Selnex is in the eye of the storm. On January 11, the company announced that its CEO Tobias Martinez would leave his position the following June. With him, the telecom tower operator has led an intense growth story based on acquisitions and capital increases. The resignation of the executive has also opened a period of strong volatility in the stock market. Shares have heated up amid rumors (not confirmed) of a possible takeover by US conglomerates American Tower (AMT) and Brookfield.
Despite the price heat — the titles are up 16% so far this year — it’s hard to stop any courtship. We are not talking about small games. The value of Cellnex on the stock market, the company’s debt and the premium they must pay to shareholders, would require around 50,000 million euros, according to the shareholders consultation. Barclays echoed this possibility: “With the recent change in strategy and the appointment of a new CEO still pending, we believe Selnex may be open to other strategic options, including acquisition.” And they add: “Cellnex’s portfolio has limited overlap with AMT outside of Spain. Regulatory problems could arise in France, where Selnex has a large presence, but AMT’s French portfolio is relatively small and the US could probably solve regulatory problems through local divestment.
Cellnex plays down the acquisition rumors and recalls that it has been a constant since its IPO in 2015. Furthermore, this type of operation must pass through the filter of the Council of Ministers”, advised company sources.
Cellnex Telecom has its origins in the Autopistas Concesionaria Española (Acesa) – in the business class of La Caixa – and its foray into telecommunications infrastructure from the world of the road. First, it acquired the public company Tredia Telecom, and in 2003 it acquired the state public company Retevision, which offered the same service to RTVE, Mediaset, A3 Media and regional channels. Ecessa was renamed Abertis and strengthened this commitment with the management of the so-called TETRA networks (Trans European Trunked Radio) in Spain, which are vital communications for emergencies (police, army, maritime rescue…).
This business model by which television and radio stations paid an operator to broadcast their signals, still wanted to take Abertis Telecom into the world of mobile telephony where operators (Telefónica, Vodafone, Orange…) Shared broadcast towers, but this time for voice and data. In 2014, Abertis took the first step by acquiring 4,500 mobile phone towers from Telefónica. It currently has 107,000 cell phone towers spread across 12 European countries and has a commitment to acquire 25,000 more towers by 2030. In those eight years of frenetic buying, it has invested €40,000 million to establish Selnex as the main European infrastructure operator. wireless telecommunication.
That 2014 was the pivotal year for the separation of the telecom business from Abertis and the creation of Cellnex Telecom, which would debut on the stock market in May 2015. The company had a stock market value of €2,235 million at its launch and nearly eight years later reached a market capitalization of €25,300 million, ranking seventh among the Ibex 35 values. The growth of value parallels the progress of its earnings, which rose to 450 million euros in 2014 and in 2022 they will end up around 3,500 million according to the company. Since its inception, the business has changed and now radio and television business accounts for less than 10% of its business, while mobile telephony accounts for over 90%.
This meteoric growth in its figures hasn’t transferred to its net profit: Cellnext will again close this year with a loss. The company does not forecast a year in which profit will turn from red to black, but they expect 2024 to “close with a positive free-cash-flow (profit plus amortization) that leads to a new shareholder remuneration policy or buybacks”. Action”.
Juan Moreno, Bankinter analyst, highlighted in a recent report that the company’s results show “high visibility into cash flows with growth of close to 20% during the 2021-2025 period, due to its strong investibility and average maturity.” Show a solid financial position with a tenor of its debt over six years and mostly at a fixed cost. Also, it offers protection from inflation, with a substantial portion of the contracts linked to inflation,” he pointed out in his report. .
change of strategy
The difficulty of growing at these rates with new acquisitions and a rising interest rate environment has led Cellnex to announce a new phase in its business, one where organic growth generated by the company’s activity prevails and it reduces debt. Enters the period of doing. The slowing of activity that Goldman Sachs analysts see as positive: “Now that Selnex has moved away from its M&A strategy, we hope it will be able to remove an (in our opinion) undue discount on the shares and promote them.” will help”.
In addition to exploiting towers, Cellnex’s businesses will aim to target activities involving telephone towers for the development of 5G, which requires fiber optics. Also 5G private network for industrial environment like ports, mines, petrochemicals or any construction activity. and enhance security and emergency networks and connectivity in high-attendance indoor environments such as tunnels, subways, stadiums, etc.
The company has a net debt of 17,000 million euros, which is eight times its Ebitda and they want to reduce it to less than seven times in the next two years. They also set a target for the loan to reach “investment grade” by the rating agencies (now it’s only Fitch that notes).