Telekom Austria AG (TA1.F) Earnings Call Transcript & Summary

Over to Alejandro Plater, CEO of A1 Group.

Thank you very much, and welcome to this Capital Markets Day. I mean the first one that we have done in quite a long time. And of course, this time, we have a special occasions since we will go a little bit more in detail in the creation of EuroTeleSites. So we have to prepared a little bit of an agenda for you where we will cover a little bit the A1 investment profile, and we will be going back into history, what we have done so far, what our plans into the future. Thomas will cover a little bit more details on the transaction per se, including the impacts on A1, and then we will hand over to the new management of ETS to go through more in detail into the tower business and the future company and the future plans of the tower company. So that's basically what we have prepared for you. We will have 2 blocks for questions, 1 after the introductory part about the A1 Group, and then there's going to be another Q&A after the ETS presentation. So if I move forward, let me give you a nutshell what A1 stands for. We are the leading telco company across Austria and part of the CEE. We have a well-balanced performance, a mixture of stability in Austria. I will go a little bit into details there with high growth in the CEE countries. I will also show to you some data supporting that statement. We have been growing very solid. We have a very solid balance sheet as well, a sustainable dividend policy, we will cover a little bit more details on that. So today, we have EUR 5 billion in revenue. This is 2022 full year data a EUR 1.8 billion EBITDA, 27 million customers throughout the footprint, and we have roughly 18,000 employees. If I go a little bit more in the composition of our business, you can see in the upper left part of the graph in which position we are in each market, which gives you also an indication of our true future prospects as well. Where do we see growth potential. So of course, in Austria, we are the former incumbents with high market shares in mobile and high market shares in fixed, and will very well-developed B2B digital or ICT business. We have almost 50% market share in the market. In the other countries, in the CEE, you can see that we are more the second player, the challenger player in some countries with a more strong position like in Bulgaria or Croatia in another more the challenger like in Slovenia and Serbia. When you see basically the business, like roughly 50% of our business is coming from Austria in terms of revenue and EBITDA, a little bit more on cash flow. And you see also that the growth profile of these 2 platforms is pretty different. So you see in the first half of 2023, that our growth in Austria was close to 3% where in the CEE market was above 10%. So you see this combination of a very solid platform with high market shares in Austria with a very stable business and a lot of growth potential in CEE. And we will move forward, you will see that, that performance would be maintained over time. Yes, please. So let me go into a little bit more details on what Thomas and myself, we have been doing in the last 5, 6 years together here in the company. So you see that our revenue growth has been almost 3%. And taking into account that 2020, we saw a little bit of a reduced revenue due to the corona impact. Otherwise, the CAGR will be a little bit higher than that. Very consistent EBITDA growth also of 3%, 4%. Basically, with a very stable across platform while enjoying the revenue growth, we're converting the majority of this revenue growth into EBITDA and therefore, as well in cash flow. You also see some issues on 2020 and 2019. But after that, you can see that free cash has been growing very well. And hence, our dividend policy has been also reflecting these, plus we stated our dividend policy that as our operational performance improves our dividend policy will also be improved. And you see in the graph how this has been reflected over the years. Now we always look at our peers, and we have been doing this analysis for now many, many years, where we take the same peer group, and we will compare our performance to the peer group. And this we have selected basically companies in Europe that have a similar profile as we do. And basically, you can see there that we have been outperforming in revenue growth as well as EBITDA growth all our peers in Europe, and that performance has accelerated actually when you look at the right columns, you will see that the gap between us and our European peers have accelerated in the last couple of years. So it's an indication that we are taking the right decisions on how we are addressing the market. And the other thing that was very important for us and it was a focus area was to work on our leverage level. And then you can see that we have been reducing our leverage level substantially. I think we had to keep the peak of something around [ 3.5% ], and now after the spinoff of ETS, we will be around [ 0.4% ]. And of course, we think that this is a suboptimal capital allocation, and we will cover what we are planning to do with this because we don't think that this is the leverage level that we should keep on the long run, and we will cover this a little bit more moving forward. And of course, all these activities, the performance, the deleverage of the company has been reflected in how the rating agencies are looking at us. And you can see basically, in this case, a Standard & Poor's, but you can look also at the other credit agencies, how they have been improving our rating over time. Now we are rated among the best European telcos, you can clearly see that performance. So that is basically looking a little bit back. But let me tell you -- give you a little bit more insight on what has been the drivers of this performance, where we have been focusing the last couple of years to generate this performance. And as a nutshell, to just select a few of those drivers we will be focusing for. So what is we decided to go monobrand. So we were operating with several brands in several countries, not only one different brand for country, but also we have an array of different brands within a country, which was created in our analysis a little bit of lack of a clear proposition positioning of the companies in the market. So that was an area that we focused. The second one was the B2B digital portfolio or the ICT portfolio, where we thought that there was a lot of growth potential by upselling customers from connectivity into more digital and high ICT solutions. The third one is a lot of focus in commercial execution, and I will cover a little bit some insights there. And the fourth one was this concept of one company, which was one too many, not let's remove -- let's not do the 7x, I will cover a little bit some insights on what we have been executing on that. But if I move into the unified brand, this is a study you have the reference in the bottom of the page that we have seen that as soon as we migrated into a monobrand, as soon as we have put all our efforts in terms of investments, communications and a more clear proposition and value proposition to our customers, the value of the brand -- A1 brand has increased basically 3x. This is an Austria study, but you can clearly see how much the A1 brand value has increased. Now we are the third most valuable brand in Austria after very famous brands as Erste and Red Bull. So the way to position -- reposition the company as a premium telco player in the region, not only in Austria, we believe that has paid off. If I move into the digital portfolio. And this is something that we have been working a lot. And I think that moving forward, you will see that we are thinking that we can even materialize even more opportunities. This has been the growth -- average growth rate the last couple of years, our digital B2B portfolio, where we have been growing an average of 34%. So that's basically 4, 5x faster than the traditional telco business, and we see a lot of potential here, not only in the digital portfolio, but also in the managed portfolio. I will cover that a little bit when we talk about how we see growth into the future. We see this trend, we call it as managed everything, not managed IT, managed security, managed productivity. So we see this big trend of companies offloading more and more responsibility to companies like us. But until now we have been focused a lot on the digital portfolio, you see that the growth rates and just an example of what kind of new services we have been able to develop and to monetize. If I move forward, and there was a lot of focus on commercial strategy and commercial excellence. So the majority of our efforts was about how to upsell the base smartly. And I think most of our revenue growth is coming from upselling the base. Of course, we have also a growth in new customers, but there was a lot of focus in upselling the base smartly in Austria. A lot of focus in offsetting the fixed base to higher speeds. We have discussed this in many of our investor calls, the focus on upselling, upselling and how to monetize that slowly and surely. So every step we should see some value being created in terms of the speed that we deliver. In the future, we will focus on something else. I will show you a little bit something that we call connectivity plus, which is how to take this concept to improve speed to all the rooms of your households. I will show a little bit more detail on that. Also, big investments and focus in having the best mobile networks. I expect one country today. We have the best mobile networks basically everywhere we are second very close to the first one, which is our target to be number one or second, very close to the first one, you see some examples of prizes prices that we have won is a value proposition that for us is very important in our market is part of the A1 brand. And 2 more comments One is, especially in Austria, but in all the other markets we have been working in the fixed plan with a more technology-agnostic approach where depending on the quality of our infrastructure and customer needs, we were playing with fiber assets or fixed assets as well as XXXXXXXXXXXXXX ]. And you have seen that through all our costs, how we were playing in this market, we call it Internet of home, trying to take ourselves from the discussion is the fixed or mobile and focus more in what creates value for the customer, as we call it in our strategy how to become relevant to our customers. And the last one, which we don't talk about, but it was also very important. We have been very active doing a small M&A, focusing primarily in how to complement either the infrastructure that we own in the countries or the portfolio that we own in the countries. And if we move to the next one, you will see basically a list of companies that we have acquired in the last 6, 7 years. We have invested EUR 500 million. And despite of this, we managed to lower the debt substantially. So we have been very targeted in buying other companies to our complementing infrastructure, especially and fixed. And on the other side, complementing the portfolio, especially the ICT portfolio as we did a few acquisitions in Austria. The third concept that we were focusing a lot on fourth -- sorry, is this concept of one company. And this was a been for the company, how to move out from this silo country thinking in more a common multi-country platform. And then you see a little bit of concrete examples that we have been implemented like a standardized SAP system, standardized security platform and in the go-to-market and standardized TV platform. So a lot of solutions since we operate in relatively small countries, we cannot afford to have one solution for -- per each country, we need to go into more multi-country approach in terms of back-end platforms but also front-end platforms like the TV efforts that we are doing. That has created a lot of better time to market. So now we are in a situation where we are able to develop solutions faster and our ability to deploy it in the market in the past was exactly the opposite. Having said that, I need to talk a little bit about what we are planning to do moving forward. In some areas reinforcing what we are doing, in some areas is changing a little bit what we are doing. So this is a view for the next 3, 4 years. So what you see now is our strategy. And our strategy is focused basically, as we call it the human in the center because believe that the employees are in the center of our transformation, and we want to make that very visible. But for the sake of time, I will focus only in 2 aspects of our strategy. One is something that we call move the organization from a product-oriented organization into a customer journey oriented organization. So if I move into that a little bit, we see 2 big trends. Of course, we see that there is a need for consumers in this time to be -- offer a little bit more personalized offers. And personalized offer doesn't mean that we need to offer the right solutions. But what is even more important is at the right time. And we are very far away from this, still our up-selling and cross-selling activities are not very personalized, not in the type of offer neither on the time of the offer. And we have a lot of synergies to win out of that if we just manage to create this customer journey-centric organization where we focus on these 2 concepts than what and the time, especially. And also, we see that in the residential segment or in the consumer segment. On the business segment, we see this big trend of, as we call it, managed everything. So we see this trend starting with large corporations first, but we believe that it's going to move more and more to SMEs that companies wants to move from sourcing connectivity to moving more connectivity as a service with this combination of fiber assets plus SD-WAN and then you move security as a service and then you do IT as a service. So we are seeing a big trend in our footprint on this managed everything. And for us, it's a great growth opportunity if we manage to come up with a good strategy, how to customize in the front end but standardized in the back end. I don't have time to go through all of these now, but maybe we'll come to a target point in one of our investor calls. When we talk about the journey, there is a lot of discussions, and there is a lot of change that we as a company has to do to implement this because there is a lot of change in the mindset, our organization as well as how we measure these things. And this is related very much that instead of trying to optimize products and customers, we will need to try to optimize value on the lifetime of the customer, and how to extract the most of the value out of this. This is what we are implementing now in the organization. I think it's going to be a big change in terms of the thinking from moving into a product-oriented organization into putting more the customer in the center and the journey as identifying the value proposition. The other area where we want to focus a lot is to evolve this concept of what best network is, what best quality is to again put more the customer in the center. And then we created a concept that we call -- we move to next one called connectivity plus. So today, we have been focusing a lot on press network program, which is basically the quality of the speed. There's something that we call the integrity index. It's not only the speed, it's the latencies and a few factors that we measure on the integrity of the network. So that's what we have been focusing in the last couple of years on the best network program, which was focusing a lot on integrity of the network, which is the service at the phone or at the modem. Now we want to move into new concepts that we started to work on. One is from the network to the device, and we have a lot of work to do there, not only in the mobile parts, but especially on the fixed network. When you talk about the type of devices that we have in the households, how many devices, how is the WiFi connectivity, the quality of the WiFi connectivity. There is a lot of dependence in the quality of the WiFi, in the type of device, type of modems that we use in the households. And we are doing a modernization program on that. And we believe that this will improve customer experience a lot. But we don't stop there, then we want to work on the application aspect. So the streaming quality end-to-end, not now the bandwidth, but now the streams within the bandwidth, and we are doing a set of activities to start to ensure the quality of those streams. And then there is the last one, which is like our biggest ambition to just not think about the quality in terms of network device and applications but the end-to-end journey of the customer, which includes other aspects of these journeys. So basically, all this results in an ambition moving forward with this ambition for the next 3 years. So assuming that currencies will develop as we expected, especially the Belarusian currency and assuming that inflation will develop as we expect in our plans. We expect revenue growth between 3% and 4% for the coming years. EBITDA growth of 4% to 5%, a stable CapEx for the next 3 years of accumulated EUR 2.8 billion. With dividends, we see it as a baseline of [ EUR 0.32 ] with the same comments as before, improvements of the dividends will be basically based on our operational performance. If our operational performance keeps of improvement, we will reflect this improvements in our performance, in our dividend policy. So having said that, I would like to hand over now to Thomas to drive us through the transaction in more detail and also the implications in our company.

