Rai Way S.p.A. (RWAY) Earnings Call Transcript & Summary

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Rai Way Industrial Plan 2024 and 27 and 2023 Full Year Results' Analyst Conference Call. [Operator Instructions]. At this time, I would like to turn the conference over to Mr. Andrea Moretti, Head of Investor Relations. Please go ahead, sir.

Thank you, operator. Good afternoon, and welcome to all of you today to our '23 results. And even more importantly, new '24 '27 Industrial Plan Presentation. Considering that I may be new to you, being my first call, let me start by quickly introducing myself. My name is Andrea Moretti, the new Head of IR at Rai Way. I joined a couple of months ago, and I will be your new point of contact with the company. You can find my details at the end of the presentation, and I'm obviously looking forward to speaking with you soon. Today's speakers will be Mr. Roberto Cecatto, our CEO; and Adalberto Pellegrino, CFO; and Giancarlo Benucci, Chief Corporate Development Officer, who will take you through the latest results and the outlook, pillars, initiatives and targets for the next 4 years. At the end, we will open the line for your questions in the usual Q&A session. Let me therefore hand the call over to Mr. Cecatto. Please go ahead.

Good morning, everyone, and let's begin this call, which will be slightly longer than usual, but I am very excited to share with you the plans, route commitments and priorities for the coming years. This will be a more interactive call. I will start with some quick highlights of 2023 performance. And then I leave the financial details to Adalberto. Then we will move on the plan with my introduction on the foundation of the plan. Together with Giancarlo Benucci, we will outline market trends, pillars and initiatives. Adalberto will take you through the financial targets, and I will conclude with some final thoughts. Starting with the comment on the year just ended, the fourth quarter '23 confirmed the extremely positive trends on the first 9 months. A growth that actually has been continuing steadily since our IPO in 2014. In 9 years, the company has been able for now, essentially by organic means, [ alone ] to increase EBITDA by 60%, profitability by about 12% points, net income and the dividends by 2x, cash generation by almost 2x, distributed dividends overall of more than EUR 580 million. All this while keeping net of IFRS 16 accounting contribution, debt essentially unchanged. In particular, 2023, so [ trading ] growth, which show the benefits of several strengths of our business model materialize. Revenues were boosted by the usual CPI link included in our contracts by the contribution of new regional multiplexes for the full year in '22. The entry into operation has been gradual and by the excellent performance in the tower [indiscernible] business of certain customer categories such as fixed wireless and radio, brought about 20%. Revenue growth came in the [indiscernible] drop in energy tariffs, reduced consumption and especially careful control of other cores. These trends translate into an adjusted EBITDA growth in the range of 20%, 19.4% to be precise, in line with the updated guidance shared in November. While slightly above 20% is the growth recorded in recurring free cash flow generation, which rose from EUR 93 million to over EUR 110 million. Development investments totaling EUR 46 million registered market acceleration in the fourth quarter with over EUR 27 million spent, equal to 4x the average of the previous 3 quarters. Acceleration that is just now also came from the Board renewed support towards the execution of diversification initiatives happened in the final days of September. But we will talk about this in detail shortly. Also with some update on the authorization process for data scale apparently moving in the right direction. And before turning the floor over to Adalberto for more details on the numbers, let me confirm the proposed distribution of almost 100% of the '23 net profit or precisely EUR 32.2 cents per share, currently, equivalent to a dividend yield of 6.7%. While in terms of expectation for 2024, that are consistent with the projection of the new plan, we will strive to keep our adjusted EBITDA in the growth trajectory and to continue capital deployment in the development projects. Please Adalberto, the floor is yours.

Thank you, Roberto, and good afternoon to everyone also from my side. So slide 7, if you look starting from the top line, core revenues were EUR 271.9 million, with a refunded EUR 45 million in 2022. More specifically, as concern Rai, you may see a 9.3% growth compared to the full year 2022 figure driven by CPI indexation. Let me remember the comparison with 2022 is negatively affected from the 9 months, as we commented in the 9 months conference call by the termination of the medium wave radio service that has been effective since the end of the third quarter 2022 with a EUR 2 million one-off penalty. On the other hand, acceleration in third parties revenues is confirmed also in the last quarter of the year, pushed by the full contribution of the new regional moves capacity sold to local broadcaster as well to a lesser extent, the good performance on fixed wireless access player and radio broadcaster. The overall growth is 20%. Moving now to cost and to slide #8, total cost in 2023 amounted EUR 92.6 million against the EUR 94.9 million recorded last year. In particular, excluding non-core items, personnel cost is relatively stable. And other operating costs marks a 10% reduction, benefiting from lower utilities, [48 ] decrease of energy price in 2023 and also consumption efficiency, minus 11% in 2023 vis-a-vis the previous one, while other opex items recorded a growth on a normalized basis of approximately 6.5%, and this is the overall trend for our opex. Let's now move to the next slide, slide 9. Bottom line at EUR 86.7 million recorded an overall 18% growth in 2023 despite EUR 5.3 million of non-recurring costs. The trend mainly reflects the just commented, of course, EBITDA dynamic, resulting in a significant increase in the profitability over 2022, 475 basis points, just to give a number. Then we have mentioned non-recurring cost of EUR 5.3 million related to -- mainly to an early retirement program, higher D&A following investment activity and provision, financial charge more than double, reflecting the higher interest that we already commented in the last call. Tax rate finally is back at normal level at around 28.6%. Moving now to the cash generation, slide 10, you can see how net debt after the increase recorded in the 9 months has decreased during the fourth quarter, coming out at EUR 105 million, in line with the 2022 figure, as a result of, among others, the strong EBITDA contribution, the capex spending and the taxes paid during the year. Last but not least, of course, our dividend. It is worth remembering that part of the debt has been spent so far on diversification initiative. Overall, a record recurring free cash flow to equity of EUR 114 million was generated, better explained in the following slide. The recurring free cash flow to equity is made available for development capex and for the distribution of 99.7% of our net income as a dividend, subject, of course, to the approval of our next shareholder meeting. The dividend proposal of EUR 32.22 cents per share implies a dividend yield of about 7%, 6.7% to be precise at current market prices, and brings the cumulative distribution since the IPO at approximately EUR 582 million, which confirms once again our strong focus on shareholder remuneration. Next slide, on the sustainability plan, let me mention the main target achieved. Apart from the increased coverage of the entire DTT network as part of the refarming process that you know very well, let me highlight the reduction of the energy consumption vis-a-vis 2020 figures, minus 26.4%. Then we confirm 100% of purchase renewable energy. And then recently, we also obtained an important certification, the gender equality certification. The very good results of our activity has been confirmed by the major rating agencies. Let me just recall the last upgrade we received on February when Rai Way was promoted in the CDP rating assessment with an improved score from B to A-, due certifying the company at the leadership level. Next slide, last one for this first part on guidance. The outlook for 2024, let me -- remember, it's based, of course, on the most recent level of power futures for 2024. Adjusted EBITDA, we expect a further growth of the adjusted EBITDA, although limited by new infrastructure costs and lack of energy tax credits, thanks to the CPI link, the rising contribution from DAB services and regional refarming. As concerned capital expenditure, maintenance capex on sales will be slightly above the recurring normalized level, and development capex will be in line with 2023 level with the large majority of the development capex devoted to diversification and other third-party internal projects. That's all on my side for this first part. I now leave the floor back to Roberto.

