Business Model

Business model and value chain

Cellnex is the main neutral¹ infrastructure operator for wireless telecommunication in Europe. Cellnex Telecom, S.A. (a company listed on the Barcelona, Bilbao, Madrid and Valencia stock exchanges) is the parent company of a group in which it is the sole shareholder and the majority shareholder of the companies operating in the various business lines and geographical markets.

Cellnex has commited up to 125,098 sites, 101,802 of them already in the portfolio and the rest in the process of completion orwith planned roll-outs up to 2030, and positions the Company in the development of new generation networks. Cellnex provides services in Austria, Denmark, Spain, France, Ireland, Italy, the Netherlands, Poland, Portugal, the United Kingdom, Sweden and Switzerland, as a result of its investment efforts to promote its transformation and internationalisation.

The Company is listed on the continuous market of the Spanish stock exchange and is included in the selective IBEX 35, and EuroStoxx 100 indices. It is also present in the main sustainability indexes, such as CDP (Carbon Disclosure Project), Sustainalytics, FTSE4Good, MSCI and Vigeo Eiris.

Cellnex’s reference shareholders include Edizione, GIC, TCI, Blackrock, Canada Pension Plan, CriteriaCaixa, Wellington Management Group, Capital Group, Fidelity and Norges Bank.

The Group's organisational structure is presented below.

The Cellnex Group achieved many milestones during 2021: the appointment of a new Chairman, the completion of the acquisition of several of the CK Hutchison's assets, the acquisition of 100% of Hivory with a portfolio of 10,500 sites in France, the agreement with Deutsche Telekom to integrate the 3,150 sites of T-Mobile Infra BV in the Netherlands, the renewal for the fifth consecutive year of Cellnex's qualification as a "Zero Outage Supplier" in Spain by Deutsche Telekom, a capital increase of €7 billion to finance Cellnex's growth, the acquisition of Polkomtel Infrastruktura in Poland, the approval of Cellnex's emission reduction targets by the Science Based Targets (SBTi) initiative and the launch of the first acceleration programme for social-impact startups by the Cellnex Foundation.

There follows a historical timeline of Cellnex's business model from 2015 to 2021.

Through the ESG Strategy, Cellnex analyses, measures and manages its impacts as a company on society and its environment. The Company's own value creation model, focusing on the shared management of telecommunications infrastructures, fosters sustainability, efficiency – and thus responsibility – in the use of the resources with which it works. By building partnerships with its customers, Cellnex has a long-term relationship with them and manages the Company with the long cycle in mind, aware of the principles of ethics, good governance, respect for human rights and dialogue with its stakeholders, which should govern Cellnex's actions.

Services

Cellnex offers its customers a range of services aimed at ensuring the conditions for reliable and high-quality transmission for wireless broadcasting of content, including voice, data or audiovisual content.

Cellnex also develops solutions in the field of "smart cities" projects, which optimise services for citizens through networks and services that facilitate municipal management. In this field, Cellnex is deploying smart communications networks in several countries, based on various IoT technologies (Sigfox, LoRaWAN...), that enable objects to be connected and, therefore, the development of a robust ecosystem for the Internet of Things (IoT).

Also relevant is the Group's role in the deployment of security and emergency networks for law enforcement agencies, known as Terrestrial Trunked Radio (TETRA) networks or by their acronym PPDR (Public Protection and Disaster Relief). This company business line embodies the skill levels of the human team that manages them and the resilience and reliability of the architecture of the networks themselves and the equipment that make them up. Cellnex also participates in the deployment of Private Network services for business environments where service continuity is critical (such as ports, nuclear power plants, petrochemicals, etc.) and dedicated radio communications networks designed to suit customers’ needs.

The services provided by Cellnex in each geographical territory in the field of infrastructure management for wireless telecommunications are presented below. In this regard, Telecommunications Infrastructure Services is still relatively the most significant item in the Group's 2021 income statement owing to the acquisition and integration of new telecommunications sites.

As Cellnex expands its presence in the territory, the Company also increases its portfolio of services. For example, with the integration of Poland, Cellnex has incorporated the provision of active equipment services into its business.

Telecommunications Infrastructure Services (TIS)

Cellnex operates in more than 134,813 Point of Presence (PoPs), has a portfolio of nearly 101,802 sites, including BTS committed deployments and is committed to the development of new generation networks.

Cellnex offers co-location services in its infrastructure for mobile operators to install their telecommunications and wireless broadcasting equipment there. This infrastructure is designed to suit the needs of various technologies (broadband, point-to-point connections or mobile communications) in both urban and rural areas. This service involves adapting sites for new co-locations or multiple network modifications required by the operators (installation of new technologies, equipment changes, reconfigurations...). The objective is to meet and improve the SLAs (service level agreements) offered by Cellnex, which are of two main types:

• The services provided according to SLAs in place, when an Operator requests a new shelter or a network modification to carry it out with the highest quality and in the agreed time or better.
• The Operation and Maintenance (O&M) SLA to provide the services with the agreed continuity, and service level, and to improve on it. It should be added that one of Cellnex's priorities is the continuous improvement of processes and procedures, and of contingency plans.

Augmented TowerCo

From pure Co-location services to the most developed Site as a Service concept, Cellnex offers to its clients telecom infrastructure services for sustainable connectivity that relief them from the burden of managing the infrastructures and networks over which their systems operate.

