Infrastrutture Wireless Italiane S.p.A. ($INW)

Good morning. This is the Chorus Call conference operator. Welcome, and thank you for joining the INWIT First Quarter 2026 Results Conference Call. At this time, I would like to turn the conference over to Mr. Luigi Minerva, Strategy, M&A and Investor Relations Director of INWIT. Please go ahead, sir.

Thank you, and good morning, everyone. Thanks for joining us today. I have with me Diego Galli, INWIT's General Manager; and Emilia Tudo, Chief Financial Officer. Before we begin, please allow me to draw your attention to the safe harbor statement on Page 2 of the presentation. Following a brief presentation on the Q1 2026 results, we will open the floor to questions. Over to you, Diego.

Thank you, Luigi, and good morning, everyone. In today's session, we share our Q1 2026 results, which are consistent with our full year 2026 guidance, reflecting the current telecom market context. A reminder of our 2026 guidance and medium-term baseline outlook, both of which are fully reiterated and a recap of our key strategic point of strength centered on INWIT's high-quality and unique network. The telco sector in Italy continues to go through a challenging phase with low returns and the minimum investment from operators. Mutal infra players can play a key role in this context, leveraging on sharing economics to deliver investments in digitalization in the most efficient way. Our MSAs create value, thanks to the consolidation of infrastructure and the unlocking of sharing synergies to the benefit of all parties. As you already know, our anchor tenants sent us early termination notices in March. We have been clear that both fall outside the legal framework of the MSAs and have taken legal actions to protect InvIT. Anyway, our wish is to move from the legal ground back to business and industrial investment. WIT remains committed to invest while collaborating with its customers to identify shared value for value solutions. Moving to the next slide. Q1 results are consistent with our full year 2026 guidance. New sites and new PoPs reflect the current market context, while the pace of real estate transactions remain sustained. As we anticipated, revenues on a reported basis are declining year-on-year by around 1%. Revenues are impacted by the absence of uncommitted revenues linked to discretionary project-based revenues. If we were to remove such discretionary project-based revenues from the Q1 2025 numbers, 2026 revenues show a normalized annual growth above 3% remain stable quarter-over-quarter at 5.2x. In a few days, we will pay about EUR 500 million in ordinary dividend, which implies a dividend yield of more than 7% at current levels, reflecting the current undervalued.

Operational KPIs in the quarter reflect the current challenging market context. new towers in Q1 is a soft start, and we expect a pickup in H2 in line with our target of around 200 new towers in 2026, around 300 new PoPs in the quarter with tenancy ratio growing to 2.39. We are aiming for more than 1,700 new POPs in 2026 with year-over-year continuous growth in tenancy ratio. 60 new dedicated EAF covering premium indoor locations across multiple verticals for a total of around 850, targeting approximately 900 locations in full year '26. 0 real estate transactions in the quarter confirm our strong track record, aiming for a total of approximately 1,600 transactions in full year '26. The normalized 2025 total revenue base takes into account the lack of project-based noncommitted revenue components, which we have developed over time with operators, capturing their discretionary flexible budget. As discussed during our full year 2025 results conference call, such discretionary budgets have been put on hold at this stage given the current context of limited budgets and stent relationships. Adjusting for this one-off step-downs, we delivered over 3% normalized revenue growth in Q1 2026, driven by the following components: inflation CPI linked based on a 2025 average index of 1.4%, anchor commitments in towers, new POPs and DAS deployment in line with MSA, wallet growth with steady pace across other MNOs and IoT, but infra growth in indoor DAS across premium locations and smart city verticals. Q1 revenues were minus 1% year-on-year at EUR 264 million, representing over 3% normalized revenue growth year-on-year as we just discussed. Revenue components, including to anchor revenues up 2%, supported by inflation and the commitment, OLOs and Smart Infra revenues down as a result of the lack of project-based revenues such as work and studies, installation upgrades on DAS, more than offsetting the growing number of POPs and DAC locations covered. EBITDA down 1.9% year-on-year to EUR 239.5 million with an EBITDA margin of 91% EBITDA leases down 2.2% year-on-year to above EUR 190 million and margin of 72%, reflecting INWIT structural operational efficiency. Recurring free cash flow at EUR 176 million is a front-end loaded profile for the year and net debt at approximately EUR 5 billion, including IFRS 16 liabilities, resulting in a 5.2 leverage ratio in line with December 2025. Recurring free cash flow in 2026 has a front-end loaded profile while remaining consistent with 2026 full year guidance. In Q1, recurring free cash flow reached EUR 176 million, up by 11% year-on-year with 74 cash conversion. This was driven by structurally low recurring CapEx, no taxes cash out with a tax payment scheduled for Q2 and Q4 as per usual seasonality, positive net working capital of approximately EUR 10 million and financial charges reflecting an efficient debt profile and the specific phasing of interest bond payments. Below the recurring free cash flow line, gross CapEx was just below EUR 80 million, EUR 90 million due to phasing. We closed the quarter with free cash flow to equity of nearly EUR 88 million. leverage ratio is stable at 5.2x, in line with Q4 2025, and we have an efficient debt profile out of which 85% is fixed, 15% floating with a current average cost of debt of approximately 3% and average bond maturity of 4.3 years. Furthermore, we have just extended our EUR 1 billion bank facilities originally maturing in 2027 to 2031 did by a pool of primary banks. I now hand it back to Diego for the guidance in the closing section.