Thanks, Adalberto. And now we could start the chapter related to the Industrial Plan. Having reviewed the '23 results, let's dive into our new plan and the outlook for the next 4 years. Let me say it is a plan that we will define as one-off strategic continuity in terms of our industrial pathway of combining our traditional broadcasting business with an extension in the media distribution services and integrated digital infrastructure. But a strong implementation discontinuity -- in terms of the focus that we intend to place on execution. When they are not put into practice, ideas, good ideas they remain just ideas, no matter how good they are. And we want them to turn into reality. This is why we are making sure that we have all of the enablers we need, including in terms of our organization and expertise. Our plan is based on 3 fundamental factors. First, our assets; second, where our target market is going from a technological and competitive standpoint. And last, what are the main levers that we will enable to unlock the real value of the company. On this basis, we identified the strategic goals of strengthening what we do today, including attracting more value from assets that are not used to their full potential. Expanding our scope of action, obviously, with an industrial approach and maintaining the consistency and synergies with our assets and expertise in order to reinforce our positioning and as a consequence of the first 2 points, we should also benefit from the acceleration and synergies coming from external growth, improving shareholder returns by utilizing our financing capacity, having more adequate capital structure. The goals were then divide into initiatives and priorities for a successful planning of the execution. I would like to make one point. Today, the subject of the presentation is the Industrial Plan, a plan for the evolution of the positioning, precisely industrial of the company. And as such, a plan that will work both in a stand-alone and a transformational consolidation scenario, whether with the current capitalization or double capitalization, with the current EBITDA or a double EBITDA, with the current leverage or a higher leverage. I'm have not said new and neither will it confirm it as a possible external development area by saying that there is a consolidation scenario in the infrastructure sector, which is being investigation. It is well known that because of institutional regulatory and governance context, we are not totally autonomous. Now nothing is all in our full hands, but we are working constructively and proactively to give to the stakeholders, all the elements to take a decision. This plan has been designed to remain valid in any scenario. And let me say in some aspects, it could have a benefit from synergies in the implementation. Slide 15. At the end of the plan, we are striving for a Rai Way that is bigger, more diversified, more digital and more efficient with better growth outlooks. In this ambition, not only we will preserve our features highly appreciated by the market. But through this pillar, the plan is expected to address the key value levers to unlock the company value. But we will come back on this at the end. Slide 17. As mentioned, and -- one of our stars has been our asset. Honestly, when I [ wrapped ] I found a portfolio of asset that goes far beyond the usual external perception of Rai Way, the only tower company of the Rai Group. Of course, there are over 2,300 towers that beyond any doubt represent Italy, one of the Italy best broadcast infrastructure in terms of coverage of suburban and rural areas. Already here at [indiscernible] we do not just host customer equipment, but this is very important, we design, build, operate networks, an element, which already in the recent past with the refarming, has demonstrated the highest stability and protection of the business model and which in the future could offer further opportunities for growth. In addition to this, we also have a transmission network, after recent investments include over 6,000 kilometers of brand-new high-performance, honed national fiber optic networks, backed up and expanded by more than 500 [ U link ] and also with the support of some satellite system section. And this can be extended rapidly and at limited cost even in the most remote areas. We have 3 control centers guaranteeing internal and direct oversights of operation and security. An extensive portfolio of land, in some cases, large plots of lands, distributed nationwide and with availability of electricity and connectivity infrastructure. These characteristics in addition to our data center also make them appealing for other users, whether internal or for in third-party operators active in some verticals. The [indiscernible] local presence of very good technicians and engineers, allowing for direct asset management. And then an existing portfolio of customers with long-term relationship, we can also leverage for most of the new services that we are introducing. And according to our plan, soon we will also have a network of data center and CDN, a content delivery network to improve video and data delivery performance. To sum up, a diversified model integrated platform of infrastructures and people with the national Italian footprint, which, in principle, allow to us to go far beyond the pure management of broadcast networks, to be leveraged to support the country's digital transition, offering customers an infrastructure one-stop shop for hosting networks, data and science, with the highest performance standards and reaching even the most remote areas. And last but not least, the prerogative of a public asset control to guarantee service neutrality, security and continuity. Rai Way has positioned itself an operator of media services management of broadcast networks and content distribution services, increasingly also on IP platforms as well as a digital infrastructure, including towers, connectivity networks and data center. These are the 2 areas to which the company must devote its focus, efforts and capital, starting with the definition of target markets and reporting as we wish to see. Slide 18. In both of these markets, media Services and digital infrastructure, trends confirm -- you see on the slide, on one hand, the still positive balance of opportunities and risk in the more traditional business. We targeted development opportunities. And on the other hand, the solid rationale underlying our areas of diversification. Now I leave the floor to Giancarlo to give you more color and details on the market trends.

