Vantage Towers : Earnings Document

Vantage Towers Q3 FY23 Trading Update Live Q&A

Tuesday, 31st January 2023

C2 General

Vantage Towers Q3 FY23 Trading Update Live Q&A

Tuesday, 31st January 2023

Q3 FY23 Trading Update

Vivek Badrinath

Chief Executive Officer, Vantage Towers

Welcome

Good morning everyone and welcome to our analyst call regarding our quarter three results for the financial year 2023. Before we jump into Q&A as we are in the middle of a process, I thought I should share a quick update on where we are at on the voluntary takeover offer.

Voluntary Takeover Offer

There was an initial acceptance period that ran up to 10th January and at the end of that period the takeover offer had been accepted by approximately 7.17% of the share capital. That takes the total tendered percentage to just short of 89%. The additional acceptance period ended last Friday, 27th January and the final number of Vantage Towers shares tendered under the takeover offer will be published tomorrow on 1st February once the confirmation of the final outcome has been established. There are two banking days of counting that need to be taken into account. Hence the result will be issued tomorrow on 1st February. I do not have the number as of today.

To reiterate, our joint reason statement in December both the management board of Vantage Towers and the supervisory board consider that the offer at €32 per share is fair and reasonable. We recommended jointly with the supervisory board that the shareholders should accept the offer. That is on that process.

Q3 FY23 Results

For today we will be covering our Q3 results and I will just give a quick summary of what they entail. First of all to say I am very proud of the team through all this period where there is change in the shareholding. I think the focus of the organisation on delivery has not changed and there has been a lot of consistency in the behaviour and in the delivery of the teams. You can see that in the three themes that we bring forward quite diligently at every quarter in front of you.

The first one is commercialisation, Commercialisation continues. In Q3 we added another 440 net new tenancies and in the first nine months that totals up to 1,150 net new tenancies. We also increased our commercial footprint and further ancillary revenue opportunities as the other theme in our commercial activity. Some coverage solutions, some fixed wireless access and some fibre across our markets. Furthermore, we have sustained our new build momentum. We have added another 260 new macro sites in the quarter. Year-to-date we have added 660 new macro sites, of which 410 were in Germany.

We have been discussing the ramp up of our build-to-suit programme across our footprint and in particular, in Germany. We are really proud of what we have achieved so far. The momentum is strong. The actions that we put in place are yielding results and indeed for me a big source of pride is first of all the arrival and appointment of our new Managing Director for Germany, Kai Uebach, and also the standing up of the regional organisation which is taking accountability very deeply on delivery. That is showing the benefits in our macro build.

Our GLBO programme continues to show strong progress, 1,800 signed contracts and commitments across our footprint since inception. That is pretty much 40% of our GLBO

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Vantage Towers Q3 FY23 Trading Update Live Q&A

Tuesday, 31st January 2023

target which was to aim for 10% of the consolidated portfolio of our macro sites. Good interest from landlords, ongoing negotiations and an increase in the number of GLBO sites. This delivers a Q3 revenue increase of 4.8% year-on-year excluding pass-through to €264 million, mainly driven of course by the inflation escalators on one hand and the tenancy growths that we observe. Overall, in nine months we have seen a growth of revenue excluding pass-through of 5.6%.

On the back of this quarter, we are confident towards the upper half of our fiscal 2023 guidance and we remain on track to deliver our medium-term targets. As a reminder our fiscal 2023 guidance is as follows. The group revenue growth between 3% and 5%, adjusted EBITDA after leases of €550-570 million, recurring free cash flow of €405-425 million, and hence what we are stating today is that we are confident towards the upper half of these guidance ranges.

With that said, happy to open the floor to questions and as ever let us try to target a question per person so that everybody can speak. Thank you very much.

Q&A

Robert Grindle (Deutsche Bank): Good morning to you both, hopefully this is not the last time we see you in a format like this. Many thanks for the update on the take private offer. My question beyond that was please could you comment on the supply chain issues that weighed on your deployment last year? Are these firmly in the rear-view mirror or is it still a challenge looking forward? Also you mentioned in the release fibre as part of your ancillary revenues. Please could you expand on that? Is this a very country-by-country opportunistic thing or is there something growing more material versus your expectations at the IPO? Thank you.

Vivek Badrinath: Thanks Robert. On the first point it is a journey, but we have identified all the issues and we are knocking them off one after the other. That is what we have been doing and that shows in the ramp up. Supply of steel, procurement, warehousing in place and ramping up. Now that you have got a warehouse and you bring in material upfront you need to then deploy it on a variety of locations. There is a bit of lag time. Why? Because the new standardised towers can only be put in places where you have applied for the permit that is for those standardised towers. However, that is now flowing through the system. What we are seeing is those measures, even if they have got a lag they are working. They are moving through the numbers. We see that also with the regional organisation. Actually, it is one of the interesting realisations for me is that the soft part is as important as the material part. Once you have got strong people, and we have really staffed well I would say in the German organisation with strong regional leaders with teams fully in place, you see the moment increasing dramatically. That is what we see in terms of ownership of the targets and delivery of the numbers. I would say the plan is working. It is still a ramp up. There are still things to be locked in, etc but the plan was right. That is the realisation I have on this.

