Interview with Alfonso Álvarez, CEO Cellnex Spain

14 Jan Interview with Alfonso Álvarez, CEO Cellnex Spain

Spain’s telecommunications sector ranks fifth in Europe. What key factors have enabled Spain and Catalonia to build such a strong telecommunications sector?

Spain has historically been less powerful industrially compared to countries like Germany or France. Regionally, while Spain shares common traits, it has traditionally relied heavily on tourism, especially along the coast. However, significant investments in infrastructure, such as roads and railways, have been made. For example, Spain leads the world in high-speed trains. Spanish companies have also contributed to major projects like the high-speed railway in Saudi Arabia and the UK.

This infrastructure-focused mindset extended to telecom, where Spain’s mobile signal quality has always been on par with other countries. The country’s geography, with a population concentrated along the coasts, has also helped boost fiber and mobile penetration. Compared to the UK, where the population is more dispersed, Spain’s geographic structure has made telecom infrastructure development more efficient. As a result, Spain is one of the leading countries in fiber penetration, almost a saturation of fiber infrastructure, prompting mergers and joint ventures among major operators like Telefónica, Vodafone and MásOrange.

This collaboration allows them to avoid unnecessary duplication of resources and focus on leveraging their existing infrastructure. The same trend is occurring in mobile. Spain recently saw its first merger of operators approved by the European Commission, involving MásMóvil and Orange, with some remedies. These adjustments will allow Digi to become the fourth operator by the end of June, gaining its own spectrum. At Cellnex, we believe this trend of market concentration through mergers will continue across countries in the coming years. Investment in infrastructure is deeply embedded in Spain’s DNA and telecom is no exception.

What major transformations has Cellnex recently undergone that will impact its operations in 2025 and beyond?

We operate in 10 countries now, down from 12 after selling our assets in Austria and Ireland. About a year and a half ago, after a long period of mergers and acquisitions and growth during the early stages of 5G deployment across Europe, we entered a new phase. Our CEO, Marco Patuano, has communicated this shift to markets and analysts. Unlike the US or China, Europe has many small countries with multiple telecom operators, all investing simultaneously in 5G and fiber, which is challenging economically.

When 5G began, European operators looked to monetize passive infrastructure, like towers, through sale-and-leaseback models. We were the first to strongly invest in consolidating this market, starting in 2015 when we expanded from Spain to a European footprint. As 5G became a reality and operators understood the required investments, we expanded from Spain to Italy, then the Netherlands, France and the UK, completing large transactions. This growth led to 115,000 assets across 12 countries. However, as inflation and interest rates rose, the financial landscape shifted. We had grown through debt and capital but with the changing environment, our board decided to become more selective. With fewer opportunities for acquisitions in Europe, the focus shifted to consolidating existing assets.

Our new focus is on rewarding shareholders, using CAPEX more selectively and simplifying operations. While we are not just a real estate company, Spain remains an exception due to the variety of services we offer, including distributed antenna systems (DAS) projects for large venues. We are now more selective in our investments, focusing on countries and opportunities with strong growth potential.  Our key markets are Spain, France, Italy, the UK and Poland, with France being the largest in revenue, followed by Italy, the UK, Spain and Poland. We also operate in the Netherlands, Portugal, Switzerland, Sweden and Denmark.

Spain and Catalonia in particular, where Cellnex was born, was our first country and a key learning ground for the tower business. Cellnex’s origins lie in the broadcasting business, starting with Catalonia’s government network created in 1984 for regional TV and radio broadcasts (TV3, Catalunya Ràdio). These assets are now part of Cellnex, our brand Tradia manages the government-owned towers, of course also commercialised to other services, like mobile operators. In Spain, there was also a state-owned network, Retevisión, which hosted customers like Television Española, Mediaset, Atresmedia, etc. Retevisión was privatised years ago and belongs to Cellnex nowadays.

We can say that broadcasting assets, both owned or under concession and later open to other technologies and operators, allowed Cellnex to start an industrial management of assets, which allowed us to go to other countries and sign agreements with the mobile operators. We somehow replicated what had previously happened in the US with their mobile tower model. Broadcasting is still a key part of our business in Spain, accounting for about 40% of our annual turnover, providing coverage for Digital Terrestrial Television and radio channels, as well as regional and local digital TV across much of the country. This broadcasting business remains unique to Spain in our portfolio, with limited broadcast operations in other countries. Of course, our main growth comes now from our business with the mobile operators, also in Spain.