Thank you, Roberto, and good morning to all of you. So starting with the trend, the market trends in the media service market, meaning the management of broadcasting networks and content delivery services that we separated into video and[ broader ] segment. The details are shown basically on the slide from 18 to 23. To sum up, the video consumption, so meaning both the traditional linear television and the digital consumption in terms of OTT online and mobile fruition. The video consumption continues to increase, supported in particular by the rapid growth in recent years of the OTT platforms, which, however, are now moving towards a pace of greater maturity. The good news is that despite this OTT boom and not counting the peaks linked to the COVID impact and the effect, the linear television has actually proven highly resilient with a reduction of only on average 1% per year in the recent period. And within the linear television, the digital terrestrial has been much more resilient than the satellite Pay TV. Moreover, considering that the COVID was still a factor in the early months of 2022, if we focus on the second half of 2023, and the first couple of months of 2024, the good news is that the audience has totally stabilized compared to the previous year level. This is true not only from a -- let me say -- audience perspective, but also from the advertising revenues' perspective. Indeed, the weight and the absolute revenues of the digital terrestrial television are stable and expected to grow slightly over the plan years. Again, OTT growth impacted the Pay TV segment in Italy, let me remember, on the satellite platform and also understandably considering the fact that the DTT is totally a free platform. For the future, the long-term vision that we have, the one -- let me say, assuming platform coexistence, already shared in the previous plan, remains totally confirmed considering the greater maturity achieved by OTT platforms, the evolution of the linear broadcast offer to better meet the demand of younger generations. The fact that some types of content are inevitably linear and DTT is the most efficient linear delivery mean. And lastly, also the requirements of the public service, our largest customer right and its contract with the state in terms of universality of coverage, let me say that this substantial continuity at platform level is also reflected in the stability of the broadcast network operator system with the structure at the national and regional level that was created after the completion of refarming and that you see summarized on slide 21, except for the possible allocation of the last available multiplex as we will see later. At the same time, the increased use of streaming video content through EP platform, whether of broadcasters, OTT-only operators, the so-called fast channels or gaming operators and other segment, that is experiencing very strong growth, is sharply boosting the need and demand in terms of traffic volumes for content delivery network solutions. In the Radio segment, sound customer alpha is expected to continue, thanks to the growing advertising revenues with the greater availability of frequencies freed up by the TV refarming, supporting the extension of the DAB network coverage, both nationally with possible benefit on networks managed by Rai and locally with benefits for our tower hosting activity. Turning now to the digital infrastructure market that we divided into tower and data center segments, the details are shown in slide 24 to 28. Precisely, as regards towers, at supply level, the number of broadcast towers is expected to remain basically stable while telco towers should grow to accommodate 5G network densification. In terms of hosting demand, the number of MNO PoPs is indeed set to increase, although mainly in urban areas and on captive telco towers, while broadcast towers are expected to benefit from both the upgrade of existing PoPs to 5G and the extension of DAB networks, as mentioned earlier, fixed wireless and albeit at lower rates, at lower tariff, also IoT. As regard tower companies at the international level, there are 2 major trends in the international landscape, consolidation and streamlining of local markets to pursue operating efficiencies and progressive diversification away from the pure passive components towards additional services and data center infrastructure. Both upstream with a small cell, thus run as a service, CDM and content management and downstream of the network architectures with backhauling connectivity and data centers. In the data center segment, we have already described the trends in the most recent calls, talking about the diversification project with a supply-demand balance in Italy that continues to remain positive, especially in certain areas and for certain applications. Demand for large data centers, so the data centers used towards the core system of large customers such as cloud providers, OTTs, telcos and so on, as well the demand for regional data centers to serve local clients and application require low latency is supported by very clear drivers that are technological. Think of the upgrade of 5G edge computing and artificial intelligence, structural drivers like the opening of new regions by global cloud providers and the trend towards outsourcing data rooms by corporations and public administration and regulatory drivers such as the GDPR. On the supply side, although it's improving, the availability of good quality assets remain inadequate compared to other countries with a similar degree of digitalization and highly geographically concentrated, essentially in the Milan area. This is reflected in an expected average annual growth of the data center segment, in particular, of the colocation of around 10% and even higher for the regional Edge assets. So let me now give the floor back to Roberto for the pillars of the plan. Thank you.