The neutral host nature makes Cellnex’s model the most efficient possible, as developing multi-operator sites which means decreasing costs to the clients, increasing sustainability to telecom and connectivity ecosystem and rapidly meeting all stakeholders expectations as services are quickly deployed.

In this regard, it is worth highlighting the efforts and achievements in terms of security, duration and cost achieved in the campaign to negotiate rental contracts with landlords. In the case of Spain, for example, at the end of the year the percentage of sites secured was over 80%, this is a significant level and guarantees the continuity of this line of business in the future.

Jumping project

During 2021, Cellnex Spain's sites have been adapted to facilitate the deployment of the "Jumping" project (sharing of active network equipment in less populated areas) promoted by two of its customers, Orange and Vodafone, thus helping operators to implement this project.

Cellnex also offers a wide range of services for the distribution of television and radio signals via satellite or teleport (Arganda), as well as data distribution via VSAT stations (Very Small Aperture Terminals or private satellite data communication networks). Cellnex combines terrestrial and satellite solutions to offer each customer the best solution in each case.

In addition, Cellnex offers advanced Ethernet and IP transport services, both for the audiovisual sector and for telecommunications operators, thanks to a fibre optic network that currently consists of 40 MPLS nodes. Cellnex has 163 points of presence interconnecting all broadcasters, audiovisual agents, operators, public administrations, TETRA networks (for critical sectors such as emergency services) and the first IoT (Internet of Things) network in Spain with more than 1,300 UNB stations.

Cellnex Netherlands wins bid for management and expansion of ProRail telecom infrastructure

Cellnex Netherlands was selected in 2021 by ProRail as the passive infrastructure provider  (PIP). Cellnex will be responsible for managing and expanding  the telecom sites for mobile connectivity along the Dutch railway tracks. For implementation, Cellnex works together with VolkerWessels Telecom, a specialist in designing, building and managing digital infrastructure. In addition to its role as a neutral telecomms infrastructure provider for ProRail, Cellnex has exclusive rights for any BTS development along the whole rail network.

DAS (Distributed Antenna System) and Small cells

Distributed Antenna Systems or DAS is a network of spatially separated antenna nodes connected to a common source via a transport medium that provides wireless services in a geographical area or structure. A DAS can be installed inside a building to boost the internal wireless signal. Cellnex uses DAS systems to provide DASaaS services (DAS as a Service) with an end-to-end approach. In addition, DAS systems and Small Cells are one of the base infrastructures from which the new 5G communication standard will be deployed.

DAS projects developed by Cellnex Spain

In Spain, the entire deployment of the 4G network has been completed in the 300 km and 300 stations of the Madrid metro, thus providing connectivity continuity throughout the underground. In addition, agreements and deployments in various football stadiums in the country, such as the Benito Villamarín stadium of Real Betis Balompié in Seville and the Ciudad de Valencia stadium of Levante Unión Deportiva, are also worth mentioning.

Also noteworthy in the field of data centres is the opening of the first data centre in Barcelona, on Paseo de la Zona Franca, in the area of industrial estates (Pedrosa and Zona Franca) and the Fira II exhibition centre. The data centre has several fibre connectivity routes and has been successfully marketed to one of the four mobile telephone operators, among other customers.

During 2021, DAS coverage solutions have been developed to provide connectivity in spaces or venues with a high volume of public that require simultaneous voice and mobile data services.

Grand Paris Express

"I'm very proud of what has been remotely achieved by a virtual multi-country team in always-on pandemic conditions. Promoting the Cellnex techinal capabilities and business model to a new French customer was not a forgone conclusion since day one. A big thanks to La Société du Grand Paris believing in Cellnex to comply with its key expectations around quality of service & shared connectivity equity."
Loic Besnard,
Country Commercial Director

Cellnex France has been commissioned by the Société du Grand Paris (SGP) to deploy a DAS (Distributed Antenna System) network on the new lines 16 and 17 of the Grand Paris Express metro.

Cellnex France will deploy a DAS (Distributed Antenna System) coverage system on lines 16 and 17 to offer mobile operators an uninterrupted and optimal voice and data service with connectivity in all stations and tunnels between Saint- Denis Pleyel and Noisy Champs (Line 16) and between Charles de Gaulle Airport and Le Mesnil Amelot (Line 17).

Cellnex Portugal becomes a referent in the Portuguese DAS market

Cellnex strengthens its position in Portugal with the purchase of towers from the Altice group. During 2021 Cellnex Portugal has closed a second transaction with the Altice group comprising 687 assets, including 223 macro sites and 464 DAS and Small- Cells. Because of these acquisitions, 3 new DAS solutions have been implemented, therefore positioning Cellnex as a referent in the Portuguese DAS market.

Cellnex Italia helps reduce the territorial digital divide in the historic center of Erice

The municipal administration of Erice has long been committed to winning the great challenge of overcoming any outstanding issues regarding the territorial digital divide. The administration’s philosophy is to combine the need for modernity and respect for the historical heritage, in order to provide a service not only to the inhabitants but also to tourists. However, its mountain-top position reduces, if not eliminates, the signal coming from the macro sites of the operators serving the internal streets of the centre.

