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Galli (CFO): the “new” INWIT will show its full potential soon

News - 04/08/2020
Less than 100 days since the deal with Vodafone Towers, the Chief Financial Officer discussed current results and announced his plan to increase revenue in Q4 and create significant growth in 2021 in an interview with CorCom. FWA and 5G will drive the business.

The ‘new’ INWIT is already fully operational. Soon it will show its full potential.” Just shy of 100 days since the deal with Vodafone Towers, Chief Financial Officer, Diego Galli, shared recent results and a growth plan that will strongly drive the business in the fourth quarter. 

June marked the end of the first semester for the new INWIT, which began operations on March 31st, so less than 100 days had passed. So, in a sense, it was actually an initial quarter,” Galli stated to CorCom. “Earnings from Vodafone Towers were consolidated for the first time for a total quarterly revenue of 184.4 million euros and 82.6% growth. In organic terms, growth was reported at just under 1%. These results revealed strong margins with Ebitdal at 65% due to very light overhead costs and our traditional attention to optimizing rental costs. Recurrent cash-flow was quite high this quarter at 79.5 million, equal to 43% of total revenue.

Are you still in the transition phase? When will the ‘new’ INWIT fully demonstrate its potential?

“Soon. First and foremost, we were very fortunate not to have felt the impact of COVID-19. On the contrary. The growing demand for data and digitalization is a medium-term driver of our business. INWIT provides an essential service and both our employees and supplier base have been working steadily. Our new team has been operative since day one, and we’re working on new processes and system renovations. We believe the most important work will be finished by the first quarter of 2021. More importantly, from a commercial standpoint, we have a large ‘order book’ that will translate into intense acceleration of services rendered to operators in the second semester. We’re strongly focused on the over 1,000 new hosting services that we’ve forecast for the second semester. Revenue growth will be visible from Q4 and will climb in 2021.”

Over the next few years, will INWIT have the financial capacity to develop the wireless TLC infrastructure that Italy needs?  

“Yes, definitely. Today, following the merger with Vodafone Towers, INWIT’s debt is around €4 billion. Excluding the effect of IFRS accounting principles, the debt is only about 2.8 billion euros. Overall, we have leverage of approximately 5.8 times our Ebitda, which is a level of debt in line with industry standards. As I mentioned before, INWIT’s strength is in its ability to generate cash flow, which enables us to both execute our plan to invest over one billion euros between now and 2026, and to steadily decrease our debt.”

Have there been any recent developments?

“Many good things have happened very quickly. We’ve finished listing the shares that were issued to support the merger. We’ve joined the FTSE MIB, which highlights the fact that we’re among the top 20 listed companies in Italy for capitalization over 8 billion euros. In addition, we’ve received positive ratings from leading agencies: – BB+ from Standard&Poors and BBB- from Fitch, which is investment grade. These indicators affirm the solidity of our business. We entered the debt market for the first time by issuing 1 billion euros in bonds, which were met with strong demand – about 4.5 times the issued amount – from quality investors all over Europe: Italy, Germany, France, the UK.”

What is INWIT’s growth strategy?

“INWIT has a complex growth plan with many drivers, in essence, to foster the fast and efficient development of 5G by operators. That requires an increase in the number of Tim and Vodafone devices, as well as those of other mobile operators, and an increase in devices from operators who offer high-speed intranet via FWA technology, for example in rural areas. Furthermore, we strongly believe in the importance of micro-coverage, both outdoor and indoor, via small cells and DAS. There’s a recent example from Luiss University: a typical case where INWIT has created value by offering operators the infrastructure they need for digital development, correlated high data traffic and dedicated applications. In terms of numbers, the plan basically calls for reaching over 1 billion in revenue by 2026, compared to the current 750 million, with around 200 million in synergies realized in terms of Ebitda.”

INWIT is part of a sector, telecom infrastructure, that has not felt the economic effects of the current pandemic. How can you explain this upward trend at a time of worldwide economic difficulty?

“The concept of sharing is the basis of many new business models in the digital economy. We’re talking about sharing existing assets to maximize returns. That’s the logic in many sectors from cloud computing to AirBnB or Uber. Infrastructure is based on the same concept applied to sharing the same mobile phone service. For example, in the past if there were 2 towers managed by operators, now there is only one managed by INWIT with 2 or more operators’ devices. The benefits are clear in terms of economic efficiency, speed of development, professional specialization and environmental optimization. It’s a model that creates value for everyone involved.”

Is there anything unique about this experience, can it become a best practice for other operators to adopt?

“I believe so. INWIT is the leader in Italy with over 22,000 towers and 40,500 hosting services, which we believe are assets of the best quality available. It’s the outcome of merging Tim and Vodafone’s infrastructures, which as incumbent and leading challenger, have invested in Italy to create the best network with top-quality locations and construction standards since the birth of telecommunications. INWIT has inherited all of that. Analogously, INWIT has inherited a wealth of high-level technical and professional knowledge and is striving to combine Tim’s, Vodafone’s and INWIT’s own best practices to create a new, winning formula. Our goal is to create a set of systems, processes and knowledge that make up our best practices and add a lot of value to foster, as I mentioned earlier, operators’ fast and efficient development of 5G.”