Cellnex launches new land grab

The passive infrastructure specialist announced its intention to move into land acquisition at its Capital Markets Day last month, but the news was somewhat overshadowed by its deal to sell its Irish business to Phoenix Tower International.

But speaking after the firm's annual shareholder meeting, CEO Marco Patuano – presiding over his first such gathering – apparently told the Spanish press that it has set up a new subsidiary to buy up land and rooftop locations. Furthermore, according to El Economista, which shared a logo, once up and running the new business will be known as Celland.

It's hard not to imagine some sort of mainland European theme park centred around telecoms towers, conjuring images of scores over-excited children queueing to ride the Mobile Mast Blaster 3000 or some such. But the reality of the situation is much less fun. In fact, it's highly sensible.

By buying up land, Cellnex can predict and control the cost of leases, which, as it explained back in early March, will form part of an efficiency plan designed to help it improve its EBITDAaL margin by 500 basis points to 64% in 2027.

The dedicated vehicle, which we now know as Celland, will buy up land in selected countries, initially focusing on 10,000 sites, Cellnex said.

El Economista added more colour, citing unnamed sources as saying at the outset the business will cover Spain, where it will be headquartered, plus Italy, France, Portugal and Poland. It has yet to decided whether to wrap its existing parcels of land into Celland – Cellnex owns the space in which 16,000 of its towers are located, leaving 96,000 still on leased land – or to start from scratch with newly-bought land; the latter option is beneficial from a tax point of view, the Spanish paper explained.

It's a business model that is already prevalent in the US, where infrastructure companies own between 50% and 70% of the land on which their masts are located, it added.

Its sources note that the costs of buying the land would be equivalent to a 10-year rental deal. While that seems like a big outlay, the firm is currently mainly signing up to 25 to 30-year leases, so there is value in buying, beyond the obvious benefit of shielding the company from inflationary pressures. It will also help the company sidestep the growing practice of land aggregators buying plots of land on which masts are located and then reselling the rights to towers companies, the paper said, noting that this is an issue for Cellnex in France in particular, with the risk of Spain following suit.

Celland will also look to broker deals for rooftop sites. It would be willing to pay in the region of €400,000 to groups of building owners for 20-year leases for use of the rooftop, the paper added.

All in all, the new landgrab seems like a good solution for Cellnex, despite the fact that it means getting the chequebook out again.

The company has worked hard to shed its image as a high-spending expansionist, having shifted to an organic growth focus some 18 months ago, a period which has seen it bring in a new chairperson and CEO, and essentially look to keep shareholders happier; it reiterated its intention to pay out at least €3 billion to shareholders out of a €10 billion cash pot by the end of the decade at its shareholder meeting, incidentally.

That refocus has also seen the company move to divest non-core assets, including the aforementioned sale of Cellnex Ireland and last year's decision to pull out of private 5G with the divestment of Edzcom to Boldyn Networks. Next in line is likely Cellnex Austria, which has been up for sale for some time.

Cellnex's Q1 results late last week brought a small update on that score; the company expects non-binding offers in May and is already talking about an earlier distribution to shareholders following the sale of the business. The process is drawing strong interest from the industry, with Saudi Telecom and partner PIF having emerged as the most recent interested parties, but rumour has it they face a lot of competition, which has to be good news for Cellnex.

The Celland business also brings with it a monetisation opportunity. Last month Patuano noted that he has not ruled out bringing in minority investors, although there has been nothing further on that as yet. It could be a logical move, but with the business not due to be up and running until later this year, we could be in for a wait in that regard.

This is all a bit of a rollercoaster for Cellnex, but the company seems to be heading in the right direction.