Thanks, Giancarlo. Now explained our vision of the pillar of the plan. By growth referencing our assets with market trends and with the priority of acting on the main levers of value creation, the plan includes 6 action areas, 6 group initiatives, which in order to provide an appropriate representation also in terms of the associated results, we have separated between traditional business and assets and diversification areas. It's a slide that a little bit dense of information that I think it's useful to represent all the meaning. For the international business, the strengthening of the activities by exploiting target growth opportunities, particularly to improve DAB coverage and our business responsiveness. Another is the greater utilization of assets that are currently only partially used for internal purposes, such as the transmission network and land portfolio -- detail about this will be provided shortly -- and improving operational efficiency, mainly by updating the operating model and streamlining the real estate footprint. In the diversification areas, reaccelerating the execution and marketing of the 2 expansion projects already underway, the CDN in order to expand our media distribution services positioning and the data center network to complement our digital infrastructure. Another pillar, which in view is potential value creation, we have specifically focused on is improving the capital structure by pursuing external growth, both as the means of achieving industrial synergies, increasing the efficiency and the cash generation of the traditional business and as an accelerator of new initiatives time-to-market. Go to the slide 32, capital allocation. Before moving on to briefly review the initiatives and [indiscernible] the capital allocation calls for investment of around EUR 100 million in traditional businesses and assets that, together with the initial trends such as CPI, full expected growth in adjusted EBITDA in 2027 of around 13% compared to 2023. This means EUR 24 million more and the CAGR of 3.2% more with an improvement in margins of 150 basis points. Furthermore, considering maintenance investment that net of certain non-recurring work will remain stable at around 6%, 7% of revenues. Recurring cash generation, we reached EUR 130 million for the core business, an increase of 15% compared to the 2023. Then investment relating to the diversification initiatives. Assuming the development by 2027 of the CDN of 10 hyperscale data center for more or less 3 megawatt, and the first data all of the hyperscale data center near Rome for 4.4 megawatt, the amounting to about EUR 140 million over the plan period. We are expected to provide an initial contribution to revenue growth of more than EUR 10 million in 2027. In terms of EBITDA, while the contribution of this investment is still expected to be marginal in 2027, they have the potential of generating more than EUR 50 million with no additional capex, with strong future scalability, linked to the further progressive development of the hyperscale data center. Just for example, assuming the completion of the first 2 models with additional capex of EUR 160 million, thus increasing capacity from 4 to 17 megawatt. The EBITDA potential will double to over EUR 30 million. The cumulative distribution to shareholders over the plan period of approximately EUR 350 million, equal to over 25% of the current market cap, numbers that are based on the assumed continuation of the policy of distributing 100% of the net profit with an average dividend yield of approximately close to 7%. And let me say, which, as you know, is currently the maximum possible level, consistent with our distributable reserves. A reminder of capital allocation that we guided to external growth according to the guidelines mentioned previously, indeed, development investment and shareholder distribution bring the net debt at the end of the plan, close to 1.5x the EBITDA, a level that not only enable the external growth, but make it even more important also as a tool to improve the capital structure. And now moving to slide 33, from the capital allocation, it is clear how compared to the previous plan, we aim to more than offset the opportunity represented in the recent past by TV refarming. Area of development are sought primarily outside the relationship with the tenant anchor Rai. But also, we have to consider the large investment carried out just in the recent past. The traditional business and assets continue to offer good opportunities for growth. Diversification projects. we will improve growth profile and sustainability in the medium to long term, enter a phase of deep execution. Slide 34, the value creation associated with the investment in major project is evident. Initiatives in the traditional business involved capex of around 5x the EBITDA generated. For the diversification initiatives, we still see an [ unlevered ] project and IRR level of more than 10%, equivalent to a capex on run rate EBITDA generation of slightly less than 10% compared to industry multiples that are basically doubled, primarily reflecting the significant growth outlook in these business areas. And now we could go to the initiative. Without going into too much detail, we now provide you with the flavor of the main initiatives, also to pass on you the sense of solidity behind them. Starting with the traditional business, on Media Network Management, apart from a few minor opportunities to improve Rai's digital terrestrial network quality and the initial installation of some 5G broadcast equipment in a few cities, mainly to - and few technological coverage for Rai Way and to support Rai on that. The most significant opportunity is for sure in DAB Radio. As a result of the TV refarming process, the availability of frequencies allocated to digital radio has now improved. 3 new national frequencies have been identified, which are currently being put out to tender, incentivizing coverage and several tenders, around 10, have been announced for regional network development. Here, there is an opportunity in terms of both extending network coverage for Rai, which is currently lower than the 2 other national consortium and increased hosting on towers for third-party operators. Another project including the plan involves the grab coverage of the main tunnels on the major motorway section with system that substantially like similar to radio DAS, distributed antenna system. On a side note, the potential awarding of the [ MUX 12 ], the last multiplex not yet allocated in the farming process since the 2 operators who inherited the rights of use on [indiscernible] were unable to come to share an agreement. This is a multiplex also based on the VHF frequencies, which Rai Way will have a competitive advantage, since it is the only operator with VHF antennas used in the past for the older Rai micro regional multiplex. But given the difficulties connected to the tender process to date due to some pending appeals, in the plan, we have assigned a very low and conservative probability. So this means that we are leaving a potential upside. On the tower hosting front, consistent with the market trends of cloud and above, the development opportunities lie mainly in upgrade of the existing point of presence of our MNO customers to 5G, rollout of fixed and wireless networks also taking advantage of the national recovery and resilience plan incentives for gray areas [ indexation ] for DAB radio networks. In this segment, internal action is probably even more important to optimize processes by reducing activation times in a highly competitive market. Now widening the role in the media value chain, slide 37. As for our position in the media services value chain, as you know, our focus is mainly on content distribution over IP networks rather than on other, more competitive or personal intensive sub-segments such as production, postproduction or play out. The development of our edge CDN is well underway. In the summer, we will begin trials with customers to test the features and performance. By the end of the year, we will be marketing a solution that is already quite widespread with the possibility, of course, to further increase in the number of cash and injection points. It is a regionalized distributed solution with features also low latency and carrier neutrality that we believe make it appealing within the multi-CDN strategy adopted by broadcaster or TD platform, fast channel, aggregation platforms or gaming operators, particularly for live linear content that develops more traffic causing server and telco backbone congestion. Keep in mind that this is also a project with a dual strategic value, providing a public national always-on media distribution assets to complement other private solutions, representing a guarantee of the sustainability of Rai Way's role even in the currently, let me say, an expected scenario of a more pronounced rebalancing of media distribution platform. Now we speak about the digital infra expansion, the slide 40. To complete our integrated digital infrastructure in addition to towers, a key role is played by the data center network. A network that will include several edge data centers varying from hundreds of kilowatt to 1 megawatt of power, which meet the demand for both high-quality local infrastructure as well as a low latency network for applications requiring very short processing and response time. We are speaking about the application of the edge computing. And one large modular hyperscale data center scalable to up to almost 40 megawatts towards the core system of major cloud, telco and corporate customers. All of these, as we will see shortly, will be interconnected via the national proprietary backbone, fiber optic reborn, which take me extended quickly and cost effectively to even the most remote areas using wireless technology that is in our DNA. Also in this case, there is a clear value proposition, in particular, based on passive hosting and carrier neutrality and synergies with existing assets. Let me share now an update of the [indiscernible] plan also after defining some design implementation principles to keep the best optimization. The first 5 edge data center in Milan, Turin Venice, [indiscernible] and Florence for about 1.6 megawatts of power, will be operational -- let me say, not delivered by operational, so interconnected and therefore, able to generate revenues by third quarter '24. On slide 42, the picture you see are not a rendering, but the actual at all. I think that you can get an idea of the quality and reality. Coverage of Central Southern Italy, Bologna Bari, [ Campania ] Sicily, reaching about 10 data centers over the next 2 years. A possibility of scaling up in other areas based on customer requests with benefits not included in the plan for now. And on the hyperscale front, the hyperscale data center, apart from confirming the rationale behind the choice of Rome as the next Italian region for larger cloud operators, the updates mainly regard authorization. The preliminary service conference, meaning the procedure during which comments are collected from various authorities has been initiated by the municipality of [ Metsa ] with strong support from their site, which has therefore agreed on the project. The timing of this step also depends, of course, on the comment raised, but so far in line with our expectations. Indeed, we are already working to address them. But the reasonable target could be to get the construction permits by the end of '24. Keep in mind that the permit itself will generate a good value to our properties. Then move on the final design, tendering and construction, assuming 12, 18 months for these activities, the estimate [indiscernible] in the plan is that the first room for 4.4 megawatts, half of the first module will be available and therefore start generating first revenues in the 2027.

The commercial approach and priorities on the data center, let me say that together with the acquisition of specific expertise and the internal reorganization aimed at providing a separate focus and appropriate level, the marketing of new services and infrastructure will involve direct relationship with major customers, which can be managed even without a particularly widespread salesforce while reaching the smaller customers, so the SMEs, through partnership with players such as system integrators, telco and brokers. Let me pass you a few messages on the current feedback that we are getting from prospects. First of all, I will say, openness to marketing partnership also due to the absence of any conflict of interest as we are focused on the more infrastructure component. Secondly, pending more significant uptake of low-latency services, we are collecting very good interest from cloud operators, ICT and local SMEs, interested in hosting at local data centers with high-quality standards like ours. And finally, although it's difficult to get real precommitment, especially when the assets are not going to begin operations quite soon, for example, for our hyperscale data centers, we are, in any case, approaching customers, let's say, potential initial anchors customers that will improve the investment risk-reward profile. Now moving to the other pillar in terms of valorization of internal assets, Roberto, I think you can take it.