Thank you, Alejandro. Before we go into more details on the transaction in order to explain the rationale for the transaction, let's maybe take a little bit of a step aside. And when we have been thinking about the transaction, we have been thinking a lot in the past years looking into adjacent business models. And Alejandro has described a few and a few steps we take to respond to new players which address our business model as an integrated telco. So for example, the move into the ICT business in the B2B segment, Alejandro has just described, or our ambition to scale up our business or to make our business more customer-centric in order to address the hyperscalers. So now if you look into the infrastructure part, this is a bit more specific. And we have seen over the past years, the number of infrastructure companies rising into the market, which has -- which are very different business models than we do have. And the specifics here are we see much higher valuations than in an integrated telco or 3x or even more, as you can see on the slide. These infrastructure companies have much higher debt capacity. They have the ability to address additional revenues outside of the integrated telco model coming from our competitors. At the same time, we were asking ourselves, do we have the ability to address these new additional businesses within our core business or do we have to take another step. And one of the main reasons we have decided to separate is that we do believe that this infrastructure businesses, they require more independence and also because we do believe that this business model is not as core to our activities as other areas where we want to invest into the fiber deployments where we want to invest into making our business more customer-centric where we want to invest into the ICT business. And why is that? And now we take a little bit on the next slide. And I think for most of you this is a reminder look into what we actually talk about when we look into this transaction. You see here on the upper part of the slide, 2 examples of typical sites. On the left-hand side, the rooftop site, which you would find typically the areas, on roofs. And on the right-hand side, so we refit the site, which you would find typically more rural or not densely populated areas. What is depicted here in blue is the passive infrastructure, which is transferred to the new company to EuroTeleSites, which is typically very capital intense. It does not carry any signal. It can be rented to other tenants. And we do believe that it is noncore for our activities. Whereas on rate, you'll see what is retained, which is typically retained in A1, which is typically everything which carries a signal. The radio antennas, they are used, the networking equipment, the antenna cables big hauling equipment such as the microwave systems. This has significant influence, for example, also network quality. It is connected to the other parts of the network. And we do believe these active components are so core to our business that we decided to retain them within A1. Now, we are talking about close to 15,000 sites, 13,000 of -- a bit more than 13,000 micro sites, these big sites, which you see depicted here on this slide, half of which are roughly in Austria, even in large later on, when we are in the TowerCo part, in the EuroTeleSites we'll go into more detail on the specific countries and then on the specifics of the sites. So what is happening now on the date when we go live, you see here on this slide, this is a very simplified picture of the results after the spinoff, which will be a proportionate spin-off, meaning that a shareholder of Telekom Austria shares will get 1 share in EuroTeleSites. The company will be listed at the Vienna Stock Exchange. And because it's a proportion is in the shareholder structure at the first day of listing or this spinoff will be exactly the same as it is before that. Meaning America Movil and OBAG are 2 core shareholders in the pre-float currently around 15%. Beneath the 2 companies, which will be independent from each other, you see the local operations, which holds the participations in the local tower cost. As you know, Belarus is excluded from these transactions. So you don't see it here on the tower side. The Austrian towers will be hold by a holding company beneath the EuroTeleSites directly for a number of techs and other reasons. When we talk about the transaction rationale, we considered actually a number of points of use. Obviously, for A1, as I just pointed out, for us, it's key to focus our management capacity, to focus our investment capability on what we believe truly makes the business in driving this strategy forward, Alejandro has just described. We will also have increased the capital financial flexibility, as it was described earlier. We will transfer EUR 1 billion of financial debt from A1 to EuroTeleSites which will significantly increase our financial flexibility and will lead to a reduction of financial debt of EUR 1 billion. On the EuroTeleSites, we will have a management, which is laser sharp focused on driving this tower business, on gaining efficiencies in driving this business, but especially also into addressing new revenue streams. You have to think about it the way that in the past, these local tower companies, they were in terms of headcount, probably small departments in a large integrated telco organizations. Now we have, as I said, laser-focused management on that, which will drive the business. So what does it mean for you, for our shareholders, on the other side, and I think it's evident of the market, these assets tower companies they benefit from significantly higher valuations. And we believe with this transaction, we are in a position to uncover these differences in valuations typically see market were 3x higher than in an integrated telco or sometimes even more. As Alejandro just described, A1 will keep a sustainable dividend policy. EuroTeleSites, the transaction will allow us at the same time to strongly deleverage the company, which gives us, as was just described, a lot of flexibility going forward. And both companies will benefit from a robust free cash flows. When we look at the impact on A1, and I'm focusing here now only A1, you will get all the details on EuroTeleSites in the second part of the presentation. Let me point out the following. On the operational side, the impact for A1 will be very limited. On the financial side, on the balance sheet, first and foremost, again, a reduction of financial debt of EUR 1 billion which brings down our leverage in terms of net debt, excluding leases over the EBITDA after leases to 0.4x. If you include the leases, obviously, our net debt over EBITDA would increase to 1.3%. Our total asset base will increase slightly by 7%, which is due to the additional lease liability, which will we have in our books. On the P&A side, revenue-wise, very little impact, 0.2%, and these figures are assuming 2023 figures. So very limited impact on the revenue side. This is basically coming from the change of the third-party revenues from -- which we currently already have in A1 to EuroTeleSites. On the EBITDA, plus 1% because of the OpEx is transferred into leases. EBITDA after leases obviously impacted by the high leases minus 11%. On the net have a mix of effects, mainly coming on the one-hand side due to higher leases. On the other side, due to the lower interest rates we have to be on the reduced financial debt, and hence, also the slight reduction of income tax. On the cash flow, on average an impact of minus EUR 60 million on A1, driven by the higher lease rates, which are on the other side, has also to be balanced with the reduction of financial debt of, again, EUR 1 billion. What we want to point out is that because of tax reasons, we do have a negative impact in the Q3 of EUR 36 million because of the specific stamp tax, which is unavoidable in Austria. If you move to the next slide and look into the future relationship between A1 and EuroTeleSites, which is governed by a master lease agreement, which is very comprehensive, but I want to point out the most important terms of this agreement. Of course, this is planned to be a very constructive, a very long-term relationship as EuroTeleSites will be, let's say, main vendor of A1, and A1 will act as tenant for EuroTeleSites for many years to come. So the contract duration is in principle indefinite. However, we have certain termination rights on the A1 side. This is after the end of the 8 to 16 and to 24 years, so 3 plus 3 years, EuroTeleSites has the first ordinary termination possibility at the end of the 24th year. After that, each party can terminate the contract at the end of the calendar year. However, there's a strategic 36-month notice period. Inflation protection, especially in these times, important to point out, I think we have been very much aligned with the market when we opted for a way that the range and other main elements of the M&A are increased by 85% of CPI increases in the relevant markets. However, there is a 3% cap. And for steel prices, we follow the steel price index. On the provider side, we are free to choose our tower providers. However, and we are also free to choose third-party tower cost. However, we will be closely aligned to each other, and we currently plan to roll out an additional roughly 1,000 sites with EuroTeleSites over the next 5 years. In a transitionary period, obviously, also A1 will keep providing temporary certain services such on the IT side or HR side to EuroTeleSites, of course, it at arm length prices. And in the unlikely event that EuroTeleSites runs into operation of financial difficulties in one of the operations, A1 would have theoretic buyback right of the assets. So to sum it up, again, as Alejandro explained very well in his part, we do believe we are the or at least one of the best-performing telcos in Europe, if you look at it from a revenue growth perspective, from an EBITDA perspective, but also from a balance sheet structure, which we managed to deliver strongly over the past year. We have a strong strategy going forward based on our unified brand, based on the ambition to move to more customer-centric views based on the ambition to the growth opportunities, we, for example, have in the B2B segment and also based on the unified platform we have built out. We have managed to build out over our footprint, and which we intend to drive that up. And of course, with this spinoff of noncore activities, our flexibility, especially in the capital allocation will increase. We will have a very low leverage. The suboptimal as Alejandro called, but it seems to give us significant flexibility on the management side, but also on the capital side, but also on the management side driving further our business. So with that, thank you for listening, and I'm handing over to Hans to moderate the Q&A.

