Infrastrutture Wireless Italiane SpA Q3 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Roshan Ranjit - Deutsche Bank AG - Analyst : Great. Diego, you mentioned 2024 being the low point of growth. And whilst we recognize the commitments that you have from your two anchor customers, what can you say to us to suggest that it will pick up in '25? You highlight the need for investments but also the kind of budgetary constraints so you previously said '24, 2,000 anchor adds, PoP adds. Is there a number you could give us for '25, what number should we be looking to for '25? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 06, 2024 / 9:30AM, INWT.MI - Q3 2024 Infrastrutture Wireless Italiane SpA Earnings Call And secondly, if I just quickly ask on the lease costs, lease costs were down 3% year-on-year. I think it's the first time we've seen the lease cost down after a few quarters. That is despite you kind of having a low number for the site negotiations. So is there anything else going on there? Or is this now the benefits of having negotiated previous sites with the kind of inflation environment stepping down?

Question: Roshan Ranjit - Deutsche Bank AG - Analyst : That's helpful. Diego, if I may push you a little how many kind of anchor PoPs should we be thinking about then? Should we see an acceleration from the 2,000 for '24 when we're looking at the number for '25?

Question: Maurice Patrick - Barclays PLC - Analyst : A question on the OLO growth, please. I mean in your slides you helpfully showed the number of OLO PoPs and revenues, you say in the slides about how FWA is soft and you talk about some of the smart grid being positive. But can I just -- and in the text, you also talk about why the revenues are down 6% being a lower project and install work. But can I just check we're not seeing negative as in disconnections from FWA? Is it more FWA is flat and it's just the mix at all that the net adds are coming from smart grids, for example, rather than FWA actually reversing going negative. Can I check that, please? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 06, 2024 / 9:30AM, INWT.MI - Q3 2024 Infrastrutture Wireless Italiane SpA Earnings Call

Question: Maurice Patrick - Barclays PLC - Analyst : If I could just maybe just ask as a follow-up to that. When you think about the next couple of years and the growth in the OLO. I mean, do you -- the things like the EMFs, the radiation law changes, does that maybe change how you think about the growth potential in OLO from other PoPs? Do you see this kind of strong growth out there for identification? Or is that demand still there? Just your thoughts in terms of maybe next couple of years for the OLO side would be helpful.

Question: Andrew Lee - Goldm - Analyst : Thanks, Diego and team in terms of helping us understand the kind of phasing and your confidence in the network operator demand coming back. I just wanted to follow up on your -- what's driving that confidence in terms of the commitments you're seeing from the network operators. So just to give us confidence that this is just a timing/phasing issue you're facing in terms of this -- the demand driving revenue. And there's not maybe some underlying slacking that demand for whatever reason? And then just as a follow-up question, could you just help us understand how confident you are in the timing of the reacceleration in demand, specifically pertinent to your 2026 guidance? Yes, give us a sense of your confidence that this is going to be coming back in the coming quarters and, therefore, not posing any risk to your 2026 outlook.

Question: Ondrej Cabejsek - UBS AG - Analyst : I've got maybe a question also related to the (technical difficulty)

Question: Ondrej Cabejsek - UBS AG - Analyst : Hello, apologies. I had a issue with my headset, apologies for this. Can I ask your question?

Question: Ondrej Cabejsek - UBS AG - Analyst : Sorry about that. So I wanted to follow up on the kind of target discussion around 2026. So with respect to inflation, say, we're obviously tracking below in 2024 and then say this continues with inflation kind of below the embedded targets in your guidance, call it, 1%, then we're looking at a deficit of EUR10 million to EUR15 million from EBITDAaL and obviously, there will be some offset on the lease side. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 06, 2024 / 9:30AM, INWT.MI - Q3 2024 Infrastrutture Wireless Italiane SpA Earnings Call But just how confident are you that the 2026 guidance where consensus is already at the very low end, I guess, if we continue to track at lower inflation around current levels, how confident are you that there will be some offsetting factors or that you are able to generate new revenues that we will get to the guided range in 2026?

Question: Fabio Pavan - Mediobanca Banca di Credito Finanziario SpA - Analyst : Just a follow-up on new service revenues. Clearly, there has been an acceleration in quarterly growth in 2024. What we should expect for next year? And eventually, you were focusing on the vertical transportation. Are there any projects already ongoing issues? If you could give us some more color on this.