Yes. When I say valorization of internal assets, I'm mainly referring to the transmission network and land portfolio, this and [ pathway ]investing in a proprietary fibrotic backbone of around 6,000 kilometers covering Italy regional capitals. This fiber is then complemented tender with IP radio links for senior distribution to the site. Of course, the network was originally created to give the best quality for contribution and distribution activities for Rai, but following the upgrade, we have spare capacity available for transport services that we could offer to data center customers to sell intra-data center connection, but also domestic international carriers. That's mainly on a wholesale basis that we want to complete their network, however, additional capacity in the event of saturation on the most popular network section or as a backup. In addition, the availability of towers and our experience in network planning and deployment, allow us to offer again on a wholesale infrastructure basis, so to carriers, which in turn sell connectivity to end customer, wireless point-to-point taxation to quickly and cost effectively reach venues in extremely remote areas that are covered by our towers. Let me emphasize that we do not intend to compete with carriers on connectivity, rather to support them. With regards to land, consider that our sites are not rooftops, but often proper campuses with large areas available beyond the tower. In some cases, for example, the former White Media facility is no longer used. We therefore analyzed about 40 plots of land covering over 200 hectares, 2 millions of square meters and identified some areas for development, in particular. The installation of solar power plants, so electro voltaic on a certain number of sites prioritized by sites and internal use data center for a potential target of around 40 megawatts. The investment will be borne by Rai Way with the management entrusted to a third party. In the plan, we also assumed criteria for selling the energy that reduced the exposure to price swings with the [indiscernible] that are nevertheless attractive compared to the reduced risk profile. This investment is also -- let me underline this point, consistent with the government support targets for production for renewable sources. It is in line with the company's commitment to environmental protection. Then operating efficiencies, go to the slide. Very briefly, the 5th pillar is the operational efficiency. We cannot forget them. EBITDA benefits have made it our starting point with EBITDA margin over 66% makes it challenging to pursue further efficiency. But basically, we evaluated 2 drivers that have been identified. The first is related to the digitalization of maintenance system based on predictive maintenance, maybe with some flavor of intelligent artificial solution. This consists of the installation of IoT sensors and monitoring systems on more than 1200 sites -- representing the largest maintenance workload. It is optimizing field force by relying on full prediction and increase the quality service level that we could grant. And then the [indiscernible] of offices and real estate portfolio that today representing a rental expenses of more than EUR 5 million based on space rent reduction and the smart office approach. Now we go to the improving capital structures like -- this is a very important to provide -- as we have previously commented on the goal of improving the capital structure through external growth. Obviously, this goal must be functional to the planned industrial objectives and, therefore, primary [indiscernible], industrial synergy, increasing the efficiency and cash generation of the traditional business and accelerating the time-to-market of new initiatives by acquiring assets and/or expertise and operating components. In the first area, apart from a few opportunities to consolidate appealing independent mid and small portfolio that we are looking for anyway, possibly increasing exposure to specific customer segments, especially radio, the relevant option, let me say, is well known, and we are not hiding from it. On our side, in inclusion, the [indiscernible] its strategic and industrial rationale. But rationale debt, of course, need to be more precisely quantified and evaluated also depending on the possible tests and condition. As commented at the beginning, due to the institutional regulatory and governance context is not only in our hands. Rai recently expressed interest in evaluating industrial development opportunities for the way. And we are working together with our adviser to constructively and proactively to give to all the stakeholders, the elements to make a decision. In the second area, the trend that we have anticipated of a separation already observed in the tower segment between service provider, EG, cloud and telco and data center infrastructure is beginning to materialize in the market. Our interest is mainly in independent asset with existing customer and development potential, asset spun off from [indiscernible] customers with simultaneous signing of a master service agreement. This would be from telco, ASPs, cloud providers, corporate and new assets replacing our construction. And in any case, geographical areas and technical qualitative features consistent with those of the network that we are planning and developing. Moving to the slide 52, regarding ESG, Adalberto has already commented on excellent results achieved so far on our pillars of sustainability. We place us among the best companies also in terms of ratings. With the new sustainability plan to 2027, we have broadened the topics to work on, confirmed key targets, such as carbon neutrality by 2025 and maintaining 100% of renewable energy use, and [indiscernible] made to strengthen cybersecurity, internal ESG, data control center. Let me now give the floor to a lot of numbers to Adalberto Pellegrino.

