Infrastrutture Wireless Italiane S.p.A. (INW) Earnings Call Transcript & Summary

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the INWIT Fourth Quarter and Full Year 2020 Financial Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Fabio Fini, Head of Investor Relations. Please go ahead, sir.

Good evening, everyone. Thank you for taking the time to connect to INWIT's Full year 2020 results presentation. With me today are Giovanni Ferigo, our Chief Executive Officer; and Diego Galli, our Chief Financial Officer. Before we begin, please allow me to draw your attention to the safe harbor statement on Page 2 of the presentation. The session will begin by discussing the key strategic and financial highlights of the year. We then move to an assessment of the current environment and near-term outlook. The presentation will be followed as usual by a Q&A session. Over to you, Giovanni.

Thank you, Fabio, and welcome, everyone. I would like to start from where we left in November when we shared the business plan and highlight again the key feature of the new INWIT. INWIT has the best quality assets in the market, which is a key competitive advantage. An ideal position to capture growth opportunities, the rollout of 5G and overall digitalization of society, 2 time won and Cortana in Vodafone, and an ultra loss role in the market translating superior organic growth in terms of revenues and free cash flow generation. A plan to reduce leverage progressively which will give us additional opportunity. In 2020, there is no doubt that we have grown up. We are better to capture the exciting opportunities that the market and industry presents, also in the framework of the next-generation AU. The look of the investment cycle is improving on digitalization, green transition, transportation and health care, a move to modernize the Italian economy in which INWIT plays a central role. And it has been a very busy year on all fronts. Moving to Slide 4. We deployed a new team, organization and governance structure since day 1. We invested in human capital and further align management incentives to the market. We made significant progress to separate our operations and back office home team. We signed several new commercial agreements. We changed our operational process to support the new MSAs and comply with the remedies and opening the Transparency Register. We also successfully entered the debt capital market for the time. Through this project, we consolidated the platform as an independent infrastructure player capable of playing a leadership role in enabling the digital transformation for tenants as well the other operators in the market. Looking at a summary of our solid results, Slide #5. We delivered a robust Q4 with an acceleration in organic revenue growth of over 3% compared to just under 2% in the third quarter. Hospitalities in the last quarter were a record high of 1,000, twice as much as what would achieve in Q3, and guidance achieving a total of 1,500 in the second half of the year. Further progress was made in the new services, small cell and DAS, bringing total new remote units for the year to more than 1,000. Cost optimization was very solid with more than 600 renegotiation and land acquisition in the quarter. I'm satisfied with this result, which meet the 2020 guidance, allows us to consider the dividend proposal of EUR 0.30 per share and a solid anchor point into 2021, and which give us confidence to confirm our midterm guidance. These results were achieved in a difficult context due to the pandemic, as you know. We didn't record any significant impact from COVID. Our infrastructure helps companies and individuals to better cope with their challenges, something that we are proud of. Now looking at our main KPIs on Slide 6. We are pleased with the development of the main KPIs, especially the step change in new hospitalities approximately 1,000 in the quarter. With new box more than doubling quarter-on-quarter, thanks to the progress in the common grid. Also, new ports with other parties were up 12% on a yearly basis when compared like-for-like with the end of 2019. This trend is driven by the prevalent role of the fixed assets and interesting growth for opportunity in the Italian market. There are several operators amplified the allow faster, thinker, which are our clients and are deploying without services to bring high-speed broadband in the low-density areas. As the next step, we are focused on improving the revenue mix through more MNOs. Also, because of the rapid increase in demand, we are also focused on shortening the end-to-end military delivery cycle. Another positive to underline is that our tenancy ratio is up to 1.9, one of the highest in the industry. We are very much on the right growth trajectory. Moving with the new services on Slide 7. We are making solid progress on new services with more than 1,100 new small cell and DAS remote unit in the year, up 33%, as compared with 2019 over the course of 2020. DAS advanced, especially in verticals, such as health and education. We entered the Industry 4.0 vertical with a highly automated Philips Morris electronic figures plant in Bologna. We signed a contract to make the new underground metro in Milan 5G ready, and we are ramping up the repeater business with over 1,000 bank branches covered as of December with the top Italian banks. We are confident about the outlook for DAS. There is a growing market awareness and demand from location owners. We are ready to capture the opportunity with the dedicated sales organization in place. Also, the next-generation AU funds are EUR 200 billion to support projects in ability for Harald related not only to 5G, but also to health care, education, public sectors, transportation, industry automation, which are all segments already in our track record and strategic focus. Now Diego, please, will discuss our financials in more detail.

