Alfonso Álvarez: "At Cellnex we are in a somewhat less exciting moment, with fewer major deals and acquisitions"

BarcelonaAfter the first 10 years since the spin-off from Abertis, marked by acquisitions and rapid growth, Cellnex is entering a new phase. It is now focused on concentrating on its core businesses, selling off non-core ones, and delivering returns to its shareholders. With the Benetton family, through Edizione, leading the capital; followed by TC, owned by activist investor Christopher Anthony Hohn; and the Singaporean fund GIC, its CEO in Spain, Alfonso Álvarez, a telecommunications engineer who has worked there since it was an Abertis subsidiary, does not rule out participating in any consolidation process within the telecommunications tower business and emphasizes the group's ability to provide service even during an unprecedented blackout.

They have just celebrated their first 10 years, a period marked by acquisitions and significant growth. Have they now decided to change course?

— Our business is very much about volume. It's important to be significant to customers in terms of the number of antennas they have with you. This is also how you grow. When you're a major supplier to an operator's network, with all the new investments, the deployment of services that go beyond just the rooftop and tower radio network, including indoor coverage and urban densification, it's easier for them to rely on you and your investment capacity. What we did well during the acquisition period was ride the wave of advantageous financial conditions in the market to acquire assets very quickly in many countries, becoming the number one operator in Europe and one of the largest in the world. Once you have this volume, you're an infrastructure company, and your shareholders want a return on their capital. And that's why we're currently at a point where I understand it might seem a bit less glamorous, because we're announcing fewer massive acquisitions and focusing on what's truly industrial.

And what about work now?

— Getting our house in order, generating organic business—that is, fulfilling our business plans and delivering the growth we promised would come with the towers. And not just the towers, but also services. This is happening: we're delivering good results, I'd say consistently every quarter. And, as an infrastructure company, we're starting to return value to shareholders in the form of share buybacks, dividends, and so on.

Does this mean they've completely ruled out making purchases?

— Spain is a very interesting case study for that question. It's a somewhat atypical market. There are four operators: Telefónica, Masorange, Zegona, and Digi, which recently became, following the merger with Masorange, an operator with its own spectrum and network, but through Telefónica. We have four operators, but three networks: Telefónica, Masorange, and Zegona. We're talking about the possibility of further consolidation. In other words, there could be n brands, but two coverages remained. And, in contrast, there are 4 tower operators. The largest in Spain is American Tower, which has about 11,500. We have about 9,000. The third is Vantage Towers, which was created from Vodafone. And the fourth is Totem, from Orange. They are four tower companies (towercos) for 3, and we'll see if it isn't 2 networks in the future. It's not ideal. Therefore, we anticipate that there may be acquisitions of operators or something like that, a consolidation of the market. towercos.

And would Cellnex participate?

— Of course, our CEO, Marco Patuano, has said it many times: if there were an opportunity in Spain, or in any relevant country, we would obviously look at it.

So, we could end up having two networks here, right?

A situation in which there were two technical networks or a maximum of three towercosAnd then a number of operator brands on these networks or service exchanges would probably make the most economic sense. And what's true in Spain will eventually apply to other countries as well.

And what is Cellnex's focus today?

— In terms of business, it will always be what we call the toweringPassive infrastructure for mobile operators, in all its forms, is evolving. Urban densification is leading to smaller antennas. small cellsThese are necessary in areas of the city where traffic is continuously heavy, or very heavy at certain times of day, and puts the operator's response capacity at risk. Examples include subway stations. Or a football stadium, although the solutions are somewhat different. Here, Cellnex goes a step further and not only provides passive infrastructure, but also electronic equipment—active equipment for distributed antenna systems (DAS)—where operators connect their signals. We have quite a few stadiums throughout Europe and in Spain: Atlético de Madrid, Betis, we're at La Cartuja...

And what about Barça?