Thank you very much. Thank you everyone for following this first part of the Capital Markets Day. Let's now hand back to our operator, Emma, to guide us through the Q&A session, please.

[Operator Instructions] First question is from the line of Adam Fox-Rumley with HSBC.

I have two first questions, please. One was, it's interesting to hear the evolution of the strategy to talk more about security and the IT over time. And I wondered what role in particularly on security work would be done within Telekom Austria versus kind of partnerships with third parties, how do you think about that balance? And on the IT side of things, in the past, that has been a tricky area of the telecoms companies, particularly when it comes to kind of making sure that profitability is right, not being overly committed to capital and so on. How you think about the challenges that doing more in that space will entail? And then the second question I had is on the balance sheet and then to a degree of, I guess, the tension of the leases because although you say that your net debt to EBITDA is falling dramatically as it is post the transaction, your net debt, including leases goes up a little bit. You've recently had a final rating upgrade. Presumably, they've taken the including leases, a leverage target into account. So can you talk about when you say that the balance sheet is underlevered at this point or suboptimal at this point, what does optimal look like in the including leases ratio sense?

Well, starting with the first part of your question, we see not the traditional managed services as our ICT future. We see that's why we want to look at it a little bit different. So usually, we start with a customer that has connectivity already with us probably MPLS networks, VPN networks, and we gradually move them to more SD-WAN networks, to more managed connectivity networks. So that's step number one. When profitability is acceptable levels. As soon as customers are starting to move from connectivity into managed connectivity, which is usually a combination of fiber with SD-WAN assets, maybe some mobile connectivity as well in that ecosystem, the discussion goes automatically into security. Some customers at the beginning doing managed VPNs, telecom managed firewalls, then we put the firewalls in the cloud. And that goes on like that. So then you move into managed security. And that is a profitable business because it's a very highly skilled managed work. It's not this traditional low-value IT work like desktop services, all those kind of things that were very low-margin business. This is more profitable business because it's sort of consulting their and a lot of high skill competence there. That is very difficult but afterwards, it's very difficult to replicate. Once you have managed connectivity and then you have managed security, it's easier to help customers basically to do managed IT by moving them to the cloud. And by moving them to the cloud, we offer always and this -- we are still at the beginning. We will offer them combination of our own private cloud. We have a company called Exoscale as you probably know, that when we own the company, we own the software and of course the profitability there is different when you resell and a hyperscaler, but we will also resell hyperscaler because we see these IT -- managed ITS the task to migrate customers to the cloud. We are doing this exercise ourselves, because we are in the process of migrating ourselves to the cloud, and we are building all these organization. Actually, we launched 2, 3 months ago, our competence center on exactly focusing on this in the company to help us to migrate to the cloud with the ambition to use all these skills and resources moving forward, to move companies to the cloud. So you can think about these 3 layers: managed connectivity, then managed security; then manage IT, but not in the traditional way of desktop management and other things that HP and those guys were famous for more on manage the transition to the cloud. On the second part, we are working on this. So what we wanted to achieve basically in terms of targets is to deleverage the company to have the flexibility to work in 3 areas. And I think we are now exactly in that position. Area #1 is to do targeted M&A, okay? If we have an opportunity to do targeted M&A, mostly focused in country. So consolidating the countries where we operate. If you look at our fixed footprint outside Austria, we are #2, in some countries, even #3. So there is still potential growth there. Also, we see in the ICT area opportunity to do targeted nothing really big, very targeted as we have done so far. So that's where we are planning to optimize our capital structure moving forward. Secondly, I believe that we're going to CapEx opportunities. Our competitors, they have another, let's say, financial situation than ours. So we can use this opportunity targeted not to acquire, but also to accelerate certain investments. You can think Serbia, you can think Croatia, you can think Slovenia. All these countries are growing really fast, and we could also allocate more capital to grow even faster. And the third part is, of course, dividend policy, the long-term dividend policy. So we want to keep this flexibility to actually execute these 3 pockets of capital allocation. We don't have -- we cannot share specific targets. But what I can tell you is this is our basically our ambition to reallocate capital in these 3 pockets.