Thank you, Giovanni, and good evening, everyone. I'm pleased to share with you the results for the new INWIT. We show revenue growth, strong profitability and strong cash generation. Looking at the quarterly figures, I would like to firstly draw your attention to revenues at EUR 190 million, up 2% on the previous quarter on reported basis. In organic, pro forma terms, we went up year-on-year from 1% growth in the second quarter to over 3% in the fourth quarter, allowing us to enter 2021 with an improving trajectory. EBITDA margin stood at 90% in the quarter, a touch softer than our standard due to specific items, but we confirm our expectation for a 91% EBITDA margin run rate to begin in 2021. Let's focus now on EBITDA net of leasing cost, which is the main performance indicator of our efficiency. Here, we recorded clear progress with the reduction of lease costs of 5.5% or almost EUR 3 million over the past 2 quarters, showing the strength of our real estate team and optimization programs. As we can see on Slide 9, these results translated into us meeting the guidance shared with you back in November. Revenues were in line at more than EUR 663 million, reflecting progress in terms of new point of presence and services. EBITDA was strong at EUR 604 million, and EBITDAaL was close to EUR 419 million, exceeding our EUR 415 million guidance. And let me highlight our remarkable margins, 91% at EBITDA level, and 63% of EBITDAaL level as a result of our high energy ratio, hence, high revenues per site, combined with a lean organization and low rental cost. I would like now to spend a few words on inflation, confirming that an inflationary environment as a benefit to our P&L. Thanks to our MSAs with Tim and Vodafone, which are 100% CPI-linked with 0% flow and no cap. In short, every 1% in extra inflation brings approximately EUR 5 million to EBITDAaL and recurring free cash flow. Interest are currently 60% fixed, and we are targeting to reach 80% fixed by year-end. Still a couple of clarification on financials. Total interest includes the IFRS 15 component and EUR 40 million of financial charges. Looking at the reported net income, it includes the effect of high amortization due to the Vodafone merger PPA. Excluding this item, the resulting adjusted net income would be approximately EUR 223 million or 35% margin. Let's discuss now on how we generate a significant amount of cash on Slide 10. In 2020, we reached recurring free cash flow of EUR 272 million, better than expected. A cash conversion of 45% is among the best in the industry already. However, let me remind that it will improve further to 60% in 2023, up to EUR 600 million in 2023 because of the strong organic revenue growth, of which more than 50% already committed, ongoing cost optimization and lower cash taxes. This cash generation profile translates into an attractive shareholder remuneration as per our recently updated guidance with a dividend per share of EUR 0.30 in 2020 and with a progressive growth of 7.5% per year. More on the financial structure on Slide 11. We reduced gross debt from EUR 4 million in Q2 to EUR 3.7 million in Q4, with a financial leverage of 5.4x net debt to pro forma EBITDA. As for the short-term evolution of leverage, please bear in mind that we will be facing 2 cash outlays in the first half of 2021 to the tune of 0.4 to 0.5x per year, driven by the EBITDA growth. In 2023, as shared in November, leverage is expected at 4.6x, freeing up around EUR 1 billion worth of resources, which will give us the flexibility to finance further growth either organically or the M&A or to return more cash to investors. Now on to the opportunities to optimize our tax profile. So on Slide 12, we laid out all the details of the tax optimization opportunities we take to allot additional value. First, we confirm the tax scheme announced in November, only EUR 2 billion worth of goodwill coming from the merger with a benefit of EUR 150 million NPV. This is already included in our business plan. Second, the recent budget flow in Italy has created an additional opportunity, which applies only to assets and goodwill as at the year-end 2019, which amount to EUR 1.4 billion. This is another way for us to create value that we are applying to the full extent. In this case, the advanced payment is 3%, meaning EUR 42 million, and the benefit is in 18 years. We are talking about an IRR of over 80% and EUR 200 million NPV over the period. There are all the details in the slides. Let me just highlight that the total net cash benefit of more than EUR 600 million or around EUR 350 million in net present value terms. In conclusion, from my perspective, in the last 9 months, we have delivered the revenue acceleration. We have rapidly realized significant ground lease cost reduction. We have optimized the financial structure with 2 successful bond issuance. We have a lot of material tax opportunities and savings. And last but not least, we have generated a significant amount of cash. With this, back to Giovanni on Page 13.