— Barça decided to do it differently. At the Bernabéu, as at the Camp Nou, broadcasters sometimes decide, instead of going through a neutral operator, to do it directly with sponsorship agreements with the clubs and then agreements between them. But we have Balaídos, Almería, Osasuna... We've also signed with Valencia for the rights to the new Mestalla. The same problem, the concentration of people but in the street, is usually solved with... small cellswhich is the same concept as a rooftop base station, but with much less power and designed to provide very focused coverage.

What infrastructure is ideal for this?

— Streetlights, kiosks, bus stops... We're also playing a role. In addition to this focus, the services of toweringBoth passive and somewhat active, we also have a very strong focus on all activity related to the efficiency of our infrastructure, that is, land costs and cost efficiency. And not in every country, but in Spain we continue to have the broadcasting network, including television and radio, through Collserola, Torrespaña, etc.

And apart from the business focus, there's the markets aspect, right?

— For example, we decided to divest in Austria and Ireland, where significant growth wasn't anticipated. We currently operate in 10 countries. The five largest by revenue, not by diversification (Spain being the most prominent), are France, followed by Italy, the UK, Spain, and Poland. Then we have five smaller countries: Portugal, the Netherlands, Denmark, Sweden, and Switzerland. It's not up to me to say whether the geographic focus will change, as that's a decision for the board of directors, but I think it's unlikely to change in the short term. And I don't believe the focus of our activities will change either. We will concentrate on this discipline of returning value to shareholders, being the pioneer and mature consolidator in the tower markets, and growing with mobile operators. An example? Transport communications have historically been a weak point in all countries. High-speed rail, commuter rail – sadly in vogue – subways, as well as stadiums, which have also had a major problem with user concentration and, whether through direct investment by an operator or with a collaboration model with a company like Cellnex, are gradually being resolved.

Examples?

— We're already working on 5G projects, for example, in the Madrid Metro. We have a joint venture, with 60% and 40% ownership of the Madrid Metro, and we're providing full network coverage.

And in Barcelona?

— We'd like something similar with TMB in Barcelona. We'll talk to the operators, we'll talk to TMB, and we'll see if it's possible. All these investments are easier to undertake when there are fewer mobile operators, financially healthier ones, and therefore more willing to invest. We play a role in... towercosThe more established they are, the easier it is.

They are not a company with many clients, but with few large clients and a tendency towards greater concentration: won't this affect their business?

— Yes, there are fewer clients, but they're investing more, which is better for our business. In Spain, where we're diversified and started earlier, we have a larger number of clients, such as audiovisual groups. We also have clients in the Catalan Emergency and Security Radiocommunications Network (Rescat), where our client is the CTTI (Center for Telecommunications and Information Technology), and the Catalan Ministry of the Interior. We also have networks in Valencia and Navarre. In other countries, we started primarily with mobile operators, but the idea is to grow in our strategic areas of expertise, for example, public administrations.

Is 5G coverage good in Catalonia and Spain? Are there any dead zones?

— In Spain, mobile coverage is generally very good throughout the country. In fact, Cellnex, and we're not the only provider, is currently finalizing the coverage for the Ministry's UNICO 5G Rural project, funded by the European Union's Next Generation program, which brings 5G to towns with around 5,000 inhabitants. This isn't happening yet in many other European countries, where 5G isn't even available in major cities.

Will there be more deployments?

— Yes. On the one hand, because of the density and reach of the network. And not just to provide coverage, but also the capacity to handle traffic at the speed that a 5G connection promises. Regarding rural areas, Catalonia is among the regions with the best coverage.

And what about the Generalitat's fiber optic project?