[Operator Instructions] Next question is from the line of XXXXXXXXXXXXXXX With HSBC.

Yes. It's 2 questions about the tower company specifically. So firstly, you mentioned the case for managing these assets independently. And I presume you would have to make a strong case for the company to actually be truly independent. As you expand your tenancy ratio with third parties. I suppose with the management coming anyway from Telekom Austria, how can you reinforce the case for independence of the tower company? And secondly, if you think about the growth outlook of the tower company and you think about organic opportunities versus inorganic ones, which would be your preference? And how do you plan to achieve those?

Well, I think the second question, we would really like to postpone and to hand it over to the tower management, which will be responsible in driving this, and you will have the opportunity shortly to ask this question, and we will keep it for it. On the first one, they will also for sure comment, but what I can tell you is going to be two independently listed companies with management who are devoted and responsible for driving the business of their respective companies. And this is what I meant we earlier when we -- in the past, the towers business was managed by departments within our technology organization. We achieved to get some of third-party revenues from other operators, but we truly believe that with independent management in a listed company, which is fully focused on its own company. For sure, it will be very effective also to other operators. But I leave it further to Ivo and lastly on to comment.

There are no further questions on the phone. I will hand back to Mr. Lang.

Yes. So this concludes the first part of the Capital Markets Day. We will continue at 10:15 Vienna time with the EuroTeleSites presentation. Wish you all a good day, and see you later.

Thank you.

Ladies and gentlemen, thank you for holding. We are now starting with the second part of the Capital Markets Day, which is on EuroTeleSites. Therefore, I hand over to Mr. Ivanovski, CEO of EuroTeleSites. Please go ahead, sir.

Thank you very much. Good afternoon, everybody. Thank you for joining to the Capital Market Day of EuroTeleSites. I'm Ivo Ivanovski, the CEO, and I'm here joined with my colleague, Lars Mosdorf CFO. And both of us, we will guide you through the presentation in the next hour, where we'll switch from slide to slide and be able to share the story of development of EuroTeleSites with everybody who is online. Again, I'm Ivo Ivanovski, I've been with Telekom Austria since 2016, and I've been in the industry for over 19 years. And I will run EuroTeleSites once we are listed and registered, which should be end of September, beginning of October. Lars?

Good morning also from my side. My name is Lars Mosdorf. I have been working in infrastructure for 16 years, there of 10 years on C level, and I'm very glad to be part of the project, the spin-off project that will lead us to EuroTeleSites. And there, I will be the CFO.

So if we can move to the next slide, we will do the short introduction. Next please. We would like to show you the next company, EuroTeleSites, with the footprint where we exist in the 6 countries where we will have over 13,300 sites, with a very, very strong revenue, very stable revenue with great future potential for revenue growth, incredible opportunity for tenancy increase. And keep in mind to keep the OpEx very under control. We believe that we will be able to create a leading TowerCo company in Austria and Central Eastern Europe. You can see briefly on the left that we have 173 employees, headquarters in Vienna. We will be listed on the Vienna Stock Exchange. We did receive 2 investment-grade ratings from Moody's, BAA2 and BBB- by Fitch with a strong anchor tenant, which the ones that participate in the morning session, we're able to understand who is A1 Austria, in the business model, which shows a strong profitability, very strong EBITDA margins EBITDAaL of EUR 127 million and revenue of EUR 232 million, which were for 2022. To make the story even more complete, the financing is already in place with the EUR 500 million bond, EUR 500 million loan and a EUR 75 million RCF. Moving to the next slide, please. This is just to demonstrate again that we have the same shareholders as A1 Telekom Austria with exact same share structure. The long-term ownership of America Movil and ÖBAG is subject to their shareholder agreement. And with this, we believe that EuroTeleSites will be supported by very 2 strong shareholders. Next, please. On the next slide, I just wanted to show you briefly about our business model and platform. You can see on the left, we are in a cycle where the tower companies are having the golden times. We -- the strong markets that we are in with 31 million people gives us a wonderful opportunity that due to the data usage growth in the mobile telecoms, we will be able to use this opportunity and create more sites, build more sites and with that, increase the tenancy, increase the revenue. Approximately 18% of the tenancy growth will come over the next 8 years. We will see from the 1.21x ratio where we start today, we will reach a significantly higher ratio of 1.4x. With this, we are in a story that we will like to build Europe's digital infrastructure. Why is this important? Because with a strong platform that we have created at EuroTeleSites with experienced management that we have with the investment-grade rating, we have positioned to deliver. And with this, I would like to ask Lars to tell us briefly about the business and the financials. And then you will see down the road, we will take a deep dive in each of these segments of the presentation.

Thank you, Ivo. Ivo, you have mentioned that we expect a huge data volume growth in the next few years. If you look at different sources, we expect that data volume growth is expected to double every 2 to 3 years. That's an enormous increase that we expect in the telecommunication. And of course, as a passive infrastructure provider, we are the neutral host for this telecommunication developments over the next few years. And therefore, we believe that we also profit from the growth of the overall industry. And to make it a bit more precise, this growth is driven due to the fact that at the moment, we are changing a lot of things in society. So the way we work, the way we consult the doctor, the way mobility develops over time. I'm not talking yet about autonomous driving, but you see all these points will require and the demand for growth on the data volume. And now I would like to show you that our business model is also based on this participation in growth. We believe that we offer to you as a potential new or an existing shareholder. First of all, that we have a very robust business model with a strong growth. That's very important. The second one is that we also believe that we already today have a high profitability. And of course, we have a high revenue visibility and predictable cash flows over long years. And we will show you this on the next slide. We will show you where does the growth come from? I think that's an important part. On the left side, you can see that -- and this is again 2020 data that we used. Currently, we have EUR 232 million revenues per year, and we expect 4% to 6% increase of our revenues each year over the next few years. And maybe it's important for you all to mention how is the definition from our perspective for medium term and long term? The medium term, if we talk throughout the presentation, will be 4 to 5 years and the long term beyond the 4 to 5 years. And you can see that the growth is for 2/3 driven by our anchor tenant A1. And if you ask what is A1 giving to you so you participate with A1's growth. It's for and most important, of course, the 5G upgrade, which is approximately 50% of our CapEx currently. It will reduce over time because 5G upgrade will then be implemented. In addition to that, of course, we expect approximately 1,000 additional new sites. And it's very important to say and to mention that other than -- in other industries, we, as an infrastructure provider only build once we have the contract with our tenants, with our anchor tenant, for example. So this gives us security and we from day 1 know that once we build -- once we spend the CapEx, this will be a portion of our growth story in the next few years. The second and smaller portion of our growth story according to 1/3 is the third-party tenants. And you will see on the upper right slide that at the moment, our third party or other tenants reached approximately 5% of our overall revenue. And our intention, our goal by building up this company is to increase this share slightly over the next few years. So the overall revenue part is so far small, but it will grow. And of course, the profitability also will be driven from third-party success that we offer our infrastructure to other MNOs, but also to beyond MNOs' market opportunities. For the third parties, for example, we expect additional 1,200 to 1,500 new tenancies. And of course, we also strive to market our infrastructure towards new MNOs that are already existing in the market. Let's allow me maybe 1 comment on the figures, the financial figures that you will see throughout the presentation. You will always see pro forma figures for the year 2022 and the first half 2023. The reason behind is that the good thing is we are an operating company on a local level. So we have already formed operating, functioning, local companies in 6 countries, and we now combine them. And that's the reason why we don't have a historical information, and that's why we use pro forma. So we act as if those 6 countries including the group level, already would have been put together. So just for your information about pro formas, we can give you more details if required. Ivo, looking in the next chapter, could you give us some key highlights on our investment story please.

