Cellnex decided at the end of last year to launch a new strategic phase to adapt its capital structure to key priorities such as promoting organic growth, achieving investment grade with S&P, and increasing shareholder value. The European telecoms tower giant has set cash generation and debt reduction as goals in a period of rising interest rates. To achieve these goals, Cellnex will also work to reduce costs, which is a policy that the future CEO must implement.
In a recent meeting with workers’ representatives of Spanish subsidiaries Retevisión, Tradia and On Tower, Cellnex managers highlighted an organic growth strategy, which includes optimizing the business and optimizing its return as much as possible. The directors indicated that along with this policy change, the company will proceed to reduce financial and labor costs as much as possible, and promote a more centralized purchasing policy, along with other saving measures.
The company’s target time for earnings entry has been set by management in 2025.
Overall, Cellnex’s operating costs in 2022 increased by about 41%, from 615 to 868 million euros. However, the increase is in line with the inorganic growth strategy in recent years, with multiple acquisitions, which has expanded the perimeter of consolidation. In fact, revenue also increased by 38% to 3,499 million. Among other transactions, Cellnex closed the purchase of Hutchison’s phone towers in Europe in 2022, culminating in its UK infrastructure.
Among other sections, personnel costs increased by 22% to €254 million. those for repairs and maintenance 16%, up to 92 million; services, 78%, up to 283 million; And overhead costs and other services 42% to 240 million.
In presenting the results for the year 2022, the group highlighted that operating expenses were significantly lower than inflation thanks to the efficiencies program, thanks to mechanisms that help control the rise in energy prices, which are transmitted to customers.
However, operating costs could continue to rise through this year, as a result of the carryover effect from the aforementioned growth in the consolidation range due to purchases.
Suppliers
This factor will already be positive in connection with the above-mentioned policy of increasing the centralization of purchases. The fact that Cellnex has grown to the size it is now, with operations in 12 countries, allows the company to gain a better negotiating position against its various equipment and service providers.
In terms of reducing salary costs, Cellnex has already in recent years approved various Employment Regulation (ERE) files, on a voluntary basis, to adapt to the new business.
The latter agreed with unions in Spain in December 2021, which involved the departure of 208 people from subsidiaries Retevisión, Tradia and On Tower, between 2022 and 2025. The company noted that efficiencies in other “opex” operating expenses should start to emerge. As of 2025.
The company states in its annual report that this work organization plan was provided on December 31, 2021, at a cost of 81 million euros. In 2022, following the implementation of a portion of this agreement, the contracts of 80 employees will be terminated at an associated cost of $23.7 million. The balance to be paid as of December 31, 2022 related to the executed collective dismissal action represents expected payments of $33.4 million and $17.7 million recorded on the long and short term, respectively.
Previously, in 2018, Cellnex approved another ERE in Spain to terminate up to 175 contracts.
Cellnex also has a synergy and efficiencies plan in place for the period between 2021 and 2025. According to what the company has informed investors, the program meets deadlines to generate efficiencies of between 90 and 100 million euros until 2025. The company highlights factors such as renegotiating leases or buying out spaces.
The company aims to consolidate investment grade with S&P before the end of 2024. In achieving this goal, Cellnex expects to reduce its financial costs. The company has a debt of 16,900 million euros, of which 77% is fixed rate. At the beginning of this year, the group agreed to refinance a loan worth 700 million, with about twenty banks. The new loan, due in 2028, has an interest rate of Euribor plus 1.2%, at which the company will record savings of 10 million per year.
Waiting for the arrival of the new CEO
changes. Cellnex continues to work on the arrival of a new CEO, who will replace Tobías Martínez, whose departure is scheduled for June 3. The appointment must be approved by a two-thirds majority of the members of the Board of Directors, which has not yet approved the election. Panorama was approved, however, after the resignation of the two independent directors, Bertrand Kahn (previous chairman, replaced at the end of March by Anne Povero) and Peter Schur, who received heavy criticism from TCI, the fund of activist investor Chris Hone, who became the first shareholder.
advice. In this way, the Council is left with two vacant seats. In this sense, TCI has requested a representative on the aforementioned governing body, for its Director, Jonathan Amoyal. TCI and Edizione, the Benetton holding family, have backed Marco Patuano, former CEO of Telecom Italia as well as Edizione herself, as Cellnex’s new CEO. The group plans to report first-quarter results on April 27. For now, the financial markets seem confident that this situation will be resolved. Cellnex shares have risen more than 23% since the beginning of the year, rebounding to the €38 level.
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