execution of service contracts.

The Asian group, which had previously confirmed the advanced negotiations, has indicated that the entire operation could reach a valuation of 10 billion euros. If so, it will be the largest acquisition in Cellnex’s history. Likewise, it would be the largest acquisition made by a Spanish company this year. The market has been talking these days of an operation above 9,000 million.

Hutchison states that it has reached a substantial agreement on the key commercial terms for the disposals of its interests in telecommunications infrastructure assets in Europe, controlled through a subsidiary. Once the agreement is closed, Cellnex and the subsidiaries of the Asian group group will enter into service contracts for the Spanish company to provide Hutchison with telecommunications infrastructure services and support the accelerated deployment of the 5G network through a committed expansion program and custom built. “Agreements relating to the transaction are subject to final documentation completion,” Hutchison said.

In a relevant event sent to the CNMV, the company headed by Tobías Martínez has indicated that the possible terms and conditions, including the economic ones and the structure of the contemplated transaction, are currently being negotiated and, therefore, up to now they have not been has reached no binding agreement. The company has indicated that it will make a further announcement in accordance with applicable requirements when necessary.

The operation would be absolutely transformative for Cellnex, since Hutchison has 28,500 mobile phone towers, spread over the United Kingdom, Ireland and Italy, where the Spanish group would strengthen its position; and Sweden, Austria and Denmark, countries in which it would enter for the first time.

In the presentation of the accounts for the third quarter this morning, Cellnes indicated that its available liquidity at the end of the semester (treasury and credit lines) amounted to 7,200 million euros. In August, the company closed a capital increase of 4,000 million euros, to strengthen its financial muscle in the face of new growth opportunities. In this sense, the company has indicated that it analyzes projects with an investment volume that could reach up to 11,000 million euros.

Cellnex shares rose more than 5%, to 56.8 euros, a new all-time high.

Results

On the other hand, Cellnex has examined the accounts for the third quarter, in which the key indicators include the expansion of the Group’s perimeter after the 2019 and 2020 acquisitions, accompanied by the organic growth derived from the new deployments. In addition, it has confirmed its ebitda and cash flow targets for the year as a whole.

Thus, revenues amounted to 1,149 million euros in the first nine months of the year, 53% more than in the same period of the previous year, while ebitda grew 68%, to 838 million, after consolidating the acquisitions carried out carried out in 2019 and in the first months of 2020.

In a relevant event sent to the CNMV, the company points out that the leveraged recurring free cash flow (FCLRA) increased by 70% until September, reaching 435 million euros.

Cellnex has become the fourth value of the Ibex 35, with a capitalization of 26,200 million euros, only behind Inditex, Iberdrola and Santander. After doubling in size in 2019, its shares have accumulated a 40% revaluation since the beginning of the year.

In net terms, the group registered red numbers of 84 million euros, due to the effect of higher amortizations, which increased 100% compared to the third quarter of 2019, and financial costs, with a year-on-year increase of 37%, associated the intense acquisition process during 2019 and 2020, and the consequent expansion of the perimeter. “This is consistent with the phase of strong growth that the company is experiencing, and therefore, as was advanced in the presentation of results for the 2019 financial year, we must expect that the group will continue to reflect a negative accounting result in the coming quarters” Cellnex specifies.

The total investments executed in the first nine months of 2020 reached 3,585 million euros, mostly destined to investments related to the generation of new income, highlighting the incorporation of new assets in Portugal and the United Kingdom and the continuity in the integration and deployment of new infrastructures in France, as well as improvements in efficiency, and the maintenance of installed capacity.

Until October 2020, Cellnex has announced two acquisitions in Portugal; He has entered Poland hand in hand with Iliad; It has strengthened its presence in France through the deployment of a fiber optic network with Bouygues Telecom, which will connect towers, sites and edge computing centers, key to the development of the 5G ecosystem; has expanded its presence in the United Kingdom with the closing of the acquisition of Arqiva’s telecommunications division; and in Spain it has taken control of Metrocall, which reinforces its commitment to telecom infrastructure in transport.

Net debt as of September 30 amounted to 3,776 million euros, 162 million less than at the end of 2019, despite the new acquisitions made. Of this, 74% is at a fixed rate, with an average cost of the debt (drawn down) of 1.7% and an average life of 5.5 years.

The group’s backlog, contracted sales, reaches 53,000 million euros including the forecasts of the agreement with Iliad in Poland announced on October 23. The company has established itself as the largest independent tower in Europe with up to 73,000 sites, of which up to 13,500 will be run through BTS programs. As of September 30, 2020, Cellnex had a total of 50,185 operating sites (10,313 in Spain, 10,356 in Italy, 9,687 in France, 924 in the Netherlands, 7,996 in the United Kingdom, 5,277 in Switzerland, 621 in Ireland and 5,011 in Portugal) , to which 2,707 nodes (DAS and Small Cells) are added.

Infrastructure services for mobile telecommunications operators contributed 78% to total revenues, with 898 million euros, which represents a growth of 77% compared to September 2019.

The broadcasting infrastructure activity contributed 15% of the revenues with 172 million euros. The business focused on security and emergency networks and solutions for the intelligent management of urban infrastructures (IoT and Smart cities) contributed 7% of revenues, with 78 million euros.

In turn, as of September 30, 65% of revenues and 73% of ebitda were generated outside the Spanish market. Italy is the second most important market with 22% of the group’s revenues.

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