"For a long time both residents and many tourists of the historic center of Erice had suffered a major lack of connectivity. With Cellnex we managed to deliver to the city the service it deserves, through an ambitious project that we developed with passion and it eventually brought an amazing outcome.”
Emanuele Sinosich,
Commercial Sales Solutions

To achieve a solution meeting Erice’s needs, Cellnex has installed an Outdoor Distributed Antenna System. To that end, Cellnex created an optical infrastructure within the 3 km of historic centre, to connect the active equipment distributed through the medieval town.

In order to offer a modern system that respects the historic heritage, the antennas chosen for covering the areas are passive panels which have been discreetly positioned with custom fitted brackets in ideal locations to achieve a very low aesthetic impact. The system provides for the use of a total of 25 antennas.

Accordingly, to offer a high-quality service to people in the historic centre of Erice, this multi-operator system comprises  a total of 48 sectors dedicated to providing  a high-quality performance to residents and tourists in these areas. The system is supervised 24/7  from  Cellnex’s Network Operation Centre, equipped with all the necessary hardware and software, and an appropriate complement  of expert staff.

A summary of the portfolio of Telecommunications Infrastructure Services sites as at 31 December 2021 is presented below.

⁽¹⁾ Renewals: most of these contracts have clauses prohibiting partial cancellation and can therefore be cancelled only for the entire portfolio of sites (typically termed “all or nothing” clauses), and some of them have pre agreed pricing (positive/negative).

⁽²⁾ The initial term of the MSA with Wind is 15 years, to be extended for an additional 15-year period (previously confirmed), on an “all-or-nothing” basis. The fees under the MSA with Wind are CPI-linked.

⁽³⁾ In accordance with the agreements reached with Bouygues during 2016 – 2020, at 31 December 2020 Cellnex had committed to acquire and build up to 5,400 sites that will be gradually transferred to Cellnex up to 2024 (see Note 7 of the accompanying consolidated financial statements). Of the proceeding 5,400 sites, a total of 4,078 sites have been transferred to Cellnex as of 31 December 2020 (as detailed in the previous table). Note that all Bouygues transactions, like most of the BTS programmes Cellnex has in place with other MNOs, have a common characteristic “up to” as Bouygues does not have the obligation to reach the highest number of sites. During 2016 – 2017 have been signed different MSA’s with Bouygues in accordance with the different transactions completed (Glénan, Belle-Ille, Noirmoutier). All MSAs have an initial term of 20/25 years with subsequent renewable three/two 5-year periods, on an “all-or-nothing” basis. In relation to the MSA signed with Bouygues in 2018 (Quiberon transaction) the initial term is 20 years with subsequent renewable 5-year periods (undefined maturity).

⁽⁴⁾ The MSA with Sunrise have an initial term of 20 years with two 10-year periods (undefined maturity), on an all-or-nothing basis.

⁽⁵⁾ Contracts with customers are index-linked to the CPI and have an average duration of approximately seven years to be automatically extended (undefined maturity).

⁽⁶⁾ The MSAs with Iliad and Salt have an initial term of 20 years, to be automatically extended for 10-year periods, on an all-or-nothing basis, with undefined maturity.

⁽⁷⁾ Contracts with customers are index-linked to the CPI, have an average duration of c.20 years and a significant probability of renewal due to the portfolio’s strong commercial appeal and limited overlap with third party sites.

⁽⁸⁾ Orange Spain is the main customer of this portfolio of telecom sites, with which Cellnex has signed an inflation-linked Master Lease Agreement for an initial period of 10 years that can be extended by one subsequent period of 10 years and subsequent automatic one-year periods, on an “all-or-nothing” basis.

⁽⁹⁾ The initial term of the Omtel MSA is 20 years, subject to automatic extensions for additional five-year periods, unless cancelled, on an “all-or-nothing” basis, with undefined maturity. The fees under the Omtel MSA are CPI-linked.

⁽¹⁰⁾ The initial term of the MSA with MBNL and EE is 10 years with three extension rights. The duration of the MSA with CTIL is until 2024 (at least two years before, extension to be discussed).

⁽¹¹⁾ The NOS Towering MLA have an initial duration of 15 years, to be automatically extended for additional 15-year periods, on an “all-or-nothing” basis, with undefined maturity. The fees under the NOS Towering MLA will be CPI-linked.

⁽¹²⁾ The initial term of each CK Hutchison Continental Europe MSA is 15 years, with possible extensions for a further 15-year period and subsequent 5-year periods, on an “all-or-nothing” basis (same duration for all countries). The fees under the CK Hutchison Continental Europe MSA are CPI-linked.

⁽¹³⁾ InitiaI term of 15 years + subsequent automatic renewals of 10 year periods (all or nothing, undefined maturity basis).

⁽¹⁴⁾ Initial term of 20 years to be automatically extended for subsequent 10 year periods (on an all or nothing basis)

⁽¹⁵⁾ 25 years with automatic 15 year renewals.

⁽¹⁶⁾ 18 years with automatic 5 year renewals. All-or-nothing renewal clause, undefined maturity

⁽¹⁷⁾ MLA with 20 + automatic 5 year renewals. All-or-nothing renewal clause, undefined maturity

Audiovisual broadcasting networks

Cellnex is the leading operator of broadcasting infrastructures in Spain, with more than 1,700 sites exclusively dedicated to transmitting audiovisual and radio signals. Cellnex offers a comprehensive network operation and radio spectrum management service. Ensuring the distribution and broadcasting of digital television, radio and multi-screen content to the main private and public audiovisual groups in the country.

