Business model

The Cellnex Group provides services related to infrastructure management for terrestrial telecommunications to the following markets:

• Telecom Infrastructure Services 
• Broadcasting infrastructure 
• Other Network Services 

Generally speaking, this balanced set of investments, in terms of both maturity and profitability, and geographic diversification, should foster a growing positive contribution from all business sectors. In addition, Cellnex plans to continue identifying new investment opportunities and operational efficiencies that will strengthen its balance sheet and financial position.

Telecom Infrastructure Services

This is the company’s main business by turnover. It provides a wide range of integrated network infrastructure services to enable access to the Group's wireless infrastructure by mobile network operators and other wireless telecommunications and broadband network operators, allowing such operators to offer their own telecommunications services to their customers.

Cellnex acts as a neutral carrier for mobile network operators and other telecommunication operators that usually require full access to the network infrastructure to deliver services to end users.

In this context, Cellnex offers co-location services, space in its own infrastructures for installing telecommunications equipment in rural and urban sites that are suitable for providing a range of different telecommunication services. The sites are designed and equipped with the resources to provide a high-quality service that offers both availability and network stability. The co-location service includes the provision of access to the energy point, secure conditions and conditioning of the infrastructure for the installation of customer equipment, as well as operation and maintenance services.

The value creation model involves increasing the sharing ratio of its infrastructure, by incorporating new customers who view an independent infrastructure operator as the ideal partner for deploying their services, reducing barriers to entry; or by agreements for rationalising existing networks run by a number of mobile telephone operators. Network rationalisation generates efficiencies both for itself and for mobile network operators (MNOs).

In the coming years, the market for small cells and Distributed Antenna Systems (DAS) will be the main driver of the telecommunications infrastructure sector. Users are looking for anywhere and anytime high-quality connectivity. One of the key challenges for current 4G and future 5G technologies is the exponential increase in mobile data traffic caused by the wealth of content and services offered by network access operators and the capacity developed by the new-generation terminals. In that connection, it is estimated that 5G will result in a 600% growth in mobile data traffic over the next five years. The densification of networks in open and closed spaces such as sports stadiums, skyscrapers, shopping centres, dense exteriors, airports, subway lines or railway stations, is one of the main vectors for the future deployment of 5G.

“Small cells” and DAS networks significantly increase the actual data transmission capacity that operators offer their customers thanks to densification and to greater equipment capillarity. This means that the cells (areas) covered by each antenna are smaller, helping to better distribute data traffic among connected users and transmission elements.

The acquisition of Commscon in 2016 and Alticom in 2017 consolidates Cellnex's position as a key player in the development and deployment of telephony and data coverage solutions in high-demand areas, through the implementation of advanced technologies based on "small cells" and DAS that serve various operators based on a single infrastructure and deployed equipment.

Main services offered

Milestones 2017

Specifically in DAS:

• Agreement with Atlético de Madrid to equip the new stadium with mobile broadband coverage (2G, 3G, 4G and 5G in the future). Cellnex will install a unique and exclusive network of small cells in Wanda Metropolitano Stadium (Madrid), based on DAS (distributed antenna systems) technology able to provide service to the various mobile voice and data network access operators. The contract signed with will last for ten years. This is a pioneering solution in Spain and will serve the up to 68,000 spectators that can fit into Atlético’s new stadium. This will be achieved through a unique and exclusive network of up to 250 antennas, remote units, fibre network and equipment located in the technical room. Cellnex Telecom brings to the project its experience in similar solutions rolled out in large stadiums in Italy, such as San Siro in Milan (80,000 spectators, 107 remote units and 165 antennas) or the Juventus Stadium in Turin (41,000 Spectators, 38 remote units and 91 antennas).
• Cellnex and JCDecaux have reached a commercial agreement to offer a comprehensive solution to network access operators as well as Public Administrations to roll out “small cells” and DAS technologies that will speed up densification and the development of mobile broadband telecom services offered by MNOs. In order to achieve this objective, JCDecaux and Cellnex Telecom will offer joint end to end solutions to their customers in Italy and Spain to facilitate network densification from design to maintenance while streamlining site acquisition.
• 3G and 4G voice and data coverage service agreements in the Cercle de Economia and the Liceo de Barcelona in Barcelona based on a single multi-operator system implemented with a DAS system that avoids the various operators deploying redundant networks.