Thank you, Diego. A few words on sustainability. We start a journey with the definition of the new planning in November. Now we are detailing the plan with yearly goals and objectives. I would like to focus on 2 specific areas: people and environment. We are committed to having a -- more workforce -- as I am convinced it will make us more competitive. In fact, 45% of our new hires has been women. To facilitate the transition to remote working, we made sure everyone was cooped up with the right tools to work from home in a safe and comfortable way. We believe in continuous improvement and had more than 4,000 hours of training in 2020. As regard the environment, our main target is to be carbon neutral by 2025. We will provide you with updates on our intermediate steps, beginning with our 2021 objective to source 60% of our energy from renewables. This year, we will also take part in the carbon disclosure project for the fifth time or sixth time and are working on the inclusion in sustainability indices. Now a summary of 2020 on Page 14. We are satisfied with the significant progress in 2020 on all fronts. In terms of integration, we build the new INWIT. We stepped up the commercial effort with growth of new folks in acceleration during the fourth quarter. We increased our tenancy ratio to 1.9, one of the highest in the industry. We also made progress on ground lease costs and optimized our financial structure. This project allows us to continue executing on our plan, generating cash flow as expected and enter 2021 with a positive trajectory. 2020 marks the first step in achieving the business plan objectives and allows us to confirm our guidance. Going to the next slide, the -- in my final remarks, I would like to remind you of our business on target, which we are confirming in the framework of the following elements: first, in which as a set of proven strength as we have shared with you today also evidenced in our results; second, the improving market dynamics and additional internal value drivers already activated; third, we are supported by the improving measurement with the next-generation EU being a key catalyst. All this underpins the target we shared in November, which are summarized here, of which 2020 was the first step of execution. Thank you. Now we are ready to take your questions.

[Operator Instructions] The first question is from Ranjit Roshan with Deutsche Bank.

2 for me, please. We saw a very nice pickup in the PoP ads in Q4. I think you had previously guided to greater than 1,000 for the second half, and you delivered that this quarter. And whilst we did see an acceleration in the organic growth, I would have thought that maybe the increase in the KPIs may have translated into a higher organic growth. So just wondering, is there anything you could say around the pricing trends for the third-party PoPs, please? And secondly, again, going back to the run rate, a very good sustained runway in the lease optimization. If we were to annualize the second half performance, I mean, that would see a material pickup in the years ahead. And I know you've guided to 6,000 cumulative by 2023. Should we assume that, that is more front-end loaded? Because I think previously, the assumption was it was back-end loaded, but are you finding the easing winnings now in negotiating on the lease side?

Yes. Thank you for the questions. On the first one, yes, the acceleration of point of -- new point of presence is really good, and it's better than we expected. And now we are facing and addressing this rapidly increasing demand. These volumes are a record high for the company, never achieved before. And we see 2 areas where we are focused on for accelerating the translation of the accelerated volume in revenues. And there are 2 areas: the first one is shortening the cycle, the endpoint cycle and shortening also the time between contractualization and invoicing; the second area where we -- that is a focus area is to further improve the mix, the mix of new tenants because we are very happy with the demand of fixed access that is very strong. And it's also, can I say, quicker to satisfy it. And now we do expect, we are working on to complement it with a stronger new point of presence related to ours to MNOs to mobile equipment. So these are the 2 areas which will help and support us to accelerate the conversion -- the speed of conversion of the higher point of presence in revenues. So it's the speed of acceleration, the focus to address the point that you correctly raised. On lease cost, actually, the speed of acceleration is very, very good. So the plans and the programs and the teams are working very well. The results are tangible and already visible in the P&L. It's too early to change our plans. So we -- I mean, the teams are targeted to go on fast, and we will see in the future. But for now, the -- both revenues and cost, there is only one input to go as fast as possible as quick as possible.