Thank you, Lars. Yes, definitely, I think continuing with the growth story, what is very important for EuroTeleSites. We heard in the morning that when the towers were part of the mobile company, defining the part in different sectors, typically, the KPIs where they have the best performance that they try to overcome -- with the competition to have a better coverage, better quality, and they were not set to grow tenancy to growing tenants. This is where the difference comes when there is a separate new management for this company, then our goal is to grow tenancy and grow locations. So some of the growth drivers that we can see on this slide is, of course, the way we live, the way our life has changed where we are so dependent on data, and the data is growing 80% cumulatively up to 2028 based on some studies. And then with the technology adoption, 5G was mentioned multiple times, that 5G coverage is still not completely reached based on the spectrum allocation that was given to A1 in this case. There is still a lot of opportunity in the footprint and in some countries such as Serbia, 5G has not been awarded yet. Then if we speak of the quality of service, the more quality means more coverage, or I should say, more coverage means better quality. Why is it important that we will see the connected cards, for example, if you move on the next slide, we will see how the technology is changing and how the future is changing the way we live and the way everything is being connected. So on the bottom left, where we have the 4G, just 1 site, 1 tower covering multiple devices, then moving to 4G plus or 5G in the middle. And then moving to the next generation where we're going to have the smart cities, the edge data centers, the open run, the 5G rollout from new entrants possibly. Then we see that everything is going to be connected. And in order to have such a quality connectivity, then you need proximity, in order to have proximity, that means that you need more sites. So the sites will become closer to the user, and there will be more most likely smaller, but this is where we see the opportunity for the growth. And this is where it's important that EuroTeleSites gets into the lead of this and be able to attract the new tenants. So if you go to the next, I can just show you briefly about the macro development in the footprint where we will operate. So starting from Austria, Slovenia, Croatia, Bulgaria. These are the 4 countries that are part of the European Union, where almost 90% of EBITDAaL comes from European with a very strong country rating. Serbia and Macedonia are participating less than 10%. Then if we go to the inflation numbers that we see on the bottom left, we see that inflation has slowed down. And hopefully, soon, it will normalize back to prior the COVID times. We also see on the top right, the positive economic growth across the footprint with exception to North Macedonia. And just what is important is that there is a very limited risk of currency FX. Most of the revenue comes in euros anyhow. And with exceptions to Serbia, the rest of the countries they're either in the euro or they're back to the euro. So maybe, Lars, you can tell us a little more about how footprint looks like in the sites, rooftops, greenfields and other tenants.

Yes, let's talk about our current towers. And you can see that, as mentioned, we already today operate 13,225 towers across the 6 countries in which we operate. So they are existing. It's the infrastructure that is already has been operated in the past, while it was still linked to A1 as being a cost center during -- at A1, and now we form with these assets, the new company and our growth, of course, is also built on the strategy that we will develop those towers over time. Let's look at the specific numbers. I have mentioned the towers overall amount, which is 13,225 and approximately 6,000 are based in greenfields. So they stand somewhere in the country, and approximately 7,300 are on rooftops, so in densified areas, cities and villages and so on. If you look at the towers by market position, I think that's a very important number because if you add up those markets in which we are either #1 or #2 jointly with A1, of course, we reached 88%. So the biggest portion of our business is done in markets in which we are the market leader or very close to the market leader being #2. And thirdly, I think that's also a very important, all the other 5 countries that Ivo just has mentioned. And this is an important point, therefore, because we believe Austria is our core market. It's a very stable, very solid market in which we operate. That gives us also security over the next years, and CEE is a growing market, and it bears the growth potential because if you look at the figures of the CEE market, you can see that it's slightly build a market average, if you just take the average of the peers that we mentioned here on this slide, you will calculate approximately 2%. So then you can already see that there is a room and a headroom that we expect to fill over the next few years. And if you ask what is your goal? I will present on a later slide about the guidance, how we think that the business will be driven over the years. And we will mention there that we expect to increase the tenancy ratio from 1.22x today to 1.44x approximately in the early '30s. This would be an 18% increase. So we believe it's realistic and compared to these peers, it's still, of course, a bit underperforming the market. So there, you can see that we strive really to get them also on the third parties on the MNOs, excluding A1 to really build on additional revenue steps or also revenue potentials by giving our towers, our infrastructure to other MNOs. Looking into the next slide. You would probably ask the question, who is the management. The management is, of course, Ivo and myself. We have briefly introduced ourselves, but it's also Gernot, who will be responsible for the core market of Austria. Also Gerhard mentioned who will be responsible for the group finance or for the whole group finance. And beyond that, Ivo, as mentioned on the first slide that we are currently 173 employees in our new company. The majority of those employees are from their previous positions in the tower business, joining now the new company. So they know their business, their experience -- long-year experience. And I think we are quite diverse team. We come from 10 nations as we have collected, and we have, of course, also a share of female colleagues on Board. We have competencies from all kind of different perspectives on board, long-time experienced, linked, of course, also to the history that with the people have been working on the tower business during -- it has been a cost center in A1. And the good thing is we are already on board now. So the company is ready to go. We're fully operating. Team is mainly staffed and I'm very positive that I think all of our colleagues are -- after having worked on this project for quite some long time are eager to develop the company now and drive the company. And on a daily basis, I can tell you it's a lot of fun to work together, and people are happy that we now can work on our own fit and create the company. Ivo, having mentioned the management team and the team itself, maybe let's look at the business overview a little bit more in detail.

Yes, always better. So the focus is based on 3 pillars. So it's boost the core, growth areas and digitise process. What does it mean boost the core? Boost the core is our core business, which means we need to roll out sites in a very efficient way in order to be competitive with the other peers, and we need to find the best locations and to provide the best quality for our tenants. The growth areas that we see I briefly mentioned that there are a lot of opportunities due to the new technology that is changing, due to the 5G spectrum, but also just by separating the tower company from the mobile company. Lars mentioned that we have a very solid team that came from the mobile company, now the tower company. Now we are in a process that we need to make a culture change that we are a separate company, then we need to be independent in the mind that the A1 is our anchor tenant and our best tenant, but we need to treat equally every single customer that comes and we need to make sure that we strive for the best service that we can provide for the next customers. In the digitise process is something that we are very proud that we started early on to change a lot of the process, the way they were done before, thanks to the new technology that is being out there, we believe that we will be in the leading front pretty soon. Once we digitize most of the processes, then we will see that it will have impact on OpEx and especially with the CapEx that we have planned, that we can be very competitive in the areas that we operate. So if you go to the next slide, I just want to show you briefly what does it mean the asset equipment, what is the active equipment. So in the tower company, we only manage the passive equipment, all the red -- on the picture, all the red items are the active equipment such as antenna, the microwaves are staying with the tenants, the telco and the passive comes with the TowerCo. We provide space, we provide maintenance. We do EMF support, and then we have additional services, which are important such as upgrades, energy. We have many sites where we have our own solar panels and wind turbines that is used for only the telco benefit. But sometimes when we are overproducing, we are also able to sell that to the grid in the markets where that is allowed. And this is something that we are striving to improve our ESG and also help the tenant in their ESG targets. So if we move to the next we can just see an example of how an agreement looks like, in this case, between A1 and EuroTeleSites. So we start with the master lease agreement, which we will get into more details on the next slide. Then we have the site lease agreements where we have agreements with landlords and some sites are owned by us, some sites are owned by the telco, some sites are owned by multiple landlords. This is where we do the management, and we see an opportunity that we can be more efficient in this way. And then we have this ARGE agreements, unique to Austria with 3 other telco players. And then moving to the right is the other tenants that we have. So what is important that we have long-term contracts agreements with telcos and non-telcos and the third-party agreements are dealing with the rollout in construction of sites, and the infrastructure maintenance. Again, the important part is that if the order comes, then we roll out into construction. We do not have any plans for M&A, especially not for keen market consolidation. We might have some M&A opportunities on sites, which are still part of A1 and -- but there will be a small number, nothing significant. So if we move to the next -- coming back to our anchor tenant. Maybe some of you did not participate in the morning session. A1 is one of the best performing telcos in Europe, with very strong revenue and EBITDA. But what is important for us today is that we have an indexation in the lease agreement that we have with them, then we have arms-length agreement and we have a very long-term 3 x 8 years agreement contract with A1. The build-to-suit commitment is not into the master lease agreement. However, there is an opportunity for the 1,000 new sites that the A1 needs to develop according to the radio planning department in the next 3 to 5 years that we are well positioned. And if you go to the next slide, we will see a little bit of the details for the master lease agreement. I believe this is very important for some of you that we have a lease agreement with indexation, which are capped to 3% or 85% of the annual adjustment. We believe that when the master lease agreement was created that inflation at that time was very high. However, stabilized in long term since this contract is for 3 x 8 years. We do not expect and the analysis do not expect it will be significantly higher than 3%. And what is important that steel, which is the majority of our CapEx when it comes to rolling out new sites is not capped. So it's a fully index, and this is where we see the protection in case the steel prices go up that we can pass through the cost to the tenant. The partial termination rights is also an option that it's capped to 5% over a period of 8 years. That means the A1 in this case can terminate 1% per year up to 5%. What is mandatory upgrade something that 5G rollout for A1 remains a mandatory upgrades to many of the sites. And these are sites that when we upgrade them, we are also investing to be ready for a second or a third tenant. So this is -- the order comes from A1 in this case. It's in the business model. However, the sites will be prepared to support multiple tenants. And the last important thing to mention is that up to 5% of the sites can be used as a golden site. Of course, there will be a surcharge for this. Now this is a master lease agreement that is with the mobile operator. Maybe Lars, you can tell us a little bit of nonmobile operators, tenants and opportunities that we see.