Thank you, Emil. We reiterate our 2026 targets, medium-term baseline outlook, reflecting the current market environment. Even in the unrealistic scenario in which the market remains stuck over the medium term, we will be able to have a decent organic growth, an attractive dividend and a solid balance sheet. The baseline outlook does not include the potential upside related to the normalization of the industry dynamics, the network densification, both on door and indoor and with opportunities to expand across digital infrastructure. At the same time, the baseline outlook does not include the downside risks of MSA's termination as we don't believe this is a likely or realistic outcome. Moving to the next slide. We are protecting the integrity of the MSA and in with rights to the legal path, and we are confident on the strength of our arguments. However, we would rather focus on investing efficient growth and value creation for all parties and stakeholders. It's not approate to enter into legal details considering that the case is open. Let me just say that timing-wise, it's moving on as expected given the complexity of the case. I'm also keen to reiterate that we have always executed the contract in fairness and good faith. -- of course, being open to discuss with our customers and by the way, envisaged by the contract itself to further optimize the commercial opportunities within the contract framework. At the same time, we all stakeholders, including the public interest related to the strategic nature of our infrastructure. Moving to the next slide, let me reiterate a few important considerations on our MSAs prices and terms. MSA fees are competitive and intrinsically linked to the structure of the sales and leaseback transactions as industry standard. The higher the upfront amount paid to the operator, the higher the resulting tower MSA fees. With regards to INWIT, the MSA terms and conditions are an integral part of the overall transaction carried out in 2020. The average total fee per is around EUR 20,000. This is the combination of sales and leaseback towers, new towers and new PoPs. We can estimate that broadly half of the fee is related to the financial component of the transaction, which is comparable to the interest fee of a perpetual bond, while the other half is related to the pure hosting fee. All our prices are in line with the market. They are even more attractive because the MSA fees also include unique rights to the benefit of AMC. On the left-hand side of the slide, we show once more a benchmark of our MSAs tenant fees, which are competitive and well below the European average. Finally, -- we are aware we benefit from an uncapped escalator linked to the inflation. This is a better future than in other European MSAs. We paid for this as for all the other components of the MSAs in the 2020 sale and leaseback transactions. Looking at the 5 years or 10 years time framework, the average inflation that we applied with our escalators has been about 2% or 3%, basically in line with historical trends and expectations. Anyway, we understand that the uncapped escalator created some specific impact. And going forward, Telecom Italia, Vodafone in INWIT, where we could take the benefit of first-mover advantage to build top quality sites in the best available location. 35% of our sites are in unique locations. This means that there is no other tower company within relevant distance range. For 40% of sites, there are other alternatives within the relevant range. However, either there is no space available on the towers or there are technical issues that prevent the same quality. Our network is available to our anchors on the all or nothing basis. As I said, our network is the result of the consolidation of multiple network and is a material source of efficiency within the industry through the benefits of sharing economics. A consolidated and optimized network is also a way to reduce the use of natural resources. Greenfield initiatives in a mature market create infrastructure duplication and fragmentation, leading to medium, long-term inefficiency and structural higher cost base for the industry. Furthermore, we believe that the market needs further 10,000 new towers in the next few years. Such greenfield initiatives would divert CapEx and delivery capacity away from the network densification that the Italian market needs to make the much needed progress on digitalization. Final remarks from my side. Q1 results are consistent with our 2026 guidance. The towers business model is based on long-term contracts that create value for all parties, thanks to sharing economics and network efficiencies. The Italian telco market continues to be under pressure with low prices and sub power returns and telcos are offloading challenges also on the infra. -- current context, the legal path will move on as expected, and we are confident on the strength of our -- for us, it's key to protect the integrity of the MSA as a long-term contract. We are open to optimize further the terms of the contract, particularly on new investments, and we remain committed to collaborate with our customers and identify shared value for value solution. The industry needs material investment for densification, which may unlock growth and material opportunities for all. With this, we thank you for your attention. We aim to provide you with an updated business plan in as visibility would allow it. now open the floor to Q&A.

