the main neutral fiber optic operator in Spain will distribute its sales booklet in a matter of days. “It may be this January or early February, but the announcement of the teaser is imminent,” says its CEO, José Antonio López, in a meeting with the Economist via videoconference. The future valuation of the company, owned by the French fund Antin, is at the expense of the laws of supply and demand, although its chief executive does accounts with the closest referents to venture a starting price well above 3,500 million, and perhaps exceed 4,000 million euros. With nearly 42,000 kilometers of fiber optic deployed in Spain and a presence in 60,000 properties in 2,700 towns, the company is confident of taking advantage of the good moment currently shared by the telecommunications infrastructure and technology businesses, whose latest operations have enjoyed ebitda multiples of between 30 and 40 times.
When do you expect to start the process of selling the company?
We are prepared for when the shareholder decides to give the starting signal. We will try it shortly. I don’t know if it will be this week or next.
What price do you estimate?
Sold for what it’s worth, always is. If I move by references, we see what has been paid for 40% of Reintel, which only has dark fiber, and has been valued at 2,200 million euros. There is also the sale of Adamo, for 1,300 million, despite the fact that it only operates in the rural world and has very few clients. If you add these amounts it reaches 3,500 million euros. Now, Lyntia has more assets than what these two companies offer together, because we have light fiber – unlike Reintel, which is only dark fiber – and because we have many more customers and homes passed with our fiber than Adamo. I understand that Lyntia should be worth a lot more.
The sector is managing multiples of ‘ebitda’ in really surprising valuations, what is this euphoria due to?
Yes, the ebitda multiples are very high. They have paid 32 times for the Telxius towers and 30 times for other Infra operations in Europe. In the United States, the valuations of a few weeks ago by data centers are almost 40 times. The multiplier is surprising us. It goes up every six months… The reasons? I see that there is a lot of liquidity in the market, there are many funds that see Infra as a place to be. They are aware that growth in the world of data is exponential.
What profile of potential candidates is expected to show interest in Lyntia?
Lyntia is interesting for Infra funds, private equity and for some industrial partner. It is a very attractive company because it is a unique asset and it is the last one that you can hope to buy. It is difficult for Telefónica to sell its entire network to someone. Red Eléctrica, for its part, has already stated that it wants to retain the majority after selling 49%. In other words, for funds that like this type of business there is no other like it. We expect many different profiles and many people attending the teaser. We anticipate a lot of demand and as regards the estimated term of the sale decision, it will be for next summer, in about six months.
The phenomenon of 5G telephony will also add value to fiber infrastructure firms, right?
Next-generation 5G will not work to its full capacity without fiber transmission. Logically, the deployment of 5G will boost our business and we will see it shortly. Between the next three and five years, 90% of the macro stations that we know of in Spain will have fiber, not counting the small cell and other transmission systems. The growth margin is very high since, currently, of the 44,000 towers that exist in Spain, only 35% are fiberized.
The growth of data also plays in favor of your business…
Definitely. I recently read in the Financial Times that one of the great challenges for Microsoft, Facebook and Google is that current bandwidths are not enough for the demand that is coming and I agree with that. Data growth is much faster than what we have seen now with the addition of virtual reality, 5G, IoT, artificial intelligence, the metaverse… and analysts see and value that. This is going to accelerate much more than we think and we are talking about highly concentrated businesses. In dark fiber there is only Reintel and us; in illuminated fiber, Telefónica competes with us as an alternative.
What else can buyers value positively?
I think that the ebitda by itself does not say much in the sector. They calculate where this market is going. They are sure that the data is essential for everyone and that there is a high possibility that the demand will continue to increase. In addition, fortunately, in the world of Infra, fiber and towers there are no low costs suffered by operators. There is no competition on that side. Ours is a very stable business that generates a lot of cash and that is attractive to analysts. In addition, we have a lot of room to grow after preparing the infrastructure for three years and integrating the three networks (Iberdrola, Endesa and Ufinet) to be the only national alternative in illuminated fiber to Telefónica. In addition, our fiber is technically prepared to offer national solutions to companies.
How does a neutral operator interpret the possible wave of acquisitions that seems to be approaching Europe and perhaps Spain?
Rock and roll suits us neutral operators. Basically, we, with whom we compete is against Telefónica. Therefore, the creation of larger players, with their own networks, will tend to separate more and more from Telefónica. That’s good for a neutral operator. If that ends up happening, we will look at it positively, because at least there will be cards on the table to play. The march is going for me. Our obligation is to be flexible, fast and more agile than the competitor and, therefore, I prefer a dynamic market.
And if a stronger fourth operator appears, how would it impact the business?
If a fourth major operator appears, it is not good for the sector, although it will not go badly for us, since it will need a network. It will be negative for us if Telefónica buys someone, since neutral operators cannot compete against that company and it would remove that client from the market as a result of the acquisition. Although that is quite unlikely due to regulatory issues. In addition, Telefónica already has a network and does not need infrastructure from neutral operators.
How would an eventual sale by Telefónica of part of its fiber impact Lyntia?
I think it would be good for us. Go ahead, it is a friendly company and as a Spaniard I am proud of a company like Telefónica.
If Telefónica sold its fiber network, or part of it, it would not be able to make the bandle, neither by regulation nor commercially, and that favors us. I insist, I would love to see the chips move because that is how opportunities will arise. The same in a year I tell you that the market moved and Lyntia did not catch a single one. Such is life, but I prefer to risk it in the game rather than watch it from the bench.
Does Lyntia have tough competition in circuits with Telefónica?
What Telefónica does very well is the bandle. It happens, for example, in the most rural access network: that customer who wants two circuits may need to buy the package with four circuits to have a good price. For neutrals it is more difficult to compete on that terrain. It should be remembered that Telefónica continues to maintain a 75% market share in the Spanish circuit business, which is unusual in Europe. The logical thing is that the incumbents do not have more than 50%, so we should aspire to earn a 25% share in the medium or long term.
Did you have opportunities in the sale of fiber from Red Eléctrica?
No, by regulation we cannot. We have more than 90% of the dark fiber in Spain, so the purchase would have generated such wild remedies that it would not make sense to us. Without remedies we would have loved it, blessed monopoly it would have been.
What was the conflict between REE and Adif?
The concession is still alive until 2032 and what Adif has publicly stated is that it has no intention of renewing it. That he then changes his mind between now and 2032 is something else. Therefore, at this moment Red Eléctrica has 10 years of service remaining.
Regarding the new constructions that could be incorporated into the agreement, could there be another package offered by Adif that would be of interest to you?
Perfectly. Everything that was not contemplated in that package is expressly excluded. If they continue to build high-speed networks and roll out fiber or do pipelines, then that would be something we would look at with affection.
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