Of course, on the next slide, you can see the so-called non-MNOs. And I just would like to jump back theoretically 1 time to our overall revenue overview. So you remember that we have talked about our revenue that we currently have with our anchor tenant A1, which is 95% of the EUR 232 million that we achieved in 2022 and 5% are linked to other MNOs. So peers of A1. And on this slide, we would like to show you that beyond the other MNOs, we also think about additional business once we spin off. This part is a very minor part according to our revenue share at the moment. It doesn't even reach approximately 1%. But I think we would like to mention it because this is one of the stories where we would like to really put effort into growing further and into developing also our infrastructure. Namely, it's, of course, the biggest portion of this small portion is that we serve government and also public radio users. We also serve utilities and public companies. And we believe that in the framework of what Ivo has described about how the data volume will grow or how mobility will change, how the industry changes, we see some opportunistic plans to grow alongside such development. So just to keep it in mind, there is anchor tenant, there is MNOs and there is additional business. And one of our strategic aspects is, of course, to develop also this so far minor part as in called based outside of MNOs. Let's jump to the next slide, where we show again the tenancy ratio as well as our towers. So I think I don't need to revert too much into the numbers of the towers and also the tenancy ratio. What is important for me to say or to mention at this part is that -- and that's the reason why we also showed the year 2021 that we see a slight increase over the years also on those parts. If you look on the right side, you can see that there is a development overall of approximately 1% to 2% per year. And if you look at the red part, which is other MNOs, you already can see that increase of 4% to 7%. Just to give you an indication, and this was, of course, pre-spin-off, preforming an own company that strives to also develop third-party contracts and third-party business. I have mentioned our target, which will be 1.44x. So an increase in the tenancy ratio is not only planned, but is our clear goal to achieve. And the chart gives you an overview of how we start, how the company starts once we spin off and from where we will then put up the growth. And a very important point that we would like to mention is the snapshot of our ESG. I think it's for all of us being part of the company, being also part of society, ESG is relevant. Ivo mentioned that we are currently working also on our team and also on building a new culture for the team. And we believe that it's very important to have the ESG goals, but we also insist of course, to live them on a daily basis. What drives us? We are driven by the idea that through our neutral infrastructure, we can improve the ecological footprint. Therefore, that you remember the big data volume growth that we have presented. And this would require, if you would go ahead in a way we do it today to massively also increase the passive infrastructure. So no matter if it's our company or if it's other companies, but if we would not cooperate, just driven by the data increase, we would see a significant increase of towers and tower infrastructure to serve this development that we can see in the market. And we believe if we become more active on the market, if we go further into sharing this infrastructure as being a neutral host for the passive infrastructure, we will achieve that overall, we will get a reduction of soil ceiling, and we will, of course, share all the other emissions towards different MNOs. And I think this is a very important ecological point that we would like to stress and to emphasize. Furthermore -- and this is a nonscientific number that I'm mentioning here. Our overall footprint, the emission footprint for a tower company is on a low 1-digit percentage of the overall emission footprint of an MNO company, because the major parts are, of course, electricity and our infrastructure is served not by the electricity that the active parts will require. But we, of course, manage house and the light on top of the tower, the security and so on, but not the major part, the electricity. That's what I would like to mention. So we already have to frame it in that case that ESG and emission cost was an important part for us to transparently monitor, but also to develop. And the reason why we are doing so is that we also are starting and developing further alternative energy supply. We have very good examples in place. We plan in addition, further increase of using solar tenants, for example, Ivo mentioned also wind turbines that we would like to put on the towers. So we see a good opportunity to use our existing infrastructure to reduce the emissions and to reduce, of course, the requirements on the electricity side also from an A1 or also from other M&O perspective. We've recently talked about HR. That's also a very important part, because we are forming the new culture, we're forming and developing across the company, and we're on a good step there. We are very proud talking about governance, to have a very well-established Supervisory Board already in place. We are very glad that our Chairwoman will be [indiscernible] already working together with us. And from there, we will develop, of course, the company in its new framework. Important to say is that talking about risk management, talking about compliance, talking about all the other guidelines that have to be in place, all the SOPs requirements and so on, those are all either in place or most of the time, very strictly also in line with what our anchor tenant provides and A1 has a very high standard on that side as well. And of course, we would like to keep this standard and work safety from our perspective, has been mentioned ESG as well, is something we would like to focus and to keep the focus also in the future. Now let's look into the next chapter. We've talked a lot about financials.

Yes. Before we go to the financials to the hardcore part of this presentation, I suggest to make another 5 minutes break and continue then. See you in 5 minutes.