For digital television content, Cellnex has led the implementation of DTT in Spain. The solutions offered by Cellnex include signal distribution, encoding in the most innovative formats and broadcasting of Ultra High Definition (UHD) content. For radio services, Cellnex offers configurable sound quality, data services capacity, flexibility in multiple channel composition, spectrum efficiency and cost efficiency.

In 2021, these DTT and FM services were provided with a very high level of service (SLA - Service Level Agreement), and, despite inclement weather, without any significant incident thanks to the operational excellence of the organisation, resources, processes, procedures and people.

In 2021, these DTT and FM services were provided with a very high level of service (SLA - Service Level Agreement), and, despite inclement weather, without any significant incident thanks to the operational excellence of the organisation, resources, processes, procedures and people.

The tasks associated with the Second Digital Dividend were also completed, a process initiated in 2020 aimed at freeing up the 700 MHz frequency band to facilitate the deployment of 5G. To that end, multiple actions were carried out in national, regional and local DTT broadcasting networks, with channel changes, adaptation of elements such as radiating systems, multiplexes, etc., always in coordination with the administration and broadcasters. At the business level, all contracts that were due to expire during the year were successfully renewed.

Cellnex also provides innovative services for the management and distribution of paid and free-to-air Internet content for multi-screen environments. For example, Online Business Support Services is a practical and efficient solution to manage all the processes involved in a customer's complete lifecycle, from first contact to billing and collection, through subscription service management, data modification and customer management.

Network and other services

Cellnex offers integrated and adaptable solutions to develop a connected society and make the smart concept a tangible reality in both urban and rural areas. Cellnex provides end-to-end network services for Public Administrations and large companies, integrating and adapting the required solutions. These include: Mission Critical Private Networks (MCPN) services, Business Critical Private Networks (BCPN) services, connectivity services, Operation and Maintenance services and IoT and Smart services.

• Mission Critical Private Networks (MCPN) services: these are networks for Security and Emergency forces that are provided with very high availability and communications security. During 2021, significant contracts were renewed in Spain (Radiecarm Network in Murcia, Tetra Network in Galicia, Secora Network in Seville, Tetra Network in the Balearic Islands ....) and tactical cell pilots were carried out with emerging LTE technology. Also, through the subsidiary Zenon, terminals and accessories were sold to various security and emergency forces.
• Business Critical Private Network Services (BCPN): a pilot test was deployed in Spain with BASF at its petrochemical plant in Tarragona, the largest plant in southern Europe. In this new network, a number of industrial 5G use cases were developed: vehicle guidance, assisted maintenance with augmented reality, monitoring and location for worker safety in professional environments, etc.
• Connectivity services: Cellnex's main transport network in Spain has been renewed to improve its security and enhance its capacity, a key aspect for boosting the connectivity business through mixed fibre and radio link solutions for companies and operators. Radio-link connectivity is provided from high rural towers that have direct line of sight covering more than 95% of Spanish territory and the deployment of new connectivity or fibre back-up has excellent quality and dedicated capacity and a very fast time to market. In terms of fibre, Cellnex, through its subsidiary XOC (Xarxa Oberta de Catalunya, Open Network of Catalonia), has the highest fibre density and is working with the Catalan government to boost high bandwidth communications in Catalonia, offering connectivity for both the Catalan government and wholesale services. Demand for both fibre and radio services continued to grow at a good pace. A new development was the start of the Quantum Communications project with ICFO and the Barcelona Supercomputing Center (BSC). The objective is to implement a node of the European Quantum Communication Infrastructure in Barcelona, and Cellnex provides connectivity between the sites involved through fibre rings, both primary and secondary.
  "The pandemic situation has allowed us to find a new way of communication with our clients that we could not even imagine before. Being able to connect remotely with them has offered us an unimaginable immediacy. From now on we will be able to combine the two worlds, remote and face-toface, getting the best of each of them."
  Marta Rubí,
  Country Head of Segment, Spain
• Operation and Maintenance Services: the agreement has been renewed for the provision of engineering, supply, maintenance and monitoring services for Enel's communications network in Spain (Endesa). Similarly, the agreement with Lyntia has been renewed for the maintenance of its fibre network, broadening its scope to include operational monitoring (Control Centre).
• IoT and Smart Services: the Connecta València project for the Provincial Council of Valencia, an initiative that will enable the development of the province of Valencia as a Smart Tourist Destination, making it possible to develop new management policies. The project includes the implementation of interactive Totems, a tourist Wi-Fi network, the provision of LoRa connectivity through the deployment of a network of 500 gateways for the transmission of information from various meteorological and environmental sensors and the traceability of mobile devices, a survey tool, a data Portal, a Progressive Web Application, a Content Manager, etc. In short, all the necessary elements to understand and analyse the experience of tourists and to guide them on their trips.

Geographical presence and portfolio

In recent years, Cellnex's business has grown exponentially through inorganic operations, which has resulted in a significant expansion of its European presence, increasing complexity both in management and in new products and services.

The resulting total amount of infrastructure (sites and nodes), as at 31 December 2021, built and acquired by Cellnex is presented below.

Cellnex in Europe

Significant events in 2021

In 2021 the following significant events took place regarding corporate operations at Cellnex Group.

