In the wake of the mass roll-out of mobile networks and the associated investment needs of mobile network operators, Cellnex in 2015 began a journey to become Europe’s first independent wireless telecommunications infrastructure operator and one of the leading stocks of the last five years.
Seven years later, it manages more than 130,000 telecommunications sites —including forecast roll-outs up to 2030— as a neutral operator in 12 European countries and plans to extend its business to other network-related assets that offer high growth prospects.
When Cellnex designed its IPO strategy, telecom operators faced stiff competition, with shrinking margins, rising debt, and at the same time, a need to invest heavily in their networks. Purchasing spectrum, 5G technology and differential content required a heavy financial outlay for these already highly indebted companies, and liquidity became vital for their future.
Previously considered an untouchable asset, telecommunication towers gradually became one of the clearest options for monetisation. Similar to a sale and lease back, many operators went from being owners of their passive infrastructures to tenants, providing them with cash and savings on fixed maintenance costs for these unique “properties” which also became accessible to other operators through a neutral TowerCo, maximising their profitability.
And it was here that Cellnex emerged as the ideal partner. As an expert in the purchase, management, rental, maintenance and operation of these infrastructures, the company has become a European leader with a market value of over €25 billion. Today, it would be hard to find a single European operator that has neither sold nor considered a segregation or alternative strategy to monetise its passive infrastructure.
Having demonstrated the benefits of neutral TowerCos and in light of the demanding and changing dynamics of mobile networks, Cellnex aims to go one step further in the telecommunications infrastructure value chain.
“The tower business model is evolving, with new increasingly important revenue streams”, stated Credit Suisse in a recent report on the sector and the role of neutral operators.
In addition to towers, there are other vital communication elements that require investment and maintenance and provide an additional return, which can give rise to a new transformation of the sector with asset segregation.
“The new technologies, particularly 5G, are giving rise to new needs around the tower that have started to drive other types of business such as connecting fibre to the towers”, explains Cellnex Global Commercial Director Oscar Pallarols.
“This asset is still very similar to a tower, although underground in this case, and with which we can provide independent service to several operators.”
Around the tower there is a universe of technology-related assets that can be shared by applying a similar economic rationale. As well as fibre-to-the tower, neutral operators can also access “the other end of the cable”: data centres. Returning to the real estate simile, under their management, these can become a kind of “co-working” space in which to accommodate several operators who no longer have to worry about installation or operating conditions.
Although mobile operators have been sharing access networks for years, these are barter agreements within non-flexible models based on sharing costs and facilities among competitors.
“A company like Cellnex can facilitate and allow more flexible and sustainable sharing agreements that guarantee long-term competition, service and visibility,” explains Pallarols.
A company like Cellnex can offer services like edge computing and rolling out more transmission networks for operators. It has spent years building long-term relationships with companies that are more like partners than customers, and who on various occasions have decided to share expansion projects in a business requiring constant investment and innovation.
“In many cases we have committed much more capital to our customers than some of their shareholders, and in 30-year contracts. The customer asks us for solutions beyond towers, and often this has been a facilitator of diversification owing to the long-term relationship of trust,” said Pallarols.
The ongoing investment in innovation and its role in the management of technologies ranging from DTT to emergency networks are a value-added factor for Cellnex, which has proven its efficiency beyond towers with diversification in projects related to Smart Cities, IoT (the Internet of Things), public transport networks, private networks for industries or with DAS and Small Cells technologies in high-density environments.
“Our experience in managing different types of networks and the agreements we have reached with various customers in Europe endorse our work in this wider business model,” added Pallarols.
“The way technologies are advancing, it is no longer sufficient to transmit from the top of a mountain or the roof of a building. All new technologies are moving to higher frequencies that require hundreds and thousands of new transmission points.”
Some of these points can even be installed in urban locations as varied as a lamp post, an urban litter bin or a bus shelter, which Cellnex is already testing through its participation in a pioneering project in Dublin.
As part of this diversification from the traditional “TowerCo” towards the “Augmented TowerCo”, Cellnex took a decisive step last year through an acquisition agreement with the Polish company Polkomtel Infrastruktura that combined passive elements (towers) with active ones such as transmission equipment, radio links and fibre. This agreement may be the precursor of a trend towards networks managed by a neutral operator.
“We believe that our model beyond passive infrastructure management may be the new trend. The commoditisation of passive infrastructure makes the management of active infrastructure a natural step to continue adding value to our customers.”
Journalist and Founder of Newsbub