So just to follow up. On the revenue side, you're saying that you are shortening in the period between when you start billing the customer from when you install the PoP to when you send them the first bill. Is that right?

Yes. We are shortening the period, actually, the end-to-end, honestly, from the demand to the invoicing, but also from the contractualization of the installation and the invoicing. And how can I say this, I would say, have been in other industry and other part of life is the -- somehow is a good problem to have when you have such an increase in demand and then all the end-to-end company machine -- let me say, the effect on the end-to-end company machine, let me say, factory has to step-up to cope with increasing sales, actually.

The next question is from Jakob Bluestone with Crédit Suisse.

I've got 2 questions, please. Firstly, on the intake of our low finances. Could you maybe just give a little bit more color around the sort of mix of MNOs versus fixed wireless access? I guess that sort of follows on from the pricing trends in the previous question. And then just secondly, could you give us an update on your latest thinking around the EUR 1 billion of excess capital. Is there anything that's -- since you last presented to us back in November, is there anything sort of incremental to add an interesting opportunities that have come up? Just curious about your latest thoughts on the use of that excess capital.

Can you please repeat your second question?

Yes. So there was a question about the use of the EUR 1 billion of excess capital that you expect to generate over your next 3 years. Just what your latest thinking is around how you might deploy that cash returns versus M&A basically?

Yes. With regards to the first one. Actually, we don't disclose the mix. The details of the mix between fixed wireless access and mobile equipment, though, let me say that as we just commented, we see high numbers on fixed wireless access. So the mix is a little bit skewed towards fixed wireless access. That, again, is a good news because it's something -- demand is very strong, also driven by COVID and the need to cover the low-density areas with broadband. Though, we are working to rebalance -- not reducing fixed wireless access, but increasing further the MNOs. In terms of pricing, the pricing is broadly -- fixed wireless access is broadly 1/3 of the MNO prices. And in general, on prices, we don't see any particular pressure. So prices are stable. There are a lot of variables we do consider and actually are stable. They are differentiated based on the capacity that is used. And that's why fixed wireless access is cheaper than mobile equipment because fixed wireless access equipment do occupy much less space, both from an infrastructure point of view as well as from the electromagnetic perspective.

Okay. About the second question, okay, as Diego said, we will reduce the leverage and free up around EUR 1 billion of resources by 2023, as we shared with you in November, if you remember. And let me say, it will be a little preserve that we will put on the table of Board of Directors to discuss the utilization, okay? We study some opportunities in the market or otherwise, we will increase the shareholder remuneration.

Your next question is from Samuel McHugh with Exane BNP Paribas.

That will be quite boring and keep on the topic of fixed wallet access versus OLOs. So when I look at Q4 versus Q3, I don't know if you could give a bit of color about kind of the mix of SWA versus OLO. Should we think about the acceleration quarter-on-quarter being predominantly just fixed recess growth or more of the mix in Q4 versus Q3? And then I guess, as a follow-up, what kind of about measures to accelerate OLOs growth. I don't know if you could be a bit more explicit on kind of what you think you need to do to tap into the wind and Iliad growth in Italy?

Yes. Honestly, yes, absolutely. The acceleration in Q4 is mostly given to fixed wireless access. And with regards to MNOs, actually it's haven't seen yet and we need to think. There is also faster line. I think it's a question of, I'm going to say, time to process the different kind of product. So the demand is there. The plans, honestly, also from the operators are quite clear in terms of building their own network. So the demand is there, the pipeline is visible, and we are focused on matching the demand with the supply and speeding up the operational process, the delivery process to transform the demanding contracts and then contracts in revenues.

Right. No, maybe you could -- I don't know if you could give us an update. The remedy when you merged with Vodafone forced you to open up these 4,000 sites. I don't know if you can give us any comments on like how many of those are ready. Are you seeing any uptake on those particular sites? Or is that something that we can expect to come in the next 12, 18 months?

Yes. So with regards to the remedies, the process started back in November -- in October. So the sites are made available on the Transparency Register in line with the procedure. And also there, there are some improvement opportunities to make the process smoother is something really set up in October. So that's the focus to make the process smoother. And we would expect, anyway, the new contracts and the new hospitality related to the remedies already in 2021.

Your next question is from Luigi Minerva with HSBC.