CK Hutchison

Following the various agreements reached in 2020 between Cellnex and CK Hutchison, 2021 has been a year of completing a large part of the agreements and integration of the different acquisitions made. Thus, in December 2020 the assets of Denmark, Austria and Ireland were incorporated and in 2021 those of Sweden and Italy. Currently, the transaction in the UK is still active in 2022. In this regard, Cellnex is working together with the British Competition and Markets Authority (CMA), in relation to the ongoing analysis of Cellnex's acquisition of CK Hutchison's passive infrastructure assets in the United Kingdom. The consideration for the CK Hutchison Holdings Transaction in respect of the United Kingdom is expected to be settled upon closing partly in cash and partly by the issue to Hutchison of new Shares and (if applicable) the transfer to Hutchison of treasury Shares. On 29 March 2021, the general shareholders’ meeting of Cellnex (the “General Shareholder’s Meeting”) approved (delegating its execution on the Board of Directors) a share capital increase by means of an in-kind contribution for the payment of the portion of the consideration to be settled in Shares, as described in the item 10 on the agenda of the resolutions passed by the 2021 General Shareholder’s Meeting. Hutchison is expected to receive approximately EUR 1.4 billion in Shares (with the exact number of Shares to be received by Hutchison based on the Cellnex Share price at closing[2]).'Hutchison is expected to receive approximately 27 million new Shares, depending on the Cellnex's share price as explained below, with Cellnex expecting to transfer such number of additional treasury Shares as is necessary to reach the number of the Shares consideration payable to Hutchison pursuant to  the CK Hutchison Holdings Transaction in respect of the United Kingdom. The aggregate number of Shares to be delivered to Hutchison at completion is also subject to adjustment in the event that certain events (same adjustments events as in the EUR 850Mn 2028 convertible bond) relating to Cellnex’s share capital occur prior to completion of the CK Hutchison Holdings Transaction in respect of the United Kingdom, including, among others, issues of Shares in Cellnex by way of conferring subscription or purchase rights (such as the issuance of Shares by Cellnex that occurred on 23 April 2021). As described in item 10, paragraph 10, of the Resolutions passed by the 2021 General Shareholder’s Meeting, the General Shareholders' Meeting acknowledged that the potential differences in value between (i) the implicit value attributed to Cellnex's shares which will be issued in the context of the share capital Increase resolution; and (ii) the volume weighted average price of Cellnex's shares on a date which is close to the date where the share capital increase will be executed (subject to a collar mechanism limiting, exclusively to this purpose, the potential fluctuations in the share price⁽²⁾) will be adjusted. Such adjustment, which has a purely contractual significance and does not affect in any way the terms of the share capital increase, will be effected, if applicable, by means of Cellnex's shares transfer and/or, if agreed between Cellnex and Hutchison, by cash payment. Hutchison is expected to hold at closing of the CK Hutchison Holdings Transaction in respect of the United Kingdom an interest of between approximately 3.4% and 4.8%⁽²⁾ in Cellnex’s share capital, depending on the Cellnex's share price as explained in the presentation to the market of 12 November 2020 as well as the capital increase prospectus of 30 March 2021, assuming that no further adjustment events occur. However, in the event that the Cellnex shareholder approval to issue new Shares expires and is not renewed before completion, payment of the total consideration for the CK Hutchison Holdings Transaction in respect of the United Kingdom can be made fully in cash, unless otherwise agreed between the parties. In relation to the consideration for the CK Hutchison Holdings Transaction in respect of the United Kingdom that is expected to be partially settled through the issuance to Hutchison of new Shares and (if applicable) the transfer to Hutchison of treasury Shares, if as a result of a takeover bid prior to closing of such transaction a third party (alone or in concert with another person) acquires the majority of the votes in Cellnex, instead of delivering Shares, Cellnex shall procure that Hutchison receives at completion such equivalent consideration as Hutchison would have received had it been a shareholder of Cellnex at the time of the takeover bid.

In Italy, the closing of the purchase of CK Hutchison's telecommunications tower assets in the country (9,100 sites) was completed in June 2021, following the green light from the Italian competition authority (Autorità Garante della Concorrenza). In this sense, during the second half of 2021 and during 2022, work will be done to integrate Hutchison into Cellnex Italia.

In Ireland, the completion of the asset purchase was announced in December 2020. Thus, during that year the focus was on integrating the Hutchison team into Cellnex Ireland and understanding the assets, challenges and opportunities to operate as a just business.

In the case of Austria, Sweden and Denmark, representing new markets, the challenge in 2021 has been to enter a new market and to create the team and integrate it into the Cellnex model. In the case of Sweden and Denmark, a Shared Services team has been set up to support both countries and in the case of Austria, a Shared Services team has been established with Switzerland. In both cases, the Shared Services centers carry out business support functions such as Finance, IT or People amongst others.