Let's go on with some numbers. So, thanks Roberto. So slide 55, you may see our standard representation of the main financials of the company with the target figures for the last year of our plan, 2027. All the key metrics show a positive trend of growth, with revenues that are expected to touch EUR 316 million in 2027. The long-term marginalities confirmed above 65%, a threshold we exceeded in 2023. And this, of course, is resulting in EUR 207 million of adjusted EBITDA. Net income is expected to reach EUR 92 million, impacted by growing D&A linked to our development capex. I remember over EUR 240 million on a cumulative basis that will continue to guarantee a solid path of growth even after the last year of the plan. Free cash flow to equity will reach EUR 130 million in 2027, more than 2x the IPO values. And last chart, net debt is forecasted at EUR 286 million at the end of 2027, 1.4x EBITDA, with an improved capital structure as a consequence of the development capex spending and the dividend policy, which I will give you some more details on the next slide. I was quick on this first America slide because we now have a detail for each of those key metrics. So let's go on with the following slide, 56. Before entering into details, just a quick foreword relating to the new breakdown of our core revenues, in particular, under media distribution we have included, and we will include the following revenues: rise service contract, broadcasting, transmission, network services and CDN. In 2022, total revenues from media distribution amounted approximately EUR 241 million. On the other side, under digital infrastructure revenues, we have included revenue arising from tower hosting, connectivity, edge data center and hyperscale data center. In 2022, total revenues from digital infrastructure amounted to EUR 31 million. Finally, other revenues are related to land [indiscernible] mainly concerning the solar energy production initiative that in 2023 didn't register any revenues. Another important breakdown we will provide is the one between traditional business and diversification initiatives. As already highlighted by Roberto, the latter includes one item of the media distribution revenue, CDN and 2 items of the digital infrastructure revenues at data center and hyperscale data center. All the other revenues are part of the traditional business. Following slide, let's -- okay, let's move to 57. Slide 57, as you may see, we expect to reach EUR 316 million at the end of the plan, with an average year-on-year growth of 3.8% over the next 4 years. So the expected contribution from the diversification initiative in 2027 will be greater than EUR 10 million. And please let me clarify that this is not the full run rate impact because the EUR 140 million capex to be spent till 2027 on the diversification projects could generate up to EUR 40 million of revenues, as you may see in the slide. And even more than EUR 70 million, assuming further capex on the hyperscale data center to increase the capacity from 4.4 megawatts assuming the plan to approximately 18 megawatts Media Distribution revenues, we reached EUR 266 million in 2027 with a CAGR of 9%, thanks to new services to drive mainly related to DAS coverage extension and to the launch of CDN services with an overall CAGR of 2.5%, with digital infrastructure will touch EUR 44 million, leveraging on the progressive growth of the revenues from the edge data center connectivity and on the launch of the services in our hyperscale data center forecasted in the last year of our plan. So a very interesting growth rate. Let's now move to the following slide on the EBITDA. Next, we expect a growth of 3.5% on a yearly basis on the adjusted EBITDA that is expected to exceed EUR 200 million in the last year of the plan, reaching the amount of EUR 207 million in 2027. In the first year of the plan, the EBITDA growth is held back by start-up cost of diversification services. Furthermore, from 2026, the effect of efficiency measures and on traditional business will gradually begin to materialize more significantly as well as the results of new initiatives, such as the energy solar production project, which has a very high marginality, and will begin to support the overall financials starting from 2026. Headcount will increase over the years of the plan of about 30 units to support the diversification initiative expansion on the traditional business. The introduction of productive maintenance will help to enhance efficiencies in operating model as Roberto already commented. Notwithstanding the impact of the diversification initiative, the overall EBITDA marginality in 2027, as I mentioned, is confirmable the threshold of 65%. Marginality on core business, excluding the diversification initiative is expected to continue to grow. In 4 years, it will gain almost 150 basis points. As you may see in the slide, the effected contribution from diversification initiative in 2027 is limited to EUR 1 million. And in the long term, it should exceed EUR 15 million considering the development capex forecasted within the industrial plan time horizon, reflecting the typical return profile of infrastructure initiatives. Assuming a further investment to increase the capacity of the hyperscale data center to about 18 megawatt, the impact on EBITDA related to all these initiatives will be even higher than EUR 30 million on a run rate level with strong scalability. Following slide, 59, maintenance capex, excluding an extraordinary project due to the construction of some towers, a very limited number of towers, the overall ratio of maintenance capex to revenues should be equal to 6.5% on average. The industrial plan foresees total development investment on an organic basis of EUR 240 million, of which about EUR 100 million relating to growth opportunity of the traditional business and roughly EUR 140 million linked to the rollout of diversification initiatives, assuming, let me recall, again, for 2027, the completion of CDN, 10 edge data center and the development of the first hyperscale data center data all for 4.4 megawatts. [ IPXscale ] data center is the project that is expected to have the most important impact on capex with a total spending of EUR 77 million. Following slide no 60, cash generation to shareholders will remain very strong during the whole plan as shown here. 2027 free cash flow to equity target of EUR 130 million is EUR 16 million higher than 2023 level with a broadly neutral contribution from diversification initiatives and very light reduction in 2024 and 2025, due to interest rate that [indiscernible]. If we think in terms of yield, the current 9% is expected to grow up to 10% based on current stock prices. Let's go on. Net income is impacted by the growing trend of the D&A mainly due to the development capex that we commented, and to a manner and extent due to the increase in financial interest. Notwithstanding the mentioned trend, net income will reach approximately EUR 92 million in 2027 with a growth of EUR 5 million vis-a-vis 2020 figures. Also in this industrial plan, incontinuity with the past, the proposed payout ratio is around 100% of net income, resulting in an average dividend yield of approximately 7%. This means an expected distribution of approximately EUR 350 million on a cumulative basis in the 4 years of the plan, equal more or less to 20 -- actually more than 25% of our current market cap. Last slide, #62, containing a final overview of the capital structure evolution in the next 4 years. Considering the organic capex plan as well as the continuation of the dividend policy based on the 100% net income distribution, 2027 net debt will be around 1.4x the adjusted EBITDA, confirming our flexibility to push external growth with a sustainable level of financial leverage that we believe is between 3 and 4x the adjusted EBITDA. That's really all on my side, and I will hand over to Roberto for the closing remarks. Thanks.

Thanks, Adalberto. As you see, we have outlined the assets, the positioning, initiatives and target of [indiscernible] plan with a very clear industrial path, consistent with the company infrastructure, [indiscernible] and expertise. Focus and effort on 2 segments: Media distribution services and digital infrastructure. So complementing our traditional broadcast management of networks and services. Let me say that we will maintain a strong care on this segment also because we respect our clients, our customers like Rai regional broadcaster and all our customers today. Then traditionally, business and assets continue to offer targeted growth opportunities coming from network extension, thanks, let us remember, to a unique business model, efficiency or the better utilization of assets, but this cannot be all. We have to secure -- we feel this kind of responsibility, long-term growth, and now is the time to do it. We confirm the diversification path undertaken even after the comprehensive new Board assessment. The path consistent with the company profile with synergies, with existing assets and expertise, with acceptable level of competition, with growth and results, we are creating one of the most modern interconnecting high-performance digital infrastructure for network and data hosting, understanding our media distribution services to the new platform. We're also committed to accelerating the strategy of efficiency and diversification also through external growth by exploit our high financial flexibility, let me say, a rare feature in this sector. I know that many of you consider it to be a limitation, but today, we could see as a competitive advantage for Rai Way. Slide 65. The fact that while preserving the company's strengths appreciated by the market addresses all the main levers to unlock the full value of our company, announcing the cash generation of current assets, getting retools and improved long-term outlook from expansion into synergistic business area, obtaining industrial benefits from external growth opportunities and improving returns reaching a more efficient capital structure and size scale. So let me say the priority is very clear in our mind, in the short term, priorities lie in completing the assets, finalizing first commercial agreements and trying to accelerate external growth. Now the focus shift to execution and this, we can assure you our full commitment to deliver greater and good shareholders' value. That's really on our side. Thank you for the [indiscernible]. Sorry for the length of this presentation, but was needed, and we can now open the line for the Q&A session. Thank you.

This is the Chorus Call conference operator; we will now begin the question-and-answer session. [Operator Instructions] The first question is from Fabio Pavan of Mediobanca.

Thank you for the detailed presentation. I have 2 questions, please. The first one is referring to new business opportunities. You mentioned in the presentation, you already started discussing with customers' potential anchoring investors, anchor clients. So could you provide us some more details on how this system will work. We're talking about long-lasting contracts. You said that there is no recommitment, but how confident are you in meeting the targets on that part of new business? And the second question is more - and for one, just to summarize, if I understood properly, when we look at this plan, conclusion seems to be there are a lot of upside left, first one on traditional business. Other one is on a potential speed-up in investments to increase capacity of edge computing or hyperscaler, and finally, sector consolidation.