What initiatives is Cellnex implementing to foster local talent and entrepreneurship in Spain’s telecommunications industry?

We aim to boost internal talent, especially in reducing the gender gap in traditionally male-dominated areas like operations and engineering, though our financial and legal teams already exceed the industry average. Additionally, we need to increase competitiveness, especially in fields like artificial intelligence, where we lag behind the US and China. As AI becomes essential for our customers — mobile operators, broadcasters and public administrations — Cellnex must adopt these technologies to help them stay competitive.

We are actively working with partners and subcontractors to set a model that fosters innovation, creativity and competitiveness. In Catalonia, we have a strong history of collaboration with top companies for operational maintenance and service level agreement quality. We are now focusing on indoor coverage, particularly through DAS solutions. While large stadiums used to dominate this area, we are now targeting smaller, high-volume projects, like office buildings.

Companies increasingly rely on mobile data and Wi-Fi instead of fixed telecom, so good indoor coverage is essential. As a neutral host, we partner with mobile operators who can’t afford to cover all buildings, installing the necessary infrastructure. This initiative, launched two years ago, also involves working with integrators for equipment installation and maintenance.

What milestones has Cellnex achieved in reducing its carbon footprint and advancing circular economy initiatives?

In Spain, we are a leader in managing passive infrastructure like towers and masts. To reduce energy consumption, we focus on two elements: using less energy and sourcing green energy. We don’t sell energy, but in some cases, we provide it as part of an industrial service, passing energy costs to mobile operators. The model varies by country, with some operators directly contracting energy suppliers, while in Spain, we cover only our costs. To keep energy consumption low, it’s crucial to invest in and maintain efficient equipment. Regular maintenance and upgrades reduce consumption, prevent incidents and make the investment profitable over time.

We are investing in solar energy, taking advantage of Spain’s sunny climate. By installing solar panels and batteries, we are reducing energy costs and consumption, ensuring a greener future and greater energy independence. Our 2024 annual report, due soon, will highlight our ESG achievements, including our goal to be carbon neutral by 2035 — almost a decade ahead of schedule.

How open is the company to collaborations with foreign entities, particularly from the USA?

Our collaboration with major investors started when we went public and began to expand internationally, with our CFO and team regularly traveling to the US and London for investor meetings. Our success story has made us well-regarded in the industrial community. From 2014 to 2022, we led growth in Europe, initially alone, then joined by other companies and infrastructure investment funds. Now, we are entering a period of more selective growth and stability, with consolidation in core markets. In Spain, for example, we have four major TowerCos (Cellnex, American Tower, Orange’s TOTEM and Vantage Towers), while Italy has two main ones (INWIT and Cellnex).

There is a trend of operator consolidation, particularly in fiber and mobile through mergers. However, it doesn’t make much sense that, in the next few years, Telefónica, Zegona, MásOrange and Digi are still operating separately. For example, Digi won’t initially build a dense network and will instead share infrastructure with Telefonica. Similarly, MásOrange and Zegona have separate networks, but collaborate in rural areas under Project Jumping. It doesn’t make sense that the four TowerCos are growing if the number of operators in each country shrinks to three or two. Eventually, there will be consolidation, leading to a new wave of M&A.

Our focus should be on this, while considering anti-trust regulations that prevent any one company from controlling all the towers. We anticipate that Spain will be the first case of consolidation, but other countries will follow. As a Spanish company, we won’t sell Spain and if other towercos decide to divest, we will be there to discuss and expand our portfolio.

What are your top priorities as CEO of Cellnex España in 2025 and your long-term vision for the company’s presence in Spain and Europe?

Having experienced international expansion, I deeply value the expertise of Spanish and Catalan engineers in particular. One of my priorities is maintaining the high quality of service we provide to customers, including broadcasters, mobile operators and authorities. For example, we have strong contracts with the regional government of Catalonia, managing the emergencies and safety network and wholesale fiber networks as well.

Our customers expect excellence and while we focus on efficiencies, synergies and cost-cutting, reducing quality is never an option. Looking ahead, I aim to lead the transformation in infrastructure and consolidation. Spain offers a diversified business landscape, giving us valuable insights into market needs. As tower consolidation progresses, we can manage more assets, increasing our group’s volume. Having witnessed the growth of this project from Spain to 12 countries, I hope to maintain Cellnex’s reputation as one of Europe’s most dynamic and innovative companies, leaving a lasting legacy for the next generation.