T-Mobile Infra BV

In June 2021, the agreement announced in January of that same year was signed whereby Cellnex had reached an agreement with Deutsche Telekom to integrate the 3,150 telecommunications sites of T-Mobile Infra BV’s in the Netherlands. This operation allows Cellnex to operate a total of 4,314 sites in the country and to play an important role as a telecommunications infrastructure operator in the Netherlands. Likewise, Cellnex and T-Mobile Netherlands BV will sign a long-term service contract of 15 years, automatically renewable for periods of 10 years. The agreement also includes the deployment of 180 new sites. In addition, Cellnex, DIV and a Dutch foundation entered into an agreement upon closing, which set forth the right of DIV to sell its 37.65% non-controlling interest to Cellnex, at a price to be calculated pursuant to said agreement. Thus, Cellnex, as a consequence of the terms set forth in paragraph 23 of IAS 32, recorded a liability in the amount of EUR 296 million (see Note 19.b.VI.) corresponding to the contingent commitment to purchase the 25.10% of the Cellnex Netherlands’ shares from third-party shareholders, whose interests in this consolidated company are reflected as of 31 December 2021 under “Non-controlling interests".

Play

The agreement with Iliad announced in October 2020 was completed in March 2021, whereby Cellnex would now have a 60% controlling stake in the company that operates the nearly 7,000 Play telecommunications sites in Poland. Thus, the remaining 40% will continue to be owned by Play (Iliad), following the model agreed upon by Cellnex and Iliad in the case of the sites that Free (Iliad) operates in France. This new Polish telecommunications infrastructure company controlled by Cellnex plans to invest up to 1,300 million euros between now and 2030 in the deployment of up to c. 5,000 new sites.

Polkomtel Infrastruktura

In July 2021, the completion of the transaction with Cyfrowy Polsat Group was announced, in relation to the agreement to acquire 99.9% of its telecommunications infrastructure subsidiary, Polkomtel Infrastruktura. Polkomtel operates the passive infrastructure assets (7,000 towers and telecommunications sites) and active infrastructures (37,000 radio carriers covering all the bands used by 2G, 3G, 4G and 5G, a backbone network of 11,300 km of fiber - backbone– and fiber to the tower –backhaul– and a national network of microwave radio links). The agreement represents an investment of 1,600 million euros for Cellnex, accompanied by an additional deployment program of up to 1,500 sites, as well as investments in active equipment, mainly for the deployment of 5G, for another 600 million euros in the next 9 years.

Upon completion of the Polkomtel Acquisition, Polkomtel Infrastruktura, Polkomtel and Aero 2 sp. z.o.o., a MNO within the Polkomtel Group (“Aero”, and together with Polkomtel, the “Polkomtel Customers”), entered into a master services agreement whereby Polkomtel Infrastruktura provides access to its passive infrastructures, render the services necessary to maintain the technical conditions that are necessary to provide the transmission of radio signals of a cellular telecommunication network and provide transmission “backhaul”, among other ancillary services, to the Polkomtel Customers (the “Polkomtel MSA”). The Polkomtel MSA is following a business model consisting in a long-term revenue that ensures the profitability and return on investment (Capex) executed by Cellnex on behalf of the customer, encouraging investment in the expansion and modernization of client infrastructure and allowing better customer quality services owing to new investments (Capex). The revenue of any year according to the MSA is composed mainly by the addition of the following items: i) a Capex payback (which tend to be 10 years) ii) an industrial margin on the Capex payback, iii) an agreed opex required to run the Capex, (iv) electricity pass through, and (v) other opex items. This long term revenue model presents a tariff scheme that allow Cellnex to increase items ii), iii) and v) on year basis following the Polish CPI. Item i) will follow inflation as new capex cycles are considered in the long term revenue model. This business model presents similar characteristics to the BTS programs, as Cellnex is remunerated when Cellnex invests on the new Capex programmeagreed with the client. Also, Cellnex i) can share the infrastructure with third parties, ii) has operating leverage, iii) strong backlog and iv) maintenance capex higher to its c. 3% of total Revenues.

The acquisition of Polkomtel Infrastruktura places Cellnex in a strategic position in Poland while incorporating a new service within Cellnex's business portfolio: Active Team management. This marks an unprecedented event at Cellnex, where the challenge from now on is to expand the active team management service throughout the Company's portfolio.

Hivory

In October 2021, Cellnex's purchase, announced in February of that year, of 100% of Hivory from Altice France and Starlight Holdco in France by Cellnex was completed. Hivory manages the 10,500 sites that mainly serve the French mobile phone operator SFR. The agreement represents an investment of €5,200 million for the company, which will be accompanied by an eight-year programmefor another €900 million for the deployment, among other projects, of up to 2,500 new sites. The authorization of this operation by the French competition authority also establishes that Cellnex will have to divest approximately 3,200 urban sites of the total number of sites that the Group will be managing in France after the integration of Hivory.

Cellnex's Integration Process

Integrating the companies that are acquired and absorbing growth in an agile and efficient way, while at the same time ensuring business continuity is not an easy task. Achieving both of these and maintaining high quality standards represents a challenge for Cellnex. The the mission of the Integration team is therefore to lead the integration processes while preserving the existing value of the acquired business and guaranteeing coordination between local and corporate teams. During the projects, the processes of the acquired company are evaluated, the defined priorities are carried out and implementation plans are defined, thus ensuring the deployment of Cellnex's Industrial Model.

Cellnex has demonstrated its ability to grow, ensuring business continuity, optimizing synergies and maintaining a high level of team commitment. This is possible by the definition of an integration framework, which allows the process to be carried out in a more agile, flexible and efficient way.

Below are the main challenges Cellnex faces during an integration process.

