Cellnex Earnings: Slight Improvement in Margins and Tenancy Ratios Continues

There were no surprises in narrow-moat Cellnex’s third-quarter results. Revenue has grown by 16.9% in the first nine months of the year, with EBITDA after leases up 20%. Cellnex is finally experiencing slight operating leverage, with EBITDAaL margins up 140 basis points year over year. However, we want to see an even stronger focus on organic growth (co-location) as Cellnex needs to improve its tenancy ratios to make the most out of the tower firm operating model. Last quarter new CEO Marco Patuano gave encouraging remarks during Cellnex’s earnings call that indicated a new focus on co-location growth. Co-location growth has been softer this quarter compared with the previous one, with 582 new co-locations compared with 1,255 in the previous quarter. However, co-location growth has indeed been quite strong in the previous four quarters. Cellnex’s tenancy ratio stands at 1.38 tenants per tower, compared with 1.36 a year ago. We are maintaining our EUR 52 fair value estimate.