Cellnex gets credit upgrade, sees earnings surge after cutting debt

By Joan Faus and Andres Gonzalez

BARCELONA/LONDON (Reuters) -S&P agency gave a credit rating upgrade to Spain's Cellnex on Tuesday after Europe's largest mobile phone tower operator forecast boosting core earnings by up to a third by 2027, helping to reduce debt.

The company unveiled its new forecast earlier on Tuesday after a management reshuffle last year as it shifts strategy from acquisitions to bolstering its finances. The credit rating upgrade was a cornerstone of its new roadmap.

S&P said it had given Cellnex an investment-grade BBB-, in a one-notch upgrade from BB+ in the so-called speculative part of the scale, due to "Cellnex's stronger commitment to deleveraging" and its earnings and cash flow forecasts.

Cellnex had aimed to achieve the rating upgrade by year-end. Its CEO Marco Patuano announced the decision during an investors meeting in London.

"We did it nine months before the end of the year. It's great," he said.

Cellnex's shares closed 3% higher in Madrid.

The Barcelona-based company set a debt target in the medium- and long-term of five to six times EBITDA, down from last year's 6.9 times, expecting annual reductions of 0.4 to 0.5 points.

The company said it expected revenues, excluding costs passed through to customers, of 3.85 billion euros to 3.95 billion euros this year and 4.5 billion euros to 4.7 billion euros in 2027.

It also forecast adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) of 3.15 billion euros to 3.25 billion euros in 2024 and 3.8 billion euros to 4 billion euros in 2027.

In 2023, its adjusted EBITDA was 3 billion euros on revenues of 3.6 billion.

Cellnex said it planned to spend a minimum of 3 billion euros in 2026-30 on dividends, and 7 billion euros by 2030 on potential share buybacks, industrial business opportunities and extraordinary dividends.

By next summer, Cellnex should know if and when it could launch a share buyback, its CEO said.

Shareholders can expect a minimum dividend payment of 500 million euros a year from 2026, with a minimum annual growth rate of 7.5% in the following years, Cellnex said.

It expects free cash flow to increase to 250 million euros to 350 million euros this year from last year's 150 million euros, and reach 1.1 billion euros to 1.3 billion euros in 2027.

Cellnex also said it had reached an agreement to sell its Irish subsidiary to Phoenix Tower International for 971 million euros and would use the proceeds to cut debt.

Patuano said selling Cellnex's Austria unit was its next target, but only if it received a good offer.

"If the longer term value comes from keeping an asset we will keep an asset," he told analysts.

Cellnex also announced the creation of a real estate vehicle grouping around 10,000 of its towers and said it could potentially sell a minority stake in that to an investor.

($1 = 0.9210 euros)

(Reporting by Joan Faus and Andrés González; Additional reporting by Marta SerafinkoEditing by Andrei Khalip, Mark Potter and Charlie Devereux)