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Spain : Cellnex GSM highlights KPIs, expansion in Europe, and cash flow visibility.

Cellnex Telecom today held its 2017 General Shareholders Meeting (GSM), at which it approved the Financial Statements and Management Report for financial year 2016. The GSM is the first at which Cellnex presented figures for its first full year following its spin-off from Abertis through its IPO, placing 66% of its capital on the stock exchange, in May 2015. Furthermore, Cellnex (CLNX: MC) joined the selective IBEX 35 Spanish stock market index in June 2016. Since it had its debut on the continuous market in May 2015, Cellnexs shares have achieved an accumulated revaluation of 14.5% compared to the -3.6% of the IBEX 35.

In an interview published in the Companys Integrated Annual Report, which is also viewable on the corporate website at, Cellnex Chairman Francisco Reyns and CEO Tobias Martinez underlined some of the highlights of Financial Year 2016 that were examined by the General Shareholders Meeting.

I would highlight the strong alignment between the objectives set and the results achieved said Francisco Reyns. The history of Cellnex continues to embody the outstanding performance of a team maximising our growth options and achieving the right size. For the company, it is just as important to achieve the right size and scale as it is to integrate this growth into our management processes, ensuring that we can guarantee and deliver quality service to our customers.

The figures bear out what the Chairman has indicated confirmed Tobias Martinez. We closed 2016 with 15% growth in revenue, a 23% increase in EBITDA and a recurring free cash flow that was up 29%, all of which figures reflect the combined effect of the enlarged perimeter and the organic growth in business. Regarding this last point, the results for 2016 point to a 4.5% growth in equipment rolled out in our infrastructures. We increased points of presence in our locations by more than 200 every quarter, placing the customer ratio at 1.62, compared to 1.53 in 2015.

With reference to the performance of Cellnex shares on the stock market, Reyns stated: I would underline two elements concerning Cellnex shares in 2016. Firstly, the inclusion in the IBEX 35 index in June, which has provided more visibility to our shares and has attracted interest from shareholders who tend to focus on selective stocks, providing our shares with greater liquidity.

Secondly, it is important to consider the relative performance of the telecommunications sector. The financial year was marked by significant volatility with geopolitical factors increasing uncertainty and influencing share prices. In spite of this, the Company performed 14% better than the selective index from May 2015, when Cellnex joined the market, up to the end of 2016. Up until the close of trading on 26 April 2017, the differential relative to IBEX 35 was 18% in Cellnexs favour.

Mr Reyns continued: In this volatile environment it is essential to bring the industrial vision of Cellnexs model to the fore. Our shareholder base is very solid. Some of the reference shareholders have extended their positions as they share this long-term vision; and the consensus of analysts who follow our company maintains a clear recommendation to buy (67%), with a target price well above 17. The companys fundamentals provide visibility, solidity and predictability.

In four years we have moved from being virtually a single-product company, focused on the broadcasting business, to become a diversified company in which voice and data mobility transmission infrastructure is the driver of growth and which has already taken the lead, accounting for more than 55% of revenue, explained Tobias Martinez. We have also gone from being a company focused on a single market to enjoying a presence in five countries with 36% of revenues generated outside Spain.

It is difficult to set the limit, continued Cellnexs CEO. That will be the result of our ability to continue to demonstrate the effectiveness of a business model based on the concept of neutrality and independence. Of the more than 300,000 towers and sites within the 28 European member states, only 11% or 12% are run by independent operators, compared to the U.S., where more than 80% of non-urban sites are outsourced, as are almost 35% of the total, if we include the urban ones.

Let us add, in the medium term, what may involve the need to densify the existing network, supplementing it with the small cells of the distributed antenna systems (DAS), which will be a structural element. Only then will it be possible to ensure reliable access to permanent network coverage for applications based on the new 5G standard and the emerging IoT.

Cellnex has a very stable debt structure, said the Chairman of Cellnex. The corporate bonds issued in 2015 ( 600 million) and 2016 ( 750 million in August and 65 million in December), will only mature in 2022, 2024 and 2032 respectively. There is a fixed interest rate for 86% of the debt with an average cost of 2.6% at the close of 2016, which is among the lowest of listed companies in Spain. The company also has access to immediate funding lines which, together with its cash and banks position, are higher than 2 billion euros.

With this debt structure, and considering that market trends continue to point to low interest rates, and that the liquidity of debt markets remains high, said Tobias Martinez, the first option for funding new operations would be access to borrowing, although we would not exclude other instruments, such as bringing on board financial partners, depending on the type of operation.

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Publication:Mena Report
Date:Apr 29, 2017
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