Vivek Badrinath, CEO of Vantage Towers, which incorporates Vodafone tower assets across nine European countries, was in a bullish mood.

In prepared remarks to kick-off Vantage Towers' capital markets day – all part of the preparation for an IPO slated for early next year – Badrinath highlighted growing demand for towers due to a mixture of 5G rollouts and broader coverage obligations across Europe.

With an eye on stimulating investor enthusiasm for the listing, Badrinath said those not only helped the tower business in general but were already working in Vantage Towers' favor. The CEO flagged "firm commitments" from "our customers" to build 7,100 new sites.

It's not a diverse range of customers, however. Vodafone has committed to 6,850 of them and Italy's Wind Hellas accounts for the remainder. It didn't dampen the CEO's pitch, however.

"With inflation-linked revenue – secured for the long term – from Europe's leading mobile operator Vodafone and other high-quality investment-grade tenants, and a strong balance sheet, we have a powerful base from which to capture exciting organic and inorganic value accretive growth opportunities," claimed Badrinath.

Putting money where the CEO's mouth is, Vantage Towers said it was "preserving the strategic flexibility to pursue additional organic and inorganic opportunities." The upshot is €1 billion (US$1.2 billion) of leverage capacity, which can be complemented by the issuance of equity, "to fund larger opportunities."

As it stands, Vantage Towers has around 68,000 macro sites under management, spread across controlling interests in Germany, Spain, Greece, Portugal, the Czech Republic, Romania, Hungary and Ireland. It also owns a stake of 33.2% in Italy's Inwit tower infrastructure business. The macro-site portfolio is split between ground-based towers (35%) and rooftop towers (65%).

Show me the numbers

Vantage Towers' consolidated adjusted EBTIDAal (after leases) for FY 2020 (ended March 31 this year) was €523 million/$621 million (adjusted EBTIDAal margin of 55%). Add in Inwit's portion and Vantage Towers' aggregated pro forma adjusted EBTIDAal for FY 2020 rises to an estimated €680 million ($807 million).

The commitment to build 7,100 new macro sites is expected to make a run-rate adjusted EBITDAaL contribution of €130 million ($154 million) by FY 2027.

The tenancy ratio for Vantage Towers, averaged out across its European assets, is around 1.3x. The aim is to increase that in the "medium term" to at least 1.5x. To meet that target, it needs an additional 2,100 tenancies.

The company claimed it had "strong visibility" on the drivers of tenancy growth in the medium term, with commitments for approximately 13,400 additional net new tenancies from new site builds.

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Vantage Towers, however, has apparently already identified a "pipeline of opportunities that is multiple times greater than that to support driving a tenancy ratio of more than 1.5x."

For FY 2021 (ended March 31), Vantage Towers projects a consolidated adjusted EBTIDAal of €530-540 million ($629-641 million) and aims to generate a high-50s percentage margin in the medium term.

Consolidated recurring free cash flow (RFCF) was €373 million ($443 million) in FY 2020 and expected to be in the €375-385 ($445-457 million) range in FY 2021 (with a mid- to high-single-digit compound annual growth rate in the medium term).

A dividend of €270 million ($321 million) is to be paid following an AGM next year.

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— Ken Wieland, contributing editor, special to Light Reading