The first question is from Andre Chak from UBS.

My question was really on the guidance, the fact that you are now able to provide targets for the year in terms of KPIs. If you could just talk about what that means, how you've kind of engaged with your customers year-to-date? -- and if this includes even the anchors? And then related to that, you've been -- you mentioned that in the second half of the year, you may be able to provide a midterm outlook. So how should we think about that statement in the sense of, obviously, you having less visibility given what's going on with your anchors. So are there any -- is there any progress in -- or should we look at this as some kind of progress in talks or a pickup in market activity? Or what is this actually driven by?

Thank you, Andre. Yes, the -- as we shared, the B plan is the result of the respect of the committed with anchor tenants. There is no additional discretion business, reflecting the ongoing activities which are moving on in -- consistently with the committed revenue profile and investment profile.

We have specifically on the 500 new pulps that you expect to have this year. Can you just give us color in terms of the breakdown between the anchors and the OOs perhaps? .

Yes. In the current context, let me say that the majority of it is related to Atos, a mix of other MNOs, utilities, and IoT.

The next question is from Roshan Ranjit, Deutsche Bank. .

I've got 2 as well, please. You built 30 new sites this quarter. And I think your -- the government will step in here to move things along quite quickly because per the time frame that you have outlined, this could really drag on. And my second question is regarding the discussions. I think last week, 1 of your customer kind of suggested that they tried to have a discussion, but the discussions weren't perhaps entertained. Is it more the topic of the discussions? Or there haven't been any...

The industry and the market in Italy requires investments to catch up and to accelerate on densification and digitalization. The market has been -- I think there is come on strong consensus on that has been invested because it's a market, which is impacted by strong pressure on the top line and low or very, very limited returns. I think that it is worthwhile to mention that there is the frequency renewal process, which is going on and at least reevaluate again, for the benefit of the overall industry and digitalization of the country. With regard to the second, our customers, trying to identify a solution and opportunities to optimize the contract and the relationship though, our approach is based on win-win approach on solution, which should create value for all parties. And this is, for us, is the meaning of fairness and good fit. And while we have not engaged in discussions with the approach is with us. And the -- there is a net transfer of value. That's what we mean when we do say that we want to defend the integrity of the MSA framework. Let me also say just to be even more specific that when a conversation sold based on also different assumptions of the contract we proposed to have an arbitration or actually 2x, and that has not been affected by the customer just to show again on concrete and tangible terms, a constructive and positive approach based on good faith, we have been following across the last several one. And as I said, the legal path continues. But overall, we would prefer to focus on investments in growth and we remain open always to collaborate with the customers to identify win-win solutions to create value for all parties. And I think there should be the ground to to do so, again, based on fairness and good faith.

The next question is from Paul Sidney Berenberg.