[indiscernible] on the one hand, that we want to drive the growth with the anchor tenant, but also with other [indiscernible] as we have proposed or as we have suggested in the slides that we've already shown. And on the other side, the story is, of course, that since we will form a new and neutral independent company, we will also focus on efficiencies on the cost side, talking about OpEx costs, but also talking about CapEx costs. And if you then look at the margins that we expect, we believe that we already today have a very high margin compared to other industries and also compared to the telecommunication industry. We start with an EBITDA margin of 87%, and we expect it to be on a stable level over the years. We furthermore believe that we start with a high EBITDA after leases margin of 55% and there, we even expect an increase of the margin over time because we expect an optimization on the lease side over time. Now you will ask why do you show us 55% in the year 2022 on the EBITDA after leases margin and then a reduction to 53%. This is driven by the fact that we have a one-off cost element in the first half of 2023, mainly the IT equipment that we will take over as a company in the amount of approximately EUR 4 [indiscernible]. If you would deduct this, of course, the mentioned growth that I just said is -- would apply, and it will apply over the next few years. The same actually is relevant for the free cash flow margin, and you can see 70% going down to 65%. This is also driven by the one-off effect. Let's briefly talk about CapEx. I think CapEx is a very important driver for growth on our side because any CapEx that we spend we are, for sure, receive revenues over the mid and long term. And therefore, for us, it's profitable to invest into CapEx. And I can just get back to what [indiscernible] has described previously, we don't build if we don't have a contract. So the positive side for us is that once we have an agreement with our anchor tenant or with any other MNO or other customers, we are, of course, ready to build, and we're ready to implement new infrastructure, upgrade the infrastructure that we serve, but on the other side, we only do it once we have the agreement, and therefore, we can also acknowledge the CapEx spend, then through the rent we will receive in the next few years. If you look at the CapEx numbers that we show here, you can see that we start a little bit low in 2022. But on the guidance that I will give you on a later slide, I will mention that we expect CapEx to be at around EUR 60 million per year and that we expect that those EUR 60 million will be approximately over the years, 20% of revenues spent per year in the future. So this is a level that we also strive to keep, it is a little bit upside loaded. So you can see -- or it's front loaded, sorry, so you can see that in the first few years to come, including 2023, we already expect a little bit higher CapEx, mainly driven by the fact that we invest into 5G. On the next 2 slides, I think we briefly can walk through the slides. We just wanted to give you some more details on our core market, Austria. And on the next slide, we will see some information also on the international business that we are doing. If we go back one more time, please, to Austria, you can see that with approximately 60% of our revenues, the core market very stable, and it's not only stable, if you look at the tenants, we already are a bit over average of our 1.22 tenancy ratio. So what I mentioned before is that this is the fundamental of our business, Austria as well as in the number of towers as well as also in the revenue and also in the tenancy ratio that we would like to build over the next few years. Secondly, the markets on the next slide, international. International means what [indiscernible] has mentioned, it's in the 5 CEE states in which we operate, and we don't plan to operate beyond those 5 countries in the near future. So it's Croatia, it's Bulgaria, it's North Macedonia, Slovenia and Serbia. And there, you can see that also we see the growth potential because those countries have a high demand of the overall data volume increase, which is below the European level so far. So we have a solid base, and we have a growth story that we would like to present. On the next slide, I briefly would like to talk about our financial policy. For the first 4 years, we have a commitment for no dividends. But of course, the reason why we do so is that we would like to deleverage the EUR 1 billion debt that we have taken over from A1 within the next 4 to 5 years. So once the company is ready to start, the company launch will be with a net debt leverage of 7.6 pre-IFRS and our target to deleverage over the next 4 to 5 years is to achieve 5x leverage, which I think is a quite solid base also for the business to come and to develop beyond the next 4 to 5 years. On the liquidity/on the financial perspective, we would like to mention that we are, as we think, well financed. So we have 2, already 2 financial instruments in place. The one is a 5-year loan that is in place in the amount of EUR 500 million. And the second one is the EUR 500 million bond that is in place. In addition to that, we, for security reasons, also have in place an RCF in the amount of EUR 75 million, which we don't plan to use fully over the time. If we go to the next slide, I think this is an important slide. For those of you who would like to do their own calculations, we talked about the revenue growth. So there is a strong commitment and also, I think, plausible reasons why we believe that we can drive the growth over the next few years with high margins that will, on the EBITDA level stay on a high level, but on the EBITDA after leases level, it will even increase over the next few years. I briefly talked about CapEx being at approximately EUR 60 million over the next few years. By the way, maintenance CapEx will be approximately 3% of our revenue in the mid and long term. Of course, when the towers age, there will be higher maintenance CapEx. But if you look at the numbers for now, we can see those 3%. We will have a positive free cash flow from day 1. We don't expect it to become negative in the next 2 years, so it will grow. And I briefly also talked about the leverage and the dividends. So this is first lens into our business model and the future of our development, achievements that we would like to reach for. I think it's quite solid. I think we believe that we propose to be a business model that is from day 1 an interesting investment. And that, of course, even with no dividend policy on the midterm, it's quite interesting since it's stable. It's based on growth and high profitability. Having said that, we are slowly coming to the key takeaways to the conclusion. We thank you for your participation. Also, we are looking forward to the questions to wrap up [indiscernible]. We talked about revenue growth, I think the revenue growth is driven by the mobile data demand growth that we have talked through with you. So autonomous driving, more equipment, other way of power industry works of how society works, how mobile work is growing. These all are drivers for our growth as well. And we are the market leader in a growing and stable market in Central Europe with approximately 131 million people that we can serve, that we can operate in those markets, and we expect the revenue growth over the next few years in between 4% to 6%. Having said so, maybe [indiscernible] can kindly wrap up. Thank you, Lars.

Yes, definitely, the surging demand for data is positioning [indiscernible] in a very good position that we can continue first, with the stable revenue, thanks to the A1 agreement that we have as an anchor tenant, which is also indexed. So the indexation will support the growth of the revenue through the years, but also the way we change our lives. We are more dependent on data. Just an example, the fixed mobile substitution traffic in A1 networks currently composes about 60% of all the data traffic that we have, so that means it's a little popular cubes that some of us have that we are taking them from home to the summer vacations. These are considered as fixed, but they're going through mobile networks. And due to this demand of data, we will see more base stations coming near to us. There'll be more densification of the network. We will see smaller sites, but multiple sites near us, and this is where we see the opportunity for the growth. This will bring more revenue. I believe you're convinced now that we are very profitable with EBITDA margin of 55%. EBITDA over 87%. For some of your EBITDA, it may be closer to your heart and we believe that this will drive the [indiscernible] to higher goals. Thank you very much for the attention, and we are now opening the floor for Q&A.

We would like now to hand over to [indiscernible].

Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] First question is from the line of [indiscernible] with HSBC.

I have 3, the first one is on the build-to-suit program of 1,000 sites. So thanks for sharing the CapEx detail of EUR 60 million a year. What about the EBITDA after lease attributed to the towers to be built? Can you give us some details there and also about the phasing of it. Second question is on the kind of conditions you are keen to offer the secondary tenants. So we know how the MLA works for the anchor tenants, but when it comes to secondary tenants, can you give us some details about the discount they would get on the rent compared to the anchor tenant, the level of indexation and the details about the pass-through. And then thirdly, going back to the governance point, I appreciate all the efforts to be an independent tower co, but eventually, most of the management team comes from Telekom Austria. And as you say, America Movil will be involved in the day-by-day management and strategy of the company. So I mean what -- how can you present yourself truly as an independent when it comes to pitching for new business to third-party operators?

Thank you for the question, [indiscernible]. Just on the build-to-suit program quickly. So it's not decided that the 1,000 sites are going to EuroTeleSites. This is the build-to-suit program that A1 has predicted by the radio planning for the next 3 years. We believe that we are in the front line to get that business, but of course, for that we need to be competitive and we need to bring the best offer on the table. On the conditions for the second tenant, I just wanted to say that, yes, the second tenant will receive some discount, I'm not sure that it's appropriate that we share what is the discount right now. Maybe some of the competitors are also out there on the -- participating on the call. So we -- we'll -- we have already achieved an increase of tenancy this year. We believe that we are very competitive with that, and we will continue in the same direction. And on the pass-through, we currently have the electricity pass-through for -- to the anchor tenant. And maybe briefly answering the third part of your question, which is the question if we are an independent tower company. Most of all, yes, we will be an independent company and will be a listed company. If you compare us to the peers, of course, you can see that we are one of the few completely independent companies. We believe, of course, that it will be a transition phase. So yes, it's rightly said from your side that we -- a big portion of our team is, of course, coming from A1, which is helping us at the moment because those experts from A1 have been working on the tower business already before. So we bring knowledge and we bring, of course, also a long year experience on board. And at the same time, so far, the tower business was a cost center within the A1 universe. And now also driven by Ivo and myself and the whole team, we are obliged and we are eager to develop the business as a business case. So we really would like to operate at a market as a company. And therefore, we believe that the culture will change, the way we approach competitors and other peers will change, and we will be driven, of course, by the idea that we can serve society with our asset infrastructure in a way that we would like to take a piece of the growing pie as a new company. So therefore, the independency, I think, is, of course, a strategic phase, but I would name it positively because we bring experience and then we have an upside potential to develop the company.

[Operator Instructions] Next question is from the line of Nora Nagy with Erste Bank.