3 questions for me, please. The first one is on the 1,100 new small cells and thus, obviously, a good acceleration also on that front. Can we extrapolate this number for the -- for 2021, for example? Is it a normalized pace to have on a quarter-by-quarter basis? And the second question is more medium term, and it's about the change in the market following the acquisition of the Hutchison site by Cellnex. And how do you see this having an impact on dynamics? And whether you think it can have an effect on your mid-term organic growth? And lastly, a question on the goodwill and the tax legislation. Now the low decree 178 2020 currently applies only to the 2019 goodwill. But do you expect it to be extended at some point to the 2020 goodwill, which would imply that you can have further upside because you haven't used all of the 2020 goodwill with the 185, 2008.

Okay. About that as small cell, we are, let me say, seeing a very interesting issue from the market. There is a very, very interesting quantity of demand by the location on area. So we confirm this trajectory that we had in the last 2 quarters. There is a lot of, let me say, possibilities. At this moment, we are totally involved in the hospitals and universities, for example. But race start with oscillators so we confirm absolutely the trend. About the Cellnex acquisition of the assets on downward. Let me say, Wind today is often in our towers since a long time, and they are very, very integrated in their network. As you know, their network has been recently restructured. They swapped the bank in the radio access and optimize it. So really, I don't expect that there will be show another cycle of change. There is sort of move of high switching cost, which has an impact of the customer expectation. I remember that the Wind customer came from 2 dramatic years, and now the net is one -- probably the best net to anything, okay? So finally, repeat an important concept. Our network is made up of the best location. So our sites are not easily replicable. In terms of competition, we compete with Cellnex normally in the market. So let me say, we don't expect the competitive dynamics changing or to change. So this is -- Diego?

And with regards to the goodwill, honestly, the new budget law was very, very, very positive surprise. The 3% advanced payment is quite low, so -- and as you correctly pointed out, we have not used the full goodwill related to 2020. And that's honestly, one of the reasons why we have not done it because yes, we -- it could be. And can I say the histories, there are arguments to expect to think that there will be new loans in the future, similar to the one that has been already just issued. So in short, it's reasonable to expect that, that will happen again, honestly. Even though -- sorry, let me caveat it. Tax planning in Italy is a little bit difficult to be done. But what's happened on the good -- from a historical point of view, on the good treatment of goodwill, honestly, let us think that there could be further opportunities in the future.

The next question is from Georgios Ierodiaconou with Citi.

First question is just to get a bit of a clarification around the CPI numbers that you provided. And it's very useful as you gave us an indication of what the impact is on EBITDAaL level. Is it possible to give us any indications around the timing on which you renegotiate the rate for future years? Is it with a year's delay? Is it ahead? Just to get an indication of -- if we target inflation, when should we expect that to impact your financials? And then my second question is just on the EU funds that you mentioned earlier. I was just curious if you could give us some color as to how the dispersion of these funds work. And if you could perhaps give us an indication of where you see the benefits in your case? Is it possible that MNOs can absorb these funds within the existing plants that have agreed with you? Or if we see them absorbing some of these funds for mobile infrastructure, we should automatically assume that they are going to increase our commitments?

So with regards of -- to inflation, basically, there is one year delay. So let me say, 2020 inflation is reflected in 2021 prices or 2021 inflation will be reflected in 2022 prices. That's the basic mechanism.

Okay. About the EUR 200 million of which plenty on 5G. Okay, we can -- let me say, if you won't detail of the amount for each branch of the business in digitalization, innovation, competitiveness and culture, there are about EUR 46 billion. So we are totally involved in this. Green revolution and ecological transition, there are EUR 70 billion, okay? And our sustainability program, let me say, engage us. Infrastructure for sustainable mobility, EUR 32 billion. Let me see, hospital, airport industry 4.0 for monitoring and so on. This is a chance for us. Then there is educational results, EUR 28 million. So again, we are an actor in the coverage universities, inclusion and equation. And health, as I said previously, we are very, very important factor in the indoor coverage in the hospitals to ability the 5G vertical.

If I could ask a clarification. How do this -- how do you expect these contracts to work? Would it be tenders that you go and participate in? Is it going to be fairly centralized? So there will be major contracts that would contract? Or is it more done on a case-by-case basis?