On fibre to your question, it is country-by-country. I would not call it opportunistic. The logic behind it is that we look for the most efficient way to enable our customers to have fibre on the sites. Why? Because over time as they move towards 5G when bandwidths go up it is part of the attractiveness of our sites. However, we do not build fibre as a way of deploying capital. We build fibre over the limited distance that is required to reach a fibre rollout that

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Vantage Towers Q3 FY23 Trading Update Live Q&A

Tuesday, 31st January 2023

could be nearby or in the vicinity. The purpose is not to sell fibre, the purpose is to ensure that fibre comes to our sites. In many cases these are resale agreements that we sign where we essentially enable our customers to connect to a fibre provider who is present in that region or it could be a little stretch of fibre just to get to a point of presence. That is the approach. Of course, we want to get paid properly for it and essentially recover profit on it but it is not the core focus. The focus is that a site should be fibre-ised.

Robert Grindle: Thank you.

Vivek Badrinath: Thanks Robert.

Maurice Patrick (Barclays Capital): Hi guys, hopefully you can see and hear me in my glory with new glasses as well. A sign of age. Maybe a question from me on the German site build and tenancy growth. You have talked about building 410 sites year-to-date and there is obviously lots of noise in the market about the new entrant building its network. I think 1&1 have had limited progress so far. There is also a big focus on white spots development. I am curious to understand on your site build so far in Germany in the last quarter or so how much is rural versus urban? Where is the tenancy growth coming from? Should we think about an acceleration of total site build in calendar 2023? Thank you.

Vivek Badrinath: We are ramping up and we indeed need to increase the run rate as we go forward to deliver our full build-to-suit commitment. On 1&1 and I am sorry that you have to bear with us on this, we are bound by very tight confidentiality agreements with the United Internet Group and 1&1 in particular in terms of not being in a position to disclose the exact numbers in any way. What is fair to say is that they are very different subjects. White spots is more rural sites that are typically hard to reach, mainly GBTs. 1&1 is more urban and it is essentially colocations on existing sites, typically rooftops and a certain number of ground based. These are two very different questions to address. As Thomas had said in the previous quarters, we have put investment in these two areas and they are both progressing. They are generating a lot of activity for us.

Thomas Reisten (Chief Financial Officer, Vantage Towers: Yes. I think it is absolutely fair to say that this investment that we have been talking about already before we were entering into this fiscal year and have reaffirmed and discussed at the half-yearresults as well, they actually are helping us to continue to drive this acceleration that we see in Germany as well. Consequently, you see actually revenue increasing in Germany strongly as well on the back of this investment.

Maurice Patrick: Great, thanks.

Sam McHugh (BNP Exane): Morning guys, just a very quick follow-up on Ireland and the National Broadband Ireland deal. What exactly are you doing in fibre for them? Is that a fibre to the site or small parts of FWA for their network? Is this a different fibre agreement in Ireland with NBI? Thanks.

Vivek Badrinath: Okay. I do not know how much detail we have given on that but it is basically working with NBI to ensure that the fibre that they roll out can be supporting fibre to the site on some of our sites. That is the idea.

Sam McHugh: Okay.

Thomas Reisten: Connection of their network.

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Vantage Towers Q3 FY23 Trading Update Live Q&A

Tuesday, 31st January 2023

Vivek Badrinath: Yes, it is their network to ours.

Thomas Reisten: To ours.

Sam McHugh: Yes. Okay. Rather than you building fibre for them it is them providing backhaul for your sites. Got you, super clear. That is all I had. Thank you.

Vivek Badrinath: Thanks Sam.

Jerry Dellis (Jefferies): Good morning everybody, thank you for taking my questions. Just to specify on Germany, I think as I look at Visible alpha consensus looking for 400-500 site build in the fourth quarter now and maybe 1,300 in the next fiscal year, are those numbers tenable as you see things please? Then maybe if we could just delve into the 1,150 tenancy adds in the nine months please, are you able to specify what sort of proportion of those are mobile network operators hosting on your macro sites and what proportion of tenancies are other things, adjacent services or fixed wireless access or something that might have a different economic profile? Thank you.

Thomas Reisten: I think on the tenancies first the overall mix remains actually a very healthy mix between MNO and non-MNO customers. We do get really good additions from an MNO point of view obviously in that context as well which is reflected in our tenancy ratio increase. Obviously, we are now at the 1.45x versus the starting point of 1.39x so we continue to grow towards our target of passing the 1.5x and that remains. Back to your question, they are really a very strong point across the different mix of MNOs on the one hand and non-MNOs as well.

Vivek Badrinath: Visible alpha doing a pretty complex tracking of our KPIs on a quarterly basis. We read point but directionally the German growth is real. It is strong versus last year and we continue to ramp up. We know we have a ramp up to do. The numbers for next year we are still building them out but it is fair to say that the basis is very different from the one we had in the beginning of this year. We know very clearly where we have to take the numbers to deliver the whole plan and we have reconfirmed first of all this year's guidance towards the upper end and secondly our medium-term guidance. That should tell you where we are.

Jerry Dellis: Thank you.

Thomas Reisten: We are in the ramp up period and continue to obviously invest in that as well. That is an important fact to consider in that context. Even when you read obviously our guidance now as being confident to achieve towards the upper half of it, we are not changing the way that we are actually running the business in any shape or form. We continue to invest into the acceleration of the growth which is really important obviously in the context of your question in achieving future growth rates. Consequently, what you actually see coming through on the revenue side is not that we are out of the ordinary, halting on investment or opex spend, pausing on that, that is not the case but we do get benefits from a number of areas. I have been talking about this already at the half-year results as well. Obviously with the growth accelerating you would see the investment for that specific growth coming in earlier than the revenue return. The returns then come in as a consequence of that. That is what you see now pushing strongly through our overall expectations then as well. In that context that is actually what is driving then as well the confidence towards the upper half.

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