The Business Development Team is in charge of developing the business side of mergers and acquisitions (M&A) projects. They identify targets for possible deals that fit with the geographical areas and businesses in the countries where Cellnex operates, participate in the definition of the business plan, preparation of bids, Due Diligence procedures and the signature for the acquisition of business and/or assets. Also, once the operation has been completed, they transfer all the information collected to the relevant corporate departments so that the integration process of the company and/or assets can begin.

Before starting the integration process, there is a Pre-closing phase, which runs from the signature to the completion of the acquisition. This phase begins with the transfer of information from the M&A team to the Integration team. Based on the information available, the Integration team analyzes and defines the best integration strategy in coordination with the rest of the areas, and prepares the necessary actions to, once the transaction is closed, ensure the continuity of the service of the acquired company.

Each integration is divided into three phases:

1. "Day 1" phase: the objective of this phase is to preserve the existing value of the acquired business and initiate coordination between local and corporate teams. All the necessary internal and external communication is carried out, the project is launched and a first version of the integration plan is prepared taking account of priorities and objectives, as well as the governance structure to follow.
2. "90 Days" phase: In this phase, the processes, organization and systems of the acquired company are understood and reviewed and the main integration actions are carried out, in addition to defining and prioritizing the deployment plan of Cellnex's industrial model (based on of the country/company casuistry) during the optimization phase.
3. Optimization Phase: this lasts about 7 months, but this duration is flexible, since it depends on the complexity of the integration, the type of integration and the strategy to be followed. This phase is mainly based on the deployment of the Cellnex's Industrial Model.

As each integration takes place, Cellnex adjusts its Integration Framework based on experience and lessons learned. To that end, during 2021 the Integration Team improved and adapted its Integration methodology on the basis of the lessons learned from previous integrations, and their context, always with the speed, scalability and flexibility that the organization requires. The main actions carried out in 2021 were:

• Shortening of the integration period to 10 months (instead of 12 months, as before).
• Strengthening the local leadership of the project markets where Cellnex already operates (e.g: Italy).
• Ensuring that the Integration Methodology for different businesses or product lines is applicable to different businesses and product lines (e.g: active infrastructure).
• Improving in coordination during the transfer processes of both the M&A team and the local team.
• Improvements in communication actions to make it as effective as possible and cause the necessary and desired impact.
• Agility in negotiating of transitory service agreements.

To ensure that integration projects are properly carried out, together with monitoring and control, a similar governance structure has been defined and is being implemented in all projects. The resulting structure for integration projects is as follows:

• Identification of a single point of contact/manager, both local and corporate, for each department (as a general rule, 10 departments, such as Sales, Operations and Shared Services are identified). The main priority is to avoid putting the existing business at risk, always ensuring its continuity. Meanwhile, the Integrations Team is totally dedicated to integration and is usually equipped, depending on the maturity of the country, with an internal team and a support team of external consultants. In some cases, a corporate employee is seconded to the country, as an expatriate, to cover the necessary functions and thereby promote professional development.
• In other cases there are corporate teams to provide temporary support to the country, as needed.
• In countries where Cellnex already has a presence, local teams acquire more prominence and leadership by managing integration themselves.

In 2021, 15 integration projects were managed, 12 of them simultaneously. Each project involves the participation of about 90 people from 12 different areas. As a result of these integrations, approximately 550 new employees have been incorporated into Cellnex, more than 35,000 locations and new service lines.

Integration Buddy

The Integration Buddy project is the informal point of contact during the integration process. The objective is to help understand the culture and the formal and informal structures of the company, as well as to act as an informal link between the headquarters and the country.

Therefore, the Integration Buddy has the following functions:

• To provide information and support on the intangible aspects of the integration process.
• To provide information and support on how the company operates.
• To provide information and support on where to look for sources of information.
• To Increase the feeling being welcomed to the Company.
• To help reduce the learning curve of new colleagues, increase their well-being and have a direct impact on the efficiency of the entire integration process.

Industrial model

The Cellnex Industrial Model is the key tool for supporting the Cellnex strategy and ensuring sustainable and scalable growth.

This model consists of a common way of working, that is replicable, scalable, homogeneous and that allows rapid growth, but not proportional in costs or consumption of resources. The deployment of the Industrial Model is deployed both through integration projects for new acquisitions, as well as through value creation or continuous improvement projects, always under an Integrated Management Model. Cellnex's industrial model is applied to all Cellnex business units and departments.

Global Governance is based on the Cellnex Industrial Model being supervised by Cellnex's Senior Management at corporate and country levels, through a common Management Model for monitoring the strategy, objectives and results, and support for making the appropriate decisions in this regard. To that end, a scalable standard organizational structure has been formally defined for all Business Units, embodying basic general functions.

In this sense, the model defined by Cellnex has a matrix structure to facilitate joint working between corporate departments and countries, combining a global and local vision. Consequently, in each country the various departments report to the relevant General Manager (who, in turn, reports to the Corporate Deputy General Manager) and have a functional relationship with the corresponding Corporate departments.

The Industrial Model is implemented through the following five elements and evolves for each department according to its needs.

For the progressive implementation of the Cellnex Industrial Model in each new Business Unit, there is a Change Management Methodology, which covers the following stages:

People, Processes and IT Tools are the three central elements that support the implementation of the Industrial Model. In the case of People, it is essential to develop and implement a Corporate Culture built on the values that best define the Company and its employees. Cellnex wants to ensure that it is a reference as well as a great place to work in all the markets in which it operates.