Okay. We are, let me say, remember, we have one for tenant, and so we can join to them and in case we can participate in the tenders of the public administration alone to push our solutions.

The next question is from Stefano Gamberini with Equita.

Just 3 questions from my side. First, regarding the trend, both of macro sales and small sales during 2021. What I would like to understand is, could we expect a further acceleration you underlined that the fourth quarter was your record with 1,000 new PoPs. Could we expect an acceleration during 2021, considering your target to reach 20,000 new PoPs in 2023? So could we expect something in the region of 1,500 pace per quarter June '21 or for some ways, even probably the growth would be lower? And the same for small because the last quarter, the growth was just 200,000 DAS. Considering the target for '23, there should be a substantial acceleration between 600,000, 700,000 per quarter. Sorry if I speak about figures, but just to understand if in 2021, we could expect further acceleration on that point of view. The second regarding the 5G. How advanced is team Vodafone 5G coverage of the country. And they don't seem to be any major commercial campaign for 5G growth in Italy. Am I wrong or not? When do you expect that both telecom and Vodafone will push on it. Last question regarding the pollution. What is the situation for electromagnetic pollution? Is the situation with, if I'm not wrong, around 500 municipality that oppose the 5G due to this reason being sold or not?

Yes. Thank you. On the acceleration, yes. On the macro side, we should expect further acceleration. So we did 500. Now 1,000. There will be further acceleration. You're right, the -- let me say, the standard cruising speed should be about 1,500 per quarter. So that's the target that we think we will achieve in a couple of quarters. With regards to small cell and DAS, I think we need to somehow balance Q4 and Q3. Q3 was very, very strong with 600 remote units. Q4 has been a little bit softer with 200. So I think that considering the 2 probably is the kind of run rate we would expect for next year. Maybe a little bit faster, but not significantly faster. So we are talking about 400 there per quarter on average. About 5G? Okay. Remember that to you that if Vodafone spent EUR 2.54 billion for the use of the license or engineers. And so they are developing -- they are rolling the new technology. They are building -- we see -- we touch the common grid that, let me say, will be available. The new 5G, let me say, word. Okay. I think that they start from the big cities. They are now, for example, Milan is totally covered. Now will be the most important. It is about, let me say, the decrease in the market. Okay, you have to ask them, why they are not doing, slowing, let me say. But keep in mind that they have some very, very, very strict license obligations where they have to be compliant. Otherwise, there is, let me say, they use it only -- there is a complication in this in the use of references. And sure, the AU funds will support them in pushing the new world of the 5G will update. In terms of pollution, okay, the 500 municipalities that leave of its use. The problem is older because the authority give us the possibility 5G in these municipalities. There is a cultural problem that we are trying to solve with some education initiatives in the communities. Okay. Let me say, the most incredible fake news is that with the vaccine the -- let me say, will be inoculated, the 5G in the human body. And so everyone will be controlled. This is linked to the consistency of this, let's say, people. And okay, we expect now that the new trajectory of the new government, will have to ask to, let me say, upgrade the limitation in electromagnetic limitation that we have today. So this is my considerations, let me say.

Okay. Just a quick follow-up. When do you expect that these funds -- this recovering funds benefits could arrive actually during 2021 or probably next year for 5G development?

By the end of this year, in 2022.

Your next question is from Fabio Pavan with Mediobanca.

Yes. Congratulations for the results, in particular for what concerned the acceleration in the new business. A couple of follow-ups. The first one is on the inflation. If I do my exercise properly, 1% increase in inflation will roughly speaking, also mean 1% increase was concerned, the releverage cash flow. Can you confirm this exercise, please? The second point is, we have been discussing a lot about FWA demand. What about the trend for indoor? And is still strong in these part of 2021? And finally, if I may, would love to hear your view on what has been announced by one of your competitors, meaning the intention to managing also the active part of the team in the business?

Thank you, Fabio. On inflation, yes, the 1% inflationary translates on -- in terms of benefit probably EUR 5 million in terms of EBITDAaL and recurring free cash flow. Considering the initiatives we are putting in place to have fixed interest. So assuming a very limited impact on interest. And with regards to the active equipment, okay, it's in progress. I think that will be in the future for our noncore tenants and will manager with them this issue, okay? That is -- sorry, Fabio, the question about. I didn't understand really, sorry.