Fabio, let me start with your first question. Let me say that during the presentation, we tried to give you a bit of flavor on the marketing activities, on the new assets, both on CDN and edge data centers. Let me say that your question is how -- let me say -- confident we are. I would say that we are relatively -- the confidence is good. It's really good based on the feedback that we are getting right now. Let me say that in terms of the CDN, we have seen customers very interested in trying, in testing our solution. You know that there are other solutions on the market, but we are addressing a very interesting niche, the one for -- mainly for linear distribution where we see our solution having a competitive and technological and performance advantages and the interest in trials is very supporting. As for the data centers, let me say that what is - a certain extent also surprising us is the very good interest and level of demand that we are getting for -- from local clients. You know there are a little bit of -- I would say -- delays in the uptake of real edge computing applications. But the consensus is that sooner or later, this application will come. But there is a strong interest for our assets as regional assets. So not as hedge asset, but as a regional proximity assets from customers that today, if they want to move their servers in high-quality assets, they need to put them hundreds and thousands kilometers away from their headquarter or venues. So very good interest on that front. On the hyperscale data centers, as we said during the presentation, I mean the construction, the authorization process and the construction will take a little bit of time. We are approaching nevertheless customers, potential [ anchor ] customers. And let me say that the interest that we are getting again is very good, both for our asset or potentially also to develop new assets, in particular in the Rome area and in the south of Italy. So let me say, you summarized pretty well the situation. The answer is that the feedback that we are getting so far are good. While concerning your second question, Roberto?

So Fabio, in terms of upside left, I would say, on the traditional services, we -- for sure, we are monitoring the market in order to understand if there will be any better opportunity for a better extension of the DAB or some other projects in relation to the potential management of the entire part of the [indiscernible]. But I would focus on the diversification that could represent an upside more after the business plan time horizon because especially on -- as you mentioned, and as we highlighted on the core revenues and on the EBITDA, you see that clearly the potentiality of our development investment on diversification will have a full impact after the last year of our plan, and this is, for sure, something that may represent something interesting in terms of future growth. And then last point, sector consolidation, the potential sector consolidation is a potential upside as you mentioned.

Let me add on the last point of Fabio's -- I am Roberto. As I told in the past, I think that we have to see and to evaluate this company for what it is and for what about is would like to be. And the consolidation is something that I was very clear on that. We have to see a very interesting upside according to the condition, but it's really something that we would like to put as an add-on on the evaluation of the efforts that we are doing to move the company. We are moving the company. We have moved the company in a reasonable thing way, taking some risk. But if there are no risk, there is no margin value creation, and so this is our path.

The next question is from Stefano Gamberini, Equita Sim.

A few questions also from my side, if I may. First of all, regarding your current capital structure that you said is under geared at 1.4x EBITDA, but you don't have a reserve to distribute in order to improve this leverage and giving back money to the shareholders. This could be a way. So my question is, in case of M&A deal and the opportunity to improve the -- we can say, your equity ratios in a new combined entity, could you consider to releverage your company and moving in the comfort zone 3.5x, 4x debt EBITDA paying an extraordinary dividend or a buyback, what is the preferred tool that you may have in this case. So my question is, okay, expansion in traditional is an add-on, but I think that the market is interested to understand if this could be a way paying extraordinary dividend in case of possibility because of improvement in the equity ratios. The second in case of a deal with towers, do you consider that an alignment of the contract structure of the 2 companies, mainly related to the 2 [indiscernible], MSE on one side and Rai on the other is necessary? The second topic, in my view, is the trend of net debt. If I had on one side, EUR 140 million development capex, EUR 350 million of dividends and on the other, around 490 million of recurring free cash flow as an average of the EUR 115 million and EUR 130 million per year that you expect, I get a worsening of net debt in the region of EUR 100 million between '23 and '27, while your target is EUR 80 million higher. Could you help us to understand better why -- the third, if I may, as regard the EUR 25 million EBITDA improving of traditional EBITDA, you underline, -- could you help us to understand what is the backdown between the -- we can say -- homogenous growth and the different breakdown among the EUR 100 million investments that you will invest, sorry, in the next years? Because if I understood correctly, from other revenues, which means solar activities, you expect just EUR 5 million revenues in 2027. So it is not clear to me to understand better what are the different investments and the returns you expect? Finally, very finally, if you help us understand, which is the part of revenues that you will have at the end of the plan from Rai and what part is included in your long-term service contract [indiscernible] dated for CPI annually as a total and how the rest of revenues works in your plan?

So let me try to give an answer on your questions. Let's start -- the last question was on the component on the weight of the Rai revenues, on the total amount of revenues we recorded on the end of the plan that is EUR 350 million. Roughly, we should be close to 80%. Then all -- I'm not clear what you were saying about the CPI, but all the contract -- all the revenues related to the contract with Rai, are, of course, linked to the CPI that was 0.3% in 2024, and then we assume 1.5% in the following years.

The third question was related to the fact that you will receive additional revenue, for example, from the exploiting of DAB in the future from Rai. Are this also included in the contract service or not? Do you have also a part of Rai's revenues excluded?

No, no. It -- these revenues are going to be included in the contract. Technically, they are called [ service volatility ] that is a specific clause of the contract that regards or the new needs of our clients. And so we will include inside the contract as we did also for the other initiatives in the past. Then same we did for refarming. Just to be clear, even if the refarming at the end has been reclassified in the main fixed consideration. But at the beginning, we treated as new services, this -- that according to the contract is called service volatility. Again, about the trend of the net debt, actually, I tried to write the figures you mentioned, probably on which it's better to have a catch up later. But just let me give you some highlights. Probably the free cash flow to equity is a little bit lower than the figure that you mentioned. Just because in the first year, we -- as you may see in the slide, in the specific slide on the free cash flow to equity [indiscernible], you may see in 2024, 2025 figures that will be below the amount we recorded at the end of 2023. And then there will be some impact coming to the -- linked to the working capital dynamics, in particular in 2027, we should have a decrease of the net working capital due to the decrease of the capex vis-a-vis the previous period. And then -- of course, then we will -- we may -- we may analyze better this in a specific call in order to show and to share your figures and give you the best help to have a better understanding of the overall dynamics of our net debt. As concerned, other question, it was on the potential deal with [ 8 hours ] about potential alignment of the contract, of course, let's see the potential deal and then if we…

Let me add something on that, Roberto speaking. When I say that we have to confirm the rationale that in principle from the strategic industrial point of view are interesting, of course. When I say that the condition also should be exploit, when I say condition, one is one of this condition, we have to exploit. Of course, this kind of any kind of -- at least from the Rai side, everything should be performed to create value, a good feedback for shall shareholders.

Okay. Then in terms of reserve, yes, as you correctly mentioned, we don't have available reserve as of today. But according to the potential consolidation of the market, we could start to book available reserve assuming the deal. And this, for sure, will give us flexibility to change in a faster way our capital structure if required. -- consider that if the consolidation happened, the net debt level for sure, will increase because we will include the net debt of the other entity, but we should still remain below the 3x the EBITDA. This means, as you mentioned, that we have flexibility to improve our capital structure with some more debt. But let's see which will be -- it's quite early now to elaborate on this. Of course, we should analyze organic opportunities. As we discussed, we have a lot of investment in the plan and also after. Alternatively, of course, we will have theoretically this alternative that should be materialized in case of a merger.