I also have 2 questions, please. Your 2 customers and the MSAs, you set out their view that they believe and move away from in where it's possible in 10 years. I think 1 sort of explicitly in another didn't disagree. I feel it's easy to put it in a PowerPoint slide, but could you outline some of the practical considerations and challenges that would be involved migrating away from INWIT in such a short time frame. And just in terms of the preferred supplier clause, I know you set this out at the end of March in your call, which is very helpful. But I just wanted a month on, have you had any further thoughts on the supplier clause, the legal implications, the robustness of that clause and what that could mean in terms of going forward if some of your customers did look to build out their own towers?

Thank you, Paul. Yes, I see we saw the slides as yes. everybody and no 1 to enter into commenting on a specific basis. But I would say that in general, greenfield projects in mature markets have never been done. The switching of the network as material switching cost. Operationally, it's very, very complicated. It's extremely difficult also considering the regulations, which have been implemented in the last 10 years by the municipalities. Also in rural areas, not as easy as people may think for the next-generation EU projects on 5G in white areas actually, we -- I think is on the newspaper today is the kind of opposition from local municipalities has been amazing. So it's from an operational point of view, from a financial point of view, from an environmental point of view, is clearly a very, very complex and takes a lot of effort and focus. And as I said, I think will be more valuable and would be instead of value distraction for the industry to be value creation for the industry to focus on the new investments, which are required for the densification instead of, again, investing resources for duplication and fragmentation. With regards to the preferred supplier, that is a close where by new towers we take the right of the first offer and the last call. And we think that we will be able to match all the potential alternative offers based on the -- our financial strength, even more our industrial capabilities to deploy new towers in a very efficient and timely time remainder. Clearly, in the last few years, we set up an organization which is best-in-class, across all the chain of the deliver machine from site search to permit to build to maintenance. So we think that from a financial and industrial point of view, we can match all potential alternatives. So we will build the condition to use the preferred supplier close to keep on working with the customers and satisfy all the new towers.

I just have a quick follow-up. Apologies I missed the number of towers, Giga that you said, I think it was in your introductory remarks on Slide 12. But the number...

In the range between 7,000 to 12,000 new towers. So let me simplify 10,000 new towers for network densification to address the capacity needs in urban areas. The coverage and densification needs in suburban and also to provide coverage in the corridors and the transport corridors related to growth and rate.

The next question is from Fabio Pavan, Mediobanca.

2 questions. The first one is if you are exploring in the meantime, some opportunities to secure additional external growth? And the second question is, clearly, with our mid- long-term horizon. I know there are already discussions ongoing over the future 6G network, which many should be AI native, implying higher need for densification low latency and densification. So are you already having some discussion on that kind? What's your view on this future demand.

Thank you, Fabio. Yes. We -- as part of the last year business plan, we lay down the direction for growth and clearly, on top of towers and real estate optimization, we are growing organically in a significant matter on what we call the smart infrastructure into coverage and dedicated coverage with important, important projects. Let me mention the couple of those. One is the the 5G coverage of the new tube in Milan from the airport to the center than last year and the 5G projects, smart city projects in Rome, which again will bring 5G coverage across the metro line and across 100 city square where we will bring 5G with small cell readiness for the Smart City initiative. So that's almost organic and is embedded in our growth path. On top of that, we think that these are the 2 areas where there is potential synergies to our existing core business, and that's where we clearly we are open to talk with the -- with our customers about playing a role on the management, the ownership and management of the active keen through the rule of a neutral cost. Also on edge computing, yes, we do share you that also related to 6G, we do share the view that there will be a dramatic need of computing capacity at the edge of the network. And we are very well placed on that because we have the more distributed network in the country with 26,000 points of presence across the full nation, and that is a unique asset, which will be even more relevant in the mid long term as long as 6G low latency digitalization will move on. So we are also focused on that. and add consistently with our strategic plan.

The next question is from Abhilash Mohapatra, BNP Pariba.

