Cellnex shifts from expansion to debt in credit rating upgrade quest

By Joan Faus

BARCELONA (Reuters) – Spanish phone tower operator Cellnex said on Friday its near-term priority is to get a credit rating upgrade from S&P rather than seek further expansion as it adopts a “more conservative financial risk profile”.

After borrowing to build the largest cellphone mast network in Europe, mainly through acquisitions, Barcelona-based Cellnex is focused on its debt in a higher interest rate environment.

“The next chapter of our equity story (will be) focused on execution and clear capital allocation framework,” Chief Executive Tobias Martinez told analysts, adding that was adopting an “increased focus on organic growth”.

Cellnex, whose shares were up 2.3% at 12.10 GMT, said it was committed to obtaining an investment grade BBB- rating from S&P credit agency, an upgrade from its current BB+, and to maintain its BBB- rating by Fitch.

It expects to obtain this upgrade within 12 to 24 months, which should help it access a larger market with competitive rates, Chief Financial Officer Jose Manuel Aisa told analysts.

“We have an elevated debt level, markets are not like they were six months ago, so given Cellnex’s maturity … that leads us to request an investment grade,” Aisa earlier told Reuters.

He ruled out any plans to enter the United States by Cellnex, which is present in 12 European countries.

Cellnex’s net financial debt rose to 17.1 billion euros ($17.52 billion) from 14.3 billion in June. Aisa attributed the increase to financing for the acquisition of Hong Kong-based CK Hutchison’s British assets, while stressing the company is well-equipped to pay back its debt.

The Hutchison operation cut Cellnex’ immediate liquidity to 4.3 billion euros from 7.6 billion euros in June, Aisa said.

Asked about Cellnex’s plans for this, Aisa said: “In this moment, we have no liquidity (plans) for projects, but to secure the investment grade (rating)”.

Cellnex also reported a 45% rise in nine-month core earnings, benefiting from its 2021 expansion and 46% revenue growth, but slightly lowered its full-year guidance.

Aisa said the outlook change was due to a delay in closing the CK Hutchison purchase, which it expected to have completed by June and was completed on Friday.

It now expects 2022 EBITDA of 2.61-2.66 billion euros versus a prior estimate of 2.65-2.7 billion.

While earnings before interest, tax, depreciation and amortisation (EBITDA) jumped to 1.94 billion euros ($1.97 billion), it reported a larger net loss of 255 million as its amortisation costs rose 52% and financial costs from acquisitions rose 28%.

Cellnex expects 2022 revenue of 3.405-3.455 billion euros versus prior estimate of 3.46-3.51 billion. In January-September, its revenues reached 2.6 billion euros.

Its 2025 outlook remains unchanged, with EBITDA forecast to exceed 3 billion euros and revenues to be above 4 billion.

($1 = 0.9849 euros)

(Reporting by Joan Faus; Editing by Andrei Khalip, Inti Landauro, Jane Merriman and Alexander Smith)