Cellnex Earnings: Southern Europe Keeps Driving Organic Growth; CEO Succession Nears Conclusion

Narrow-moat Cellnex’s CLNX first quarter results included 6.8% organic growth in points of presence (6.0% last quarter), with revenue from build-to-suit and co-locations growing 7.8%. Italy, Spain, and Portugal, which represent one third of Cellnex’s portfolio, continue to increase tenancy ratios at a very healthy clip. Since last year, Spain has expanded its tenancy ratio by 3.5%, Italy by 5.3%, and Portugal by 17%. These three markets highlight how important competition among mobile operators is for tower companies, as they all count four or more mobile operators and are competitively intense, which results in more radio equipment being deployed at towers by operators. Remainder geographies’ tenancy ratios all remained stable. Lease payments came in at 28% of revenue, as the timing of lease payments is usually more concentrated in the first half of the year. We are maintaining our EUR 52 fair value estimate.

The CEO succession plan is ongoing, but Cellnex confirmed that the process is nearing its conclusion. TCI Fund Management, an activist hedge fund that has been pushing for board changes and now holds 9% of Cellnex shares, has gained a board seat. According to reports from newspaper Cinco Días, TCI is pushing for Marco Patuano, former chair of Cellnex’s board, to be the new CEO. Cellnex has hired an international search firm to help the succession, which makes us think none of the internal candidates will get the position. Internal or external, we believe it’s important that the new CEO has experience in the industry and a long-term focus.