The first one was just a clarification really to your earlier answer, only 200 sites targets for the full year. Just to clarify, did you say that that's all based on committed growth? Or is there some uncommitted targets that are wait into that as well? And then secondly, just a broader question, Diego, I don't know to the extent you'll be happy to comment, but you made a reference to the uncapped CPI how that's been viewed as a problem. Given your comments around not being ready to take a win-lose approach, should we take that to essentially mean that you would not be ready to sort of consider reversing some of those past CPIs and therefore, giving a discount on the appreciate that's not something you may want to comment with just wanted to I just wanted to ask.

Thanks, Abhilash. Yes. On the first one, the 200 towers are committed as part it down a little bit on the stock of inflation. We have -- because we understand that there is -- let me say, we are keen and open to talk overall in the framework of a win-win approach, whether it can be gives and takes. The balance of give and takes can be positive for all. And that's where inflation can be part of the overall equation where consider the dramatic need for additional investments, I do believe that there is room, again, to share to share value in more parties.

The next question is from Andrea Devita from Intesa Sanpaolo.

It's basically on discretionary investment by other operators. So I saw that in the presentation, you claim to have a positive organic growth in all revenues while the arithmetics are just a negative. So I thought that most of the discretionary was on anchor. So I'm asking the split basically for last year and the expected for this year of the potential revenue loss from discretionary between anchor and other telephone operators. .

Yes, the project base discretionary revenues is something which has been particularly strong on anchors, considering in this specific year, considering the current context has been part also of the normal business we do with the other customers. And with all customers, depending on the budget availability and the specific timing. So there has been also in the past year up and downs, which have been absorbed overall in the -- yes, the overall growth path. Clearly, this year, the combination of this impact on discretionary project-based revenues on us and in particular on Amcor in the current market condition is reliable and cannot be offset, and that's why we reported in revenue decline. The key point to underline from my side is that somehow 2026 is set a new base considering that the discretionary project-based revenues is extremely limited. So that's why from 2026 onwards, we will show also in the reported line, what is the normalized revenue growth of about 3%, which together with real estate savings will provide to a 4% margin growth over time.

Basically, my question amounts to what's the proportion roughly of discretionary investments in your other operators total revenues last year, just to have an idea where to start from. .

I think that clearly, we don't give this level of detail, but you may figure figure out from the minus 6% that you see on on the line of the -- all the revenues, so the minus 6%, it's part of the termination of some project-based projects and partially offset by the recurring organic growth coming from the new tenants.

The next question is from Victoria Adé, Barclays.

I actually have 2 regarding refinancing. We just mentioned during the call that you have our bank maturities due in '27. So that's great news. Just wanted to confirm that both the RCF and the term loan that are extended to 2031. And then I was wondering if you have any plans on the refinancing of your upcoming Eurobond due in 2028.

So, yes, I confirm that we have expanded both the loan and the RCF to 2031. So for an overall amount of EUR 1 billion. Of course, the term loan was drawn while the RCF was undrawn so gives us liquidity margin on top of the cash. And concerning the next refinancing need, the bond expiring, let's say, the relevant maturities is the bond expiring in October 2028, that we will refinance the due time, let's say, that we had time to the end of 2027. So more than 18 months, and we will evaluate the most appropriate funding strategy also taking into account the development. But we have a strong focus on our debt maturities management with our proactive approvals.

The next question is from Milo Silvestre, Equita.

Yes. Good morning. I have some question about -- regarding the migration plan. So if you started already discussion with Fastweb. And how can we think about the maximum, say, duration of the immigration plan. And the remuneration should you be net based on the number of actual hospitalities.

At the full infrastructure is considered as a block and altogether, again, based on the all of losing growth. The other close is related to timing and may say that the timing cannot be shorter than 3 years. So it's at least 3 years. So these are the 2 cores on the 2 pillars, so very clear -- both very clear in the contract, and we will -- we are not talking -- no discussion started with the customer on that. And -- but when it will start, that is the framework we will work on. The migration plan has to be agreed between parties and clearly, we'll have to respect the needs and opportunities for an all both parties.

And how should we think about the migration plan that is that may last for 5 years. Should we expect the -- I mean something which good remuneration is broadly in line with the number of sites. .