The Group now has a unique portfolio of assets, which have enabled new business opportunities to be developed through the sharing of the infrastructure necessary in the roll out of 4th generation mobile telephones, involving the decommissioning of duplicated infrastructure.

The Telecom Infrastructure Services site portfolio at 31 December 2017 is summarised below:

Following the acquisition of Commscon Italia and Infracapital Alticom subgroup, as at 31 December 2017 the Group also maintains 1,348 antennae nodes with the DAS.

Broadcasting infrastructure

The broadcasting infrastructure business is the company’s second area of activity by turnover, and the largest in Spain. The company is the only operator offering nationwide coverage of the DTT service.

The value-creation model, in the broadcasting infrastructure business, is based on sharing the transmission network between broadcasters who do not have their own networks, such as mobile telephony operators.

Its services consist of distribution and transmission of television and radio signals, and the operation and maintenance of broadcasting networks, provision of connectivity for media content, over-the-top (OTT) broadcasting and other services. Through the provision of broadcasting services, Cellnex has developed unique know-how that has helped to develop the other services in its portfolio.

In addition, Cellnex has established the strategic objective of positioning itself as a leader in 4K Ultra High-Definition Video technology. This technology provides an image with a resolution that is significantly better than High Definition (1280 x 720), up to sixteen times higher.

At the end of March 2017, the UHF Decision of the European Parliament and the Council of the European Union regulating the use of the Spectrum band 470 - 790 MHZ for the next decade was published, being mandatory for all the Member States of the European Union. European Union. It is a balanced decision as it ensures that terrestrial TV will maintain the priority use of the Sub700 MHz band (470 - 694MHz) at least until 2030 and, at the same time, allocates the 700 MHz band (694 - 790 MHz) to the MNOs. The UHF Decision provides a realistic calendar for both the Broadcast industry, offering long-term security in the use of spectrum and for the investments to be made, and for the mobile industry that will have the 700MHz band within a reasonable time horizon (2020 with possibility to delay it 2 years with justified reasons). The Decision also points out that Member States will have to compensate for the costs arising from the forced migration of services related to spectrum reallocation.

According to the UHF Decision, European administrations will have to publish their Roadmap that pilots the process before 30 June, 2018. In the case of Spain, it is expected that this will be a non-disruptive Plan, which will maintain the number of MUX and that facilitates the technological evolution and the renovation of the television park.

In this sense, during 2018, the Group will continue with its work of collaboration with the Administration in relation to the Roadmap, as well as in the research and implementation of technical improvements, both in the provision of Digital Terrestrial Television services (DTT), as in the on-line distribution of audiovisual content. Among such technological advances, the interactivity of the Hybrid DTT, or the quality improvement provided by the Ultra High Definition (UHD - Ultra High Definition) stand out. In addition to the 4K broadcasts on DTT, the Group will announce during the next months the latest developments in Hibernate DTT (HbbTV).

Another important point is that on 20 December 2017, the EU Court of Justice annulled the European Commission Decision adopted in June 2013, which ordered the recovery of state aid granted by Spain to the operators of DTT in areas extending coverage up to 98% of the Spanish population. The immediate consequence for Cellnex Telecom, as contractor for some of the tenders for extension of coverage, is that the company no longer has to refund any amounts to the Administrations, and where the refund had already been made, the Administration must return the amounts to Cellnex.

Main services offered

Milestones for 2017

Throughout 2017 a number of Ultra High-Definition pilot trials were carried out, through collaborative projects such as:

• Broadcasting of the UHD DTT test channel from Torrespaña (Madrid), Valencina (Seville) and Collserola (Barcelona).
• Broadcast of the documentary series "Spanish World Heritage Cities": Segovia. Joint project with RTVE.
• Demonstrations during the Mobile World Congress on DTT broadcast in UHD.
• Broadcast of the final of the Champions League live in 4K. Joint project with Antena 3.
• Changing of the Royal Guard broadcast live in UHD: 4K and HDR. Joint project with RTVE.
• Demonstrations at the 4K Summit in Málaga. Broadcast of three UHD-HDR services statistically multiplexed on one DTT transmitter.
• Incorporation of the centre of Mijas in trial broadcasts in UHD over DTT to cover the city of Málaga.

Cellnex has also carried out various pilot tests in the field of Hybrid DTT using the HbbTV interactivity standard.