While your last question on the contributions of the various -- let me say -- projects on the growth of our adjusted EBITDA, in particular, in terms of traditional businesses. We have put here and there in the presentation all the information. So let me help you. We are guiding for an improvement in the adjusted EBITDA of the traditional business of around EUR 24 million. Then if you look on slide 33, the EBITDA coming from the investment projects amount to around EUR 14 million. This means that EUR 10 million is more related to the -- let's call it,-- initial or recurring business, so basically CPI -- the remaining EUR 14 million of adjusted EBITDA increase is related to the contribution of new projects. Just to give you an indication, I would say that out of this EUR 14 million, 1/3 will come from new projects to Rai, 1/3 from valorization of internal assets and 1/3 from other projects to third parties and efficiencies .

The next question is from Giorgio Tavolini from Intermonte SIM.

I'm struggling to reconcile the reclassification of historical core revenues for 2023, particularly the transition from third parties revenues that was EUR 42 million in 2023. And now you expect under the new representation roughly EUR 31 million under the digital infrastructure revenues. So I was wondering what is the EUR 11 million portion of third-party services now being reclassified, if I understand correctly, in the media distribution category. The second question is on the capex allocated to the data center initiatives. In your previous guidance, you were indicating something like EUR 200 million capex, applying 10x capex EBITDA multiple, it was expected to result in a run rate of roughly EUR 20 million in the longer term. Now your guidance suggests a capex cycle of EUR 138 million. So with a 9x multiple, so leading to a run rate of roughly EUR 15 million without requiring further capex investments. So I was wondering if it's an accurate understanding mine and in particular, could you provide insight on the level of development capex allocated to the data center initiatives in 2023, since I think maybe the 2023, 2027 capex envelope is just a portion of the investments that you already made some investments. And I was wondering if there was a rightsizing of the capex spending or if you are, let's say, not considering the entire envelope in your calculations. The very last question is on the long-term EBITDA margin. I see in 2027, the profitability stabilizing at 65%, more than 65%. And in the longer term, you expect benefits from the scalability of the business related to the data center. So I was wondering what is a rational, let's say, a fair level of profitability, looking at the longer term when the data center upside will be materializing?

So Giorgio, take all your questions. On the first one, the reconciliation of revenues. Basically, the big part that is moving from third parties under the mid distribution is related to the regional refarming. So the -- basically, the frequency spent out to regional broadcasters that, of course, today is under the third parties being not buy. And -- but it's, let me say, a media distribution service. Then there are other -- let me say -- minor services related to broadcasting and transmission services while under the digital infrastructure, you will find mainly the tower hosting and tower rental component. Then coming to your second question on the capex on diversification, no, basically compared to the number that you just mentioned that you have in mind, the scope is a little bit different. We are guiding for EUR 140 million of investments in diversification initiatives. And then you have to sum up the EUR 20 million that we have spent so far. So let me say, in 2022 and in 2023, so you will end up in having 160 million. Then compared to the EUR 200 million that you have in mind, the gap is basically linked to the fact that the EUR 200 million was based on the deployment of the first module of the hyperscale data centers. While as of today, by 2027, we are including only half of the first module. So let me say that it's a difference in the scope, in the perimeter of the assets that we are developing, but there are no changes at all in terms of total spending and returns that we expect from these assets. Indeed, I mean, if you look at the run rate contribution at the rate level, it's again consistent to the ratio in terms of leveraged IRR in terms of, let me say, capex on EBITDA generation, we have always guided for. Last question on the EBITDA margin, let's put this way. I'll try to put it very simple. On the traditional business, let me say that we will reach by the end of the plan, 68%. It's a very good level then going forward, let's see, but always keep in mind that the CPI link in principle, should increase over time the profitability flowing entirely into EBITDA. While in terms of diversification initiatives, of course, in 2027, they will have a dilutive effect, given that they will bring more than EUR 10 million in terms of revenues and basically [indiscernible] EBITDA, but the indication I can give you is that on a steady-state run rate, the level of EBITDA margin for these businesses is around 40% to 50%.

The next question is from Antonella Frongillo, Intesa Sanpaolo.

Yes. And many thanks for the presentation. Just a couple of follow-up questions and then another 2 questions. So the first follow-up question is on the EBITDA breakdown in the target of the 2027 target, the EUR 24 million you were previously mentioning. You said that EUR 10 million is initial and 14 million from new projects. Could you help us understand how much is the impact of the startup costs of new initiatives that you also mentioned in your press release? And the second follow-up is on the new businesses not from Rai. Is it fair to say that over the long term, also this business will be [indiscernible]? And then I have a question on the contract -- service contract with Rai, the next expiry date is in 2028. So just 1 year after the end of this business plan. I know that it's still very early, but you know that we have to make valuations based on a long-term horizon. So how should we reason on that renewal? And very, very last question is on consolidation. We read on the newspapers this morning several things, among which are that you have appointed an adviser to evaluate potential consolidation. So can you confirm if you appointed an adviser or not?

So we can confirm it, of course. Actually, I read about this also in the past. This is not the first time I read it. Anyway, let's go on with the question on the number and on the other matters. If I remember that you mentioned the expiration -- the next expiration of the contract with Rai and 2028, this is not related to the last year of our business plan. Simply, we -- I believe same duration was in the previous business plan. Actually, we end in 2027, adding one more year in order to reach the breakeven of the diversification initiatives in order to give some more color on the evolution of these important projects. As concern the new businesses and the potential link to the CPI, we expect to have a link to the CPI also on the stream of revenues. And then last question was on the EBITDA 2027, the breakdown. Probably if you may just repeat the question, I can try to give you to give you an answer. If I wrote in an appropriate way, what you said, you mentioned the start-up cost, how this is going to impact on the trend of the EBITDA?

Yes. Correct. How much are they?

In absolute number, you will see in the slide, we are not talking about a big number, minus EUR 3 million, minus EUR 4 million on a yearly basis of all the initiatives. And then we're starting from minus 1 and the target is to have the breakeven in 2027.

A follow-up question on the [indiscernible] contracts with Rai.

Sorry, yes. I forgot the second part of your question. We didn't see any impact. We expect to have a renewal. And so I don't see any significant issue on this. So at the end of 2028, we expect to have a renewal like the one we had at the end of the first 7 years of contract.

So at the same terms as now. Yes.

[Operator Instructions] Gentlemen, Mr. Moretti, there are no more questions registered at this time. I turn the conference back to you for any closing remarks.

Thank you. The call is over. We thank you all the participants and look forward for further questions by phone or e-mail. Thank you, everybody.