— We own Xarxa Oberta de Catalunya (XOC), which we bought in 2018. It is a concession from the Center for Telecommunications and Information Technologies (CTTI) that provides the fiber optic network of backbone (backbone) of high bandwidth for many official headquarters. Now the Generalitat has launched a tender, which Cellnex entered in partnership with Telefónica [The result has been challenged.To connect up to 5,000 official buildings, schools, libraries, and hospitals with its own fiber optic access network, where the service is currently contracted with an operator. We are involved in the CHOQUE, the backbone network, which will receive all that traffic. Therefore, there is an additional investment plan so that when these locations connect with the Generalitat's own fiber optic network, the backbone network will be able to manage the traffic. And in addition to the Generalitat's traffic, it is also a wholesale access network for operators of all types. The investment is €10.3 million.

During the unprecedented blackout last April, the communication systems worked, how did that happen?

— We are very pleased with how the audiovisual network performed, which by design already ensures that the signal does not fail at the most important moments for the client, such as the prime timeOur contracts with television providers include significant penalties if we exceed a certain number of minutes without service per year. This means that investments are made with this risk in mind. In television and radio today, it's easier to invest in the main channels. sites, It's easy to concentrate a large population receiving the signal from a single location. This makes it simpler to provide a reliable service with generators, batteries, and UPS systems, so 85-90% of the population essentially never loses service. Collserola and Torrespaña would be able to operate for up to five days with the fuel they have in their generator tanks. These are critical infrastructures for the country. Furthermore, we have contracts with fuel suppliers for other blackouts, and many other major centers also have generators. That day highlighted the stark difference in how broadcasting is designed. Just when it was needed, the investment began to pay off, and people didn't lose television or radio service, although unfortunately, since there are few battery-powered televisions, people couldn't watch TV during the blackout. But radio service was restored. Mobile networks, on the other hand, by design require many more sites and different construction requirements. For example, not every urban rooftop antenna could support the weight of batteries needed for 24 hours of operation.

But has anything been planned for other possible blackouts?

— As the electricity failed, people still had some mobile signal, so some sites They have batteries, although not as many as with broadcasting. But people started consuming a lot of mobile network data and, therefore, the battery life of the sites The signal dropped faster than expected, and relatively quickly they lost it. Now, the ministry is working on a plan with the operators, including broadcasters. The goal is for mobile operators to provide up to four hours of battery life to 85% of the population. There are discussions, debates, and significant investments to be made. The truth is that the telecommunications sector, while I don't deny that we could improve the service provided, didn't cause the problem that day. It also doesn't make much sense to ask operators to bear the entire cost of providing a much more redundant and robust service now. But it is true that the operators themselves understand the importance of keeping their customers as satisfied as possible, and that, putting aside that particular blackout, for shorter outages of two or three hours, it's beneficial to have greater battery autonomy so that customers don't notice. I imagine that in the coming weeks and months, additional investments will be agreed upon to gradually deploy batteries and support systems that will allow the mobile network to last a little longer.

Is 5G sufficiently deployed in urban areas?

— Most urban areas are reasonably well covered. There are still some areas where the network doesn't provide the required coverage and will have to work with [other areas]. small cillos. It's true that in some urban areas, due to difficulties with local councils and other issues, there is a lack of coverage. These are problem areas that we are trying to resolve. towercos and operators. When we reach 99.5% 5G coverage, 6G will arrive.

Is it premature to talk about 6G?

— 6G is projected to reach its standardization, frequency access, and auction dates by 2030. It's true that 5G hasn't yet been monetized to the extent that operators had hoped. 5G is a network with very high transmission speeds and, at the same time, very low latency; that is, the delay between a network query and a response is practically nonexistent.

Is it progressing as expected?

This monetization isn't progressing at the pace operators expected. Therefore, I imagine operators will try to postpone 6G deployment until it makes economic sense, as they need to recoup a significant portion of their 5G investment. But the technology will be patented and ready, I imagine, by 2030. Equipment manufacturers will then try to promote its advantages, and as always with technology, we'll reach this duality: governments want to collect more taxes from spectrum auctions, operators will initially resist, but then the fight will begin... 5G. We'll probably be talking about 6G between 2030 and 2033.