Question: Milo Silvestre - Equita SIM SpA - Analyst : I have a question concerning capital allocation. Here, if you can remind us what are the priorities between shareholder remuneration, let's say, external growth or also acceleration of investments, I think, about land payouts. And then if you are considering investments or M&As in new verticals such as maybe data centers?

Question: Luigi Minerva - HSBC Bank - Analyst : It's a follow-up on the previous one. And particularly, I wanted to check when it comes to your capital allocation decisions, given that the current shareholder distribution pretty much absorbs all the free cash flow generation, whether at current rate condition, you would -- it would make sense for you to issue a bond in order to leverage up? And then at that point, I suppose, depending on the cost of funding, how will you benchmark the returns on a share buyback versus the signaling benefits from a higher recurring dividend versus, yes, potential growth investments as you were suggesting in the previous answer?

Question: Luigi Minerva - HSBC Bank - Analyst : Okay. Diego, that's helpful. And perhaps as I have you on the line, can I ask you still a bond-related question, but on a -- with a different angle. And I just wanted to check whether the 2026 -- the bond maturing in 2026 has any change in control clause that would limit actions from your leading shareholders, so Vantage and Ardian? So just theoretically, whether a take private scenario is limited by the covenants in the 2026 bond?

Question: Luigi Minerva - HSBC Bank - Analyst : Okay. So it wouldn't limit the actions of your shareholders? There is a put option? Is this correct?

Question: Usman Ghazi - Joh Berenberg Gossler & Co KG - Analyst : Just one quick one, please. In your capital allocation framework when you're assessing opportunities that are close to core, I mean would just be interested in how your view is evolving on what is actually close to core, if over the few months that you've been considering this if your view has changed on that front? And just related to that, this -- the transaction of Boldyn on the Roma project, do you have an understanding of how much that will contribute and in what time frame, please?

Question: Fernando Cordero - Banco Santander SA - Analyst : In that sense, I would like to ask about the behavior of one of your two anchor tenants, after exiting from the -- in the case of Vodafone, after exiting in Spain, we have seen how the new owners of the former Vodafone operations are challenging the contract with Vantage. Vodafone has also agreed to sell the operations in Italy. How comfortable are you with your current MSA with Vodafone or in other words, which extent the risk of this renegotiation of the MSA with Vodafone in Italy is under control? And the second one, really, let's say, detail, just to understand the performance of the ground leases. We have seen a material increase in leases cost due to the OpEx, EUR5 million in the quarter. Just to understand if that is a reclassification of the ground leases into short-term contracts? Or what is the reason for this increase in order to have the whole view on the performance on ground leases.

Question: Giorgio Tavolini - Intermonte Partners Sim SpA - Analyst : I have three follow-up on the major strategic initiatives. I was wondering on RAN as a service, I mean, without spoiling details of your upcoming Capital Markets Day, is it reasonable to exclude any upside or I mean any announcement on these initiatives given that TIM new business plan will be presented in mid of February and faster the Vodafone deal will be closed in Q1. So I would exclude any real news on this front? The second point -- the second question is on data center. We saw many telco players that are looking to expand into data center infrastructure and regional data centers. So I'm curious if there is enough space for new entrants in this sector in Italy, and what are the potential returns you may REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 06, 2024 / 9:30AM, INWT.MI - Q3 2024 Infrastrutture Wireless Italiane SpA Earnings Call see? And the last one on the Roma 5G initiative. We recently read about building network interest to cover other major cities in Italy. So I was wondering if you expect to replicate a similar target in other cities?

Question: Rohit Modi - Citigroup Inc - Analyst : For guidance, to 2026 guidance. I understand you have around EUR130 million of -- on the lower end you have EUR130 million of revenue increase that translates into almost EUR120 million of EBITDAaL increase based on the guidance but just want to understand what will be the other underlying factors given -- assume you have a positive exit for 2024 working capital if there's a phasing effect that could have a negative impact going forward, plus you might have higher taxes. So if you can just give a bit more color around what is the bridge from '24 to '26? And secondly, on the new services, can you confirm the profitability on the new services similar to your core infrastructure business?