It was not about taxes.

Okay. Sorry, all I can say, okay, okay. With the opening round, let me say, arrive in the market, probably the tower operator. We managed the -- all the outside agreements of the central unit, and so we'll be probably the new, let me say, perimeter of the tower cost to manage the antennas that we not so active. But I don't think that before the 5 years, probably, we will not, let me say, we'll be engaged in these new adventures. But okay, we are starting, and we will be able in the right moment to manage this new, let me say, challenge. Meantime, we are training, managing the DAS that really is active small cells. So okay, we are preparing for the new games of the tower.

The next question is from Andrew Lee with Goldman Sachs.

I just had 2 questions. One on the dividends. Just following up on an earlier question. And second question just on your update on 5G implications tenancy requirements. So on the dividends, just wanted to ask when you'll start to use dividends to sustain that 6x net debt-to-EBITDA target, if we haven't seen any M&A activity? And really kind of what point do you stop waiting for M&A and pay out more dividends to keep that balance sheet as efficient as possible? Maybe you said that forward, just wondering when it comes? And could that decision come by the end of this year to ramp up the dividends? And then secondly, I wonder if you're seeing any change in what operators are saying, is the required increase in towers to deliver the densification for 5G.? Just with regard to a couple of operator, CMDs this year so far that have talked about a much sharper rise in towers required to deliver 5G of around 75%, albeit with some active sharing included. Any comments on either would be greatly appreciated.

On dividends, the last investor plan, the last business plan set out, I can say, framework for the next 3 years. Starting from the 30% and then the progressive growth. And that's -- I can say, in this framework, logically, for sure, we would expect a review in this 3-year time horizon. Having said that, every year, we review -- we update the plan, and honestly, the industry is moving on very, very fast. So I can say, for now, the past is defined. And the key decision point is when there will be the headroom up to a material level that is the EUR 1 billion availability in 3 years. At that point in time, there will be the decision about how to use that excess flexibility. So that's the trajectory in the past that has been agreed as part of the business plan. Let me repeat myself, at the same time again, every year, we review the business plan and things are changing fast. So that's the kind of framework I would set out to give a sort of logical steps for this element. Okay. About 5G. Okay, let me say, will be necessary identification. In our plan, we have more than 2,500, let me say, new sites committed. So let me say, we are working on. Okay, in this moment, the operators are pushing in the macro coverage of the main cities doing a tune of the, let me say, effectiveness of the actual coverage. And so we are collaborating with them to really study where and how to densificate the network. It's a good opportunity for us. And keep in mind that not only the densification, but surely, the 5G will need a very, very, let me say, performance indoor coverage, where we are working on, and we have already seeing Italian championship...

The next question is from Giorgio Tavolini with Intermonte.

Just to follow up. One on the 5G. Did you have any opportunity to talk with the new government in order to understand if there is any chance to change the electromagnetic limits. I understand that last year in call out proposal, among the call out proposal, there was the realignment of the electronic magnetic limits to the European standards, and it was indicated among the initiatives to be implemented soon or fast. The second question is on tax alignment benefit. I understand that the new one will bring EUR 22 million savings. So less material than the EUR 114 million annual savings for 5 years in that case that you presented in November. But are they included in the new -- in the equity free cash flow guidance? Or do we have to add on these numbers. So the EUR 22 million savings on top to the current guidance. And the third one is on the development CapEx for 2021. You spent EUR 102 million in 2020. So what could be a good proxy for indication for 2021?

Okay. As you know, in Italy, the electro magnification solutions are one of the most severe that are in Europe. Let me say, Germany is a lot more available like United States. We are pushing this to our interfaces, but we have no visibility in terms of facts. But let me say now, really, we hope that this sale limitation that exists from 25 years, finally will be the same of the average in Europe. And with regards to tax, the EUR 22 million and this tax scheme was not included in the business plan. So yes, it's a slight upside on -- into the business plan. In terms of CapEx, we disclosed EUR 600 million of CapEx for the period '21 to '23. So that's the kind of level of investments that we would expect spread, I would say, broadly evenly in the next 3 years.

[Operator Instructions] Gentlemen, there are no more questions registered at this time.

Thank you, everyone, for connecting. Have a good rest of the day.

Thank you. Bye-bye.

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