Listen, we -- I don't have any specific plan that what is public and honestly, I've read 5 I've had about 10 years. Could be also had about a longer time frame, if not everything goes well. So honestly, for me, I cannot comment because I don't have any specific detailed plan from the customers. Again, let me reiterate most close at least 3 years in the framework of a contract, which has 8 years renewal cycle. In fact that, again, discussion and negotiation will be in good faith from parties and to respect and create the opportunities of both parties.

Just a quick up on the financing side. we plan to finance the payment of dividend considering that you have EUR 300 million of cash available and the cash out is roughly.

Basically, the dividend we have -- we will fund the dividend through the [indiscernible]

The next question is from Ben Rickett.

You were looking at buying data center assets from Wind Tre, I don't know if you can talk specifically about those reports. But generally, can you discuss whether you would be interested in buying more -- buying data center assets? And then Second question, could you -- I'm just trying to understand why your OMO revenues are being impacted by this dispute? Because obviously, the OLOs are not part into the dispute. So why are you seeing an impact on that revenue line.

Thanks, Ben. On the -- let me start from the second one. Actually, yes, there is no impact from the dispute on the revenues. It's 2 different things. As I said before, actually, the Alo revenues have had some fluctuations also in the past related to specific initiatives, project-based initiatives that we have deployed over time also with all frequency renewal process where visibility is expected to trigger the new investment cycle. On the first topic, we we are not interested in there's a potential opportunity for losing big data center intersales. That's a different business, and we don't see synergies. We we may be interested and as part of our strategic plan about integrating our distributed network with computing capacity distributed on the edge of the network. We see synergies because, again, we've got the most distributed point of presence across the country. We are -- it's -- the business model is very similar to our talent one, playing a role of neutrals. We can also leverage on our expertise in terms of site search in tenants. So there are plenty of synergies sharing the view of fully connected and digitalized society economy where the we bid the need of computing capacity and low latency distributed across the footprint. So we think we can play a role, and we will keep on assessing opportunities according to our approach, which is creating industrial synergies and healthy returns consistent with our business model based on investments and long-term visibility on revenues and cash flow generation.

The next question is from Rohit Modi, Citi. .

Apologies, I missed starting a bit of a start. So if my question has been answered, my apologies when I do a Two, please. One is I understand you mentioned about spectrum side going forward during in the second half. Does that change your medium-term outlook? Do you expect more investment coming into the sector that can benefit your your top line and kind of upside you term guidance, given that's a baseline guidance as of now. And second question is basically -- and this from -- apologies for my ignorance. But I'm just trying to understand you have 2 processes going on, legal processes going on with the injunction process decision expected sometime in June, July. I'm just trying to understand if that decision comes in your favor, does that change anything given your one other process going on which is kind of a bit long term both into '2029. So what changes with invention process? Can you just give a bit of that.

Yes. No. Thanks for the questions. On the first one, yes, the current market environment is right and with that, the frequency renewal process may be a catalyst for for the start of a new investment cycle in Italy, there has been underinvestment for a long time. There is a need to catch up and accelerate and there have been discussions about getting frequency renewals at certain conditions to the operators in a change of investment commitments that can create value for all for parties and that can be, for sure, a catalyst of a new investment cycle with potential benefit for the industry and of course, for INWIT as well. On the second question, yes, I can share that the legal path is moving on. We are overall, for us, for our customers in the industry is somehow to move to the ground of business discussions to find an equity balance with the win-win solutions for all, and that's where we keep on being open to start as did the right time to happen.

But any decision on June, July, does change anything from in which respect of just if it comes in your favor in June.

I think, again, that the -- if there is more clarity and if there is more clarity about the termination being not valid and the contract being valid up to 2038. It may, but it should help in the framework of discussions -- constructive discussions in good faith with the customers. Ultimately, I think that the overall situation should be addressed not on the legal ground. But on the industrial cost approach again, for the benefit of our customers, for the benefit of INWIT and for the benefit of the development of the investments, network densification.

Mr. Minerva, gentlemen, there are no more questions registered at this time.

Thank you very much, operator. We are available for any follow-up. Thank you so much for your attention today and speak to you soon.

Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.