With the Processes, Cellnex adds value to customers and employees, facilitating growth, change management and continuous improvement, through standardized processes and best practices. And, finally, the IT Tools allow information technology services that support the Industrial Model to be planned, implemented and provided, leveraging the Group's sustainable growth, with the highest quality, efficiency and commitment to service.

Cellnex has the necessary levers to guarantee the expected response to the business strategy and provide the necessary capacities to support growth and business transformation.

PRIME Project

The Global Governance section of Cellnex’s transformation program includes the PRIME Project initiative, which has the main objective of defining and implementing the new industrial model for the Group’s accounting and administrative functions. The PRIME Project defines a homogeneous and scalable model for all the countries so that efficiencies can be captured and the Group's fast growth absorbed.

The project started in 2018 by defining the common target model from a processes, policies, systems and organization perspective. The defined model includes the outsourcing of administrative and lower value-added activities to an external partner, while keeping the activities with the highest added-value related to administration and accounting and controlling them inside the organisation. The implementation of the model started in 2020, led by a transversal team from Finance, IT and Organization and Integrations from both corporate and country levels. In 2020 the model was implemented in six countries of the Cellnex Group (Spain, the Netherlands, the United Kingdom, France, Switzerland and Italy) and during 2021, the model was successfully implemented in five other countries, namely Portugal, Austria, Ireland, Denmark and Sweden. The deployment of the project is expected to continue during 2022, incorporating new countries such as Poland and other companies recently added to the Group.

Integration of Omtel in Portugal

At the end of 2020, the integration of Omtel into Cellnex Portugal was completed, since then the Portugal team has focused on launching Cellnex's industrial model, mainly using SAP, Agora and Prime, and achieving compliance with more 90% of the milestones of the integration project.

Organic growth generation

Recurring Leveraged Free Cash Flow (please see section 2.3 of this Consolidated Management Report) organic growth generation in the year ended December 31, 2021 amounted to 125 million euros (please see full year 2021 results presentation), driven by a number of contributors: i) BTS programme execution (approximately 58 million euros), ii) escalators or inflation (approximately 18 million euros), iii) Operating expenses, ground lease efficiencies and synergies (approximately 15 million euros) and, iv) New colocations and associated revenues (approximately 34 million euros). These are the assumptions that the management has taken into account:

• The contribution from BTS programs corresponds to approximately 2,400 average BTS PoPs, adjusting for its respective incremental contribution in 2021, along with a low double-digit thousand average fee (taking into account the resulting volume executed through each program). Furthermore, this average fee may change in future periods as the overall composition of the BTS programs delivered may result in a different weighted average figure. Additionally, Nexloop and other contracted projects contributed for a million euros low-single digit figure.
• Escalators or inflation as the annual update of the base fee. As per management estimates, around 65% of the total Operating Income is linked to domestic CPI with different caps and floors (depending on each contract - please see Note 6 of the accompanying Consolidated Financial Statements), while the remaining c.35% is linked to fixed escalators (1% of 2% - please see Note 6 of the accompanying Consolidated Financial Statements). For the year ended 31 December 2021 management estimates assume approximately 1.5% average escalator. Please note this average may change in future periods.
• Operating expenses, ground lease efficiencies and synergies correspond to the efficiencies that are achieved mostly as a result of the investment in cash advances and other initiatives on ground lease efficiencies. It also includes Operating expenses savings related to energy consumption and connectivity costs that are offset by the impact of the CPI (allowing an Opex flat like-for-like). In 2021 there were no synergies contribution. Under management estimates, the corresponding investments deliver an approximate 10x pay-off.
• New colocations and Associated revenues corresponds to new third party colocations (approximately 2,300 average third party PoPs, adjusting for its respective incremental contribution in 2021, along with an average fee that is less than half of the fee of BTS PoPs) as well as further initiatives carried out in the period such as special connectivity projects, indoor connectivity solutions based on DAS, mobile edge computing, fiber backhauling, site configuration changes as a result of 5G rollout and other Engineering Services (certain works and studies carried out on request of customers such as adaptation, engineering and design services, which represent a separate income stream and performance obligation). It also includes the impact from contracts renewal in the Broadcasting Infrastructure business (approximately -€8Mn in 2021).

¹ Neutral: without the mobile network operator holding as a shareholder (i) more than 50% of the voting rights or (ii) the right to appoint or remove a majority of the members of the Board of Directors. The loss of the Group's neutral position (i.e. by having one or more mobile network operators as a major shareholder) may make sellers of infrastructure assets reluctant to enter into new joint ventures, mergers, divestitures or other arrangements with the Group (which also affects the organic growth of the business). As the Group grows, management expects that large network operators may become open to collaborating with the Group in various ways, such as by selling their sites or other infrastructure assets to Cellnex, including in exchange for shares, which could adversely affect the Group's business and future prospects, as this type of transaction could affect the perceived neutrality of the Group.

² As such, the minimum and the maximum number of shares to be issued and delivered to Hutchison amounts to 23.7 million and 34.1 million, respectively, in the event the arithmetic average of the Volume Weighted Average Price on each of the 20 consecutive trading days ending on and including the date which is five trading days prior to the completion date of the CKH Hutchison Holdings Transactions in respect of the United Kingdom equals to or is above €57.0 per share and equals to or is below €39.6 per share, respectively.