Corporate Issuer: Cellnex Telecom

IFR Awards 2019
9 min read
Owen Wild

Supermarket sweep

Cellnex Telecom’s position as the consolidator of European mobile phone towers was cemented in 2019 with several major acquisitions. But the Spanish company did not wait for M&A to issue equity, instead taking opportunities when they arose. Cellnex Telecom is IFR’s Corporate Issuer of the Year.

In the world of equity capital markets, working on one capital raising for a client every few years would make for a highly valued relationship; anything more frequent would likely be well remunerated but would point to a slim chance of the client being there in the long term.

Cellnex Telecom is the rarest of clients, then, as a highly acquisitive company where the purchases are sufficiently transformational that it needs to use equity alongside loans to keep its balance sheet in order. Such deals came thick and fast in 2019.

When Spanish infrastructure group Abertis floated its telecoms tower business in 2015 the pitch was that the European market was on the brink of a period of consolidation already seen in the US. Mobile network operators (MNOs) would free up investment by selling off their towers and Cellnex was positioned to buy.

Investors bought into the idea but progress has not always been as quick as Cellnex would have liked. Having built a presence in six European countries in previous years, 2018 was quiet and the company did not make any significant acquisitions.

Instead, Cellnex fell back on smaller measures to drive growth including a cooperation agreement on 5G with Fastweb in Italy, a €34m acquisition of a fibre-optic company and a partnership with Bouygues Telecom in France to deploy 88 new towers.

The steady progress was shown in a share price that rose just under 5% through the year.

But management was working hard in the background and in early 2019 began talking about an €11bn investment pipeline.

“At the start of the year we had a feeling there was a lot to be done,” said Isard Serra Balague, head of corporate finance at Cellnex. “The capex needs of MNOs means that, where it was previously tough to talk to some operators, now they are more available … and thus ready to talk to neutral and independent operators like us.”

As a result, Cellnex in 2019 has massively expanded its presence in Italy, France, Switzerland and the UK – and entered its seventh country, Ireland.

At the start of 2019, Cellnex had a few hundred sites in the UK, by year-end it had around 9,000, thanks to a modest deal with BT, owner of the largest operator EE, and the £2bn acquisition of Arqiva’s UK operations in October, which alone added 7,400 sites and marketing rights for 900 more.


Where Cellnex has marked itself out in a capital markets context is in the timing of its fundraisings. Its €2.6bn-equivalent syndicated loan in July and £2bn loan in October were tied to acquisitions but it took a different approach to equity issuance.

In the first week of January the company tapped an outstanding convertible bond for €200m. Considering the company would issue £4.75bn of equity-related paper and acquire 24,000 sites across Europe in 2019, it rather suggests even Cellnex management was surprised by its subsequent acquisition activity.

But Cellnex had seen an opportunity when its shares rallied and was keen to use the equity-linked market when possible.

“We are big fans of convertible bonds. We measure cashflow per share so if we can increase that through a CB we will take that opportunity,” said Serra.

It was therefore no surprise to see Cellnex back with an €850m nine-year convertible in June on which it pays a coupon of just 0.5%. A premium redemption structure meant the yield to maturity was 1.4%, but Cellnex was relaxed about that as it also meant the effective conversion price was at an 85% premium.

Convertible buyers are not too fussed about clear use of proceeds but it is different when it comes to issuing straight equity. It was a test of trust in management when Cellnex launched a €1.2bn rights issue in February with no specific use of proceeds. Ultimately the company was looking to reduce leverage before going shopping again.

Core shareholders ConnecT and CaixaCorp backed the deal with their respective 29.9% and 6% holdings, and total demand was a staggering €20bn.

The rights issue completed in March and by May Cellnex had secured a bumper acquisition of 2,800 towers from Salt in Switzerland and towers in France (5,700) and Italy (2,200) from Iliad. The initial investment was €2.7bn with a further €1.35bn to come with the roll-out of 4,000 more locations.

“The Iliad transaction gave us credibility as we moved quickly following the rights issue. We had said we would deploy it within 18 months,” said Serra.

The Salt and Iliad transactions accounted for €4bn of Cellnex’s projected €11bn of opportunities in its seven markets. That does not include potential in new markets, such as Germany where Deutsche Telekom is set to sell off infrastructure.

“Cellnex seizes the right windows and pushes its bankers,” said one banker involved in several trades in 2019. “[Management] is smart rather than sophisticated – try something too complex and you miss the window. They have done it brilliantly.”


There are two crucial features that have allowed Cellnex to grow so fast and investors to see the many acquisitions as low risk.

Cellnex’s model is to take infrastructure that is typically tied to one operator and open it up to all. As a result its growth is not constrained by competition concerns.

For example, prior to the Salt acquisition Cellnex operated 2,339 sites in Switzerland through its Swiss Towers subsidiary that is co-owned with Swiss Life and Deutsche Telekom. Once Cellnex agreed to acquire Salt’s 2,800 sites that put 45% of the country’s towers in the company’s control.

“This is about sharing, sharing and sharing. And again, being neutral, being open, no restrictions – this is the key,” said CEO Tobias Martinez Gimeno on Cellnex’s third-quarter results call. “This is the reason why we are growing constantly – at 4%, 5% on organic growth.”

The other reason is that these are critical assets for the sellers and they do not want any risk from the transition. As a result there are typically new companies created to run the infrastructure and control is taken over time. The acquisition from Iliad in France saw a new company created split 70:30 between Cellnex and Iliad, with Cellnex taking complete control over 12–18 months. In Switzerland, Cellnex initially owns 90% of the SPV taking the Salt towers. This also allows the central Cellnex operation to remain lean even as the company grows.

There seems to be little doubt in investors’ minds about both the wisdom of the acquisitions and the ability to make them deliver. Cellnex’s shares ended 2018 at €19.7342 (adjusted for rights issues) and had already gained 15% by the time its €1.2bn rights issue closed in March. The Salt and Iliad transactions were announced together in May and triggered an 11% rise in the shares over two days and in early June Cellnex shares had gained 50% since the start of the year.

Cellnex’s shares peaked at a close of €41.33 in mid-October shortly after the Arqiva acquisition, more than double where they began the year.

A €2.5bn rights issue was announced alongside the Arqiva acquisition to refinance the £2bn syndicated loan initially put in place.

“Arqiva exclusivity came in July and then we were back for another €2.5bn. This time we could do equity with a deal and raise more than we needed to avoid coming back again,” said Serra.

A measure of how Cellnex's share price has developed through the year is that both rights issues represented a 29% capital increase at a 20% TERP discount, but the second raised more than double the first.

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