Other network services

In Cellnex, the "smart" concept means sharing, efficiency, security, resilience and ubiquitous connectivity. Cellnex provides the infrastructure required develop a connected society by providing the following network services: data transport, security and control, Smart communication networks including IoT, Smart services and managed services and consulting.

As an infrastructure operator, Cellnex can facilitate, streamline and accelerate the deployment of these services through efficient connectivity of objects and people, in both rural and urban environments, helping to build genuine Smart territories.

The network and other services activity is a specialised business that creates value through innovative solutions and stable financial flows, with attractive growth potential. Given the critical nature of these services, customers of this business require in-depth technical know-how and demanding service-level agreements.

The connectivity of objects is set to grow very significantly in the near future. The Internet of Things (IoT) network is based on a model that connects physical objects and keeps them integrated in a network. The alliance between Cellnex Telecom and IoT network provider Sigfox is evidence of the Group's commitment to developing this technology both today and in the near future. In this regard, Cellnex's position as the majority global operator of IoT has become consolidated with more than one million objects connected in Spain's largest network dedicated to the Internet of Things. 

This activity will continue to grow in the security market through our main customer in the home, people and vehicles sector. In addition to this, most development is occurring in the water metering and smart city services markets.

Main services offered

Milestones for 2017

Security and control

• The Maritime Rescue Company under the Spanish Ministry of Public Works, signed the “Provision of services within the Global Maritime Distress and Safety System” for the Safety of Human Life at Sea with Cellnex Telecom on 27 September 2017. The contract will come into force in August 2018 and has an initial term of four years, renewable for a further two years, for an annual amount over EUR 7 million. It gives continuity to the service Cellnex Telecom has been providing since 2009. The company will provide the service through its network of coastal stations which allows 24/7 listening on maritime channels, all year round. The contract allows for receiving automatic alerts and distress calls, to be sent immediately to Maritime Rescue coordinators, as well as transmitting information for maritime safety and meteorological information, according to the guidelines established by Maritime Rescue and the connection between the Spanish Medical Radio Centre and any ships requesting that service. The provision of the service complies with the international conventions signed by Spain, in particular the Safety of Life at Sea (SOLAS) Convention and the International Search and Rescue Convention (SAR), which are the most important international treaties governing the safety of ships. In relation to the above, Cellnex has extensive experience managing security and emergency communications networks and services.
• The Group has been finalising the certifications relating to the extension of the TETRA network of the Catalan Railway system. In addition, a batch of spare parts has been supplied for the TETRA network mentioned above, notably the design, supply and installation to extend the coverage of the TETRA system on the Barcelona-Vallès line of the Catalan railways (FGC), on the section extending the branch line between the stations of Sabadell Plaza Mayor and the depots at Ca N'Oriach.
• Extension of the Catalonia emergency and security radiocommunications (RESCAT) network by means of two new base stations, each with twin carriers/frequencies to enhance coverage in certain areas of the territory, and the upgrade of the network to the new available technology has begun. Similarly, rollout of the project to extend the coverage of the RESCAT network in the Girona mono-bore tunnel of the AVE (Sagrera-Figueres line) has begun; the tunnel is 7,638 m long and there are also plans to offer coverage in the 13 emergency exits.
• Contract for the maintenance of the Ascó-Vandellós nuclear power plant communications and the contract for the provision of services within the global life-saving and safety system at sea. It should also be noted that the implementation of the DMR municipal network of Marbella (Andalusia) has been initiated.

Smart communications networks

• Agreement with Castellolí Parcmotor to equip the racing circuit with the necessary infrastructures and technology to enable the agents and companies working to develop the mobility of the future, advanced traffic solutions and vehicle manufacture to develop innovative products and services linked to smart mobility and connected and autonomous vehicles. The objective is to make the Castellolí Parcmotor into a benchmark environment and an innovative testing space for the development of ITS (Intelligent Transport Systems) technological solutions, particularly in the field of vehicle-to-vehicle (V2V) and vehicle-to-infrastructure (V2I) communications, which can subsequently be implemented in vehicles (future mobility), in towns and cities (smart cities) and on roads and motorways (smart roads).
• The first part of the contract with T-Systems for connectivity and co-location services in 32 Cellnex infrastructures has been completed and distributed throughout Spain, for the pan-European EAN (European Aviation Network) network.
• The marketing activity relating to Back-Haul and Corporate circuits with the operators is operating according to the established forecasts

GRI: 102-2, 102-6, 102-7