S&P Global revises Cellnex Telecom outlook to positive, affirms BBB- rating

Investing.com -- S&P Global Ratings has affirmed its ’BBB-’ rating for Cellnex Telecom (BME:CLNX) S.A. while revising the outlook to positive from stable, following an update to its methodology for digital infrastructure companies.

The rating agency has loosened its threshold for Cellnex’s current rating, citing the company’s stable and predictable cash flows generated from very long contracts with initial terms of 15-20 years, multiyear automatic renewals, and fixed escalators of 1%-2% or CPI adjustments.

S&P highlighted several factors supporting Cellnex’s business risk assessment, including existing barriers to entry in the European tower market such as strict zoning requirements and low limits on electromagnetic field radiation in certain European countries. The agency also noted Cellnex’s strong market positions, scale across Europe, broad client diversity, and high-quality tenants.

Under the revised methodology, S&P has set new thresholds for Cellnex’s ’BBB-’ rating, including an adjusted debt to EBITDA upgrade threshold of 7.0x (with 7.75x for downgrade) and a funds from operations (FFO) to debt upgrade threshold above 9% (with 6.0% for downgrade).

S&P forecasts Cellnex’s revenue growth to be in the low-single digits in 2025 due to the full impact of Austria and Ireland disposals, improving to mid-single digits in 2026 and 2027. This growth will be supported by increased co-tenancy from expansion programs, ongoing build-to-suit initiatives, densification, and other tower services.

The rating agency expects Cellnex’s adjusted EBITDA margin to improve to 74%-75% in 2025-2027 from 73.7% in 2024, including anticipated efficiencies and synergies target of €150 million-€160 million by 2027.

S&P projects that Cellnex’s free operating cash flow after leases and build-to-suit capital expenditures will remain positive as the peak of the build-to-suit cycle payments has passed. The agency forecasts S&P Global Ratings-adjusted leverage to strengthen to around 6.5x in 2025-2026 before improving further to 6.0x in 2027, with adjusted FFO to debt expected to remain in the range of 10%-12% during this period.

The positive outlook reflects at least a one-in-three chance of a rating upgrade over the next two years if Cellnex commits to a financial policy consistent with a higher rating while maintaining adjusted net debt to EBITDA below 7.0x and FFO to debt above 9.0%.

S&P could revise the outlook to stable if it anticipates that adjusted FFO-to-debt will fall below 9.0% and adjusted debt to EBITDA will not stay below 7.0x, which could happen if Cellnex revises its current financial policy by using leverage headroom for further shareholder remuneration or debt-funded acquisitions.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.