I would have 4 questions, please. With your plans for increasing the number of tenants, I assume that you see consolidation opportunities in your footprint. It was a fact that [indiscernible], you have lower debt. So is this realistic that Telekom Austria will buy another operator who will simply use your towers and thus you can increase your tenancy ratio. Is this idea on your table? Secondly, on average, how many tenants you provide services per 1 tower. Here, I try to understand if you have plans to service, for example, 3 tenants from 1 tower whereas the earlier 1 tenant, 1 tower. And thirdly, we saw in the syndicated agreement that EUR 1 billion investment program for fiber. If I'm not mistaken, there are no details yet. Well, this will be fully carried out by the tower entity or Telekom Austria or both? And can you also share a target for the fiber rollout. And the last question, how much of your CapEx guidance will be devoted to 5G? Many thanks.

So I can try to answer -- [ you have some ] 2 questions which we believe are for A1 management, on the M&A activities for mobile and whether by acquiring mobile that will help us to grow the financing [indiscernible] synergies?

Well, thank you very much for the question. We don't have in the road map to do any consolidation on the mobile market in the markets we operate. They only basically due to regulation because it has not been approved any consolidation from [ 3 ] to do so far in the EU and all our markets, except 1 that I will comment in a second, there are already 3 players. So I don't see that there is an opportunity to consolidate the mobile market even further in number of players. The only market where there are 4 players is Slovenia, that if the opportunity arises to consolidate, we will appreciate that a lot because it's 4 mobile players and 4 fixed operators in a market that has 2 million inhabitants. So it's a very small market with many operators, but we don't see any concrete opportunity as per today. The second question since I'm [indiscernible] already on the fiber, the EUR 1 billion commitment in the syndicate agreement is for the deployment of fiber infrastructure in Austria, specifically it is a program that is already ongoing, and we have a multiyear program to meet this fiber, network has nothing to do with the tower transaction nor implications on the tower performance.

Thank you, Andre. Nora, I have difficulty understanding your second question. It was something with average tenancy [ 1, 3, 3, 3 ]. I can only guess or if you want to like to repeat that.

So on average, how many tenants you provide services per 1 tower. I try to understand if maybe you have the option to service more tenants from one tower than the current figure now?

Yes. Thank you, definitely. At the moment, we have a 1.21 tenancy ratio, and we have in different countries, different ratio, of course. And of course, with the upgrades that we are doing, which relates to the 5G on the CapEx that [indiscernible] will answer, we can also support more multiple tenants. And the goal is to reach to 1.4 tenants pretty soon, which is about 18% growth. So maybe when this relation can continue, [indiscernible], with the CapEx on the 5G program.

Yes. Thank you. If you asked about the CapEx, and I would like to mention and highlight again that each euro spent on CapEx, of course, is for us profitable because it leads to higher rent revenues in the long term and in the midterm, of course, once we have spent the CapEx. So we are driven by the fact that, of course, we would like to develop our infrastructure. We would like to build new towers and to upgrade towers and as mentioned, we expect an CapEx spend per year of approximately EUR 60 million, which is a bit front-loaded, so it might decrease a little bit over time, and it will keep level of approximately 20% of our revenues. And if we talk about CapEx, of course, we talk about new in additional sites that we would like to build. Ivor mentioned the 1,000 sites that we try, of course, to build for A1. The second category is also that we are currently focusing on a mandatory upgrade on 5G. So this is what drives our CapEx, and you asked about the portion at the moment, and this will decrease over time because the upgrades will be finalized, of course, over time. At the moment, we expect the 5G upgrade CapEx percentage in comparison to the overall CapEx of approximately 50%. And then not to be neglected, we also have, of course, a maintenance CapEx that is developing a bit over time, but on a lower level of approximately 3% in comparison to our revenues per year.

Next question is from the line of Adam Fox-Rumley with HSBC.

I wanted to ask a couple of operational questions. You've obviously got this plan to -- we would like to increase your number of sites. And I wondered if you could talk about the kind of planning challenges and lead times involved because I know that can vary quite dramatically by country. I can see in your slides, for instance, that your site count is fairly stable in Austria over the last 6 months, but has grown quite considerably in the [indiscernible] region. So -- is there anything you want to point to between the 2 different regions where your growth is focused? And maybe is there anything in the pipe that can make that more straightforward in any of the markets? With reference to the earlier question about the 5G upgrades, is there anything you can say about the proportion of the site count in total that has been upgraded or is still to be upgraded just so we can get an idea of kind of what the estate looks like, where you are able to serve kind of multiple sites or where that's constrained. And then the final part of the question was on lease renegotiation, which you mentioned in your prepared comments. Can you give us any idea of the proportion of the base where you might expect to see the opportunity for lease renegotiation to come up each year? That would be a helpful data point.

Thank you for the question. And I'll take on the first one. Time challenge and lead times was the question. Yes, some countries are more flexible with the one-stop shop kind of windows when it comes to receiving the necessary permits. Other countries are a little more challenging. We believe that in Austria is one of the large markets where the lead time is a little longer than the others. However, we have to make it important here that we are the -- A1 is the incumbent player in Austria. And with the premium size that we currently have, we are in a very good position that we can increase the tenancy ratio. And again, since the opportunity for a second player to come on existing sites is greater, this will be the focus that we can do. Why would a telco go after rolling out complete new sites if they can jump on a premium location, which previously was not offered due to competitiveness and now they're all available on the market. So we have looked into the challenges that we are faced with. We believe that we are in a good position and we will carry out with business plan that is intended. Then maybe if you take the next.

Yes, I can also add a little bit on the 5G upgrade. Your second question was based on our discussion that majority of our CapEx spend today is linked to the 5G upgrade. And I think we are performing quite well on that side, but we need to distinguish the different markets. I'll give you an example. In the current Austrian market, the 5G upgrade means that we need to upgrade the existing towers mainly. So to make them usable for the 5G equipment, the active equipment that will then be changed. And I think we're progressing well there. There are other markets like, for example, Serbia where 5G has not been yet started and where sometimes even completely new sites need to be built. And having said that, just to give you an indication about lead times, we have approximately 9 to 24 months lead time, depending on how -- in which location and about the availability of the location. And we so far don't see any problems with, for example, [indiscernible] availability, which is, of course, from our perspective, biggest portion of material that we need to use to build such sites. Adam, I think your last question was about lease [ negotiation ].

Exactly.

So on the lease renegotiation, we have already began the process to receive the consent of all the landlords in Austria, where we had legacy contracts. And in all of these renegotiations, discussions were open and conducted. So we have close to 70% of it completed. In other countries, there is no indexation included by automatic in the lease grounds. But overall, in the Austrian market, the majority of the contracts does have the indexation included. In outside of the international markets, we have an opportunity to renegotiate on the prices, and we will use methods as prepayment, if it's necessary to make the business case or sometimes if we have to be in deficit mode, we will also try to do a long-term repayment in order to bring down the leases.

[Operator Instructions] A follow-up question from [indiscernible] with HSBC.

Yes. Just to clarify in my previous question. So the EUR 60 million CapEx annually that you're guiding for, they do not include the build-to-suit program. Is that correct? And if that is true, what would be the estimated CapEx associated with the build-to-suit program of 1,000 sites over the next 5 years? And then secondly, the 1.44 times tenancy ratio target for 2031, I just wanted to check that it's based on an MNO only definition.

Thank you, [indiscernible]. Just to briefly come back to your question on CapEx. So you asked about the build-to-suit, Ivo has mentioned that A1 strives to build approximately 1,000 new sites in the mid and long term. And of course, we strive to achieve this business, and of course, we have these estimations included in the EUR 60 million. So there is no additional CapEx for build-to-suit. The EUR 60 million is the overall estimation, of course, not yet committed. But at the same time, the best guess that we can foresee for the next few years. Talking about the tenancy ratio, the increase, I think we have linked from 1.22 to approximately 1.4 in the later 20s and [indiscernible] years. This is linked to the MNO growth. And maybe you remember the one slide, of course, in addition, we are striving to develop business also beyond MNO, but the tenancy ratio is exactly linked to the MNOs.

There are no further questions registered at this time. We would like to thank you for attending the Capital Markets Day and wish you a pleasant day.

Thank you very much.