(Bloomberg) -- Combining two badly performing industries usually doesn’t make them any better. Yet that’s what’s underpinning Europe’s most expensive stock.Spain’s Cellnex Telecom SA has become the highest-valued stock on the regional benchmark by serving as a landlord to the ailing telecom industry. While real estate and telecom are among the worst performers on the Stoxx 600 Index this year, Cellnex has soared after snapping up towers from carriers eager to convert their assets to cash, helping them keep up with network investments.“They are in a very sweet spot,” Neil Campling, an analyst at Mirabaud, said by phone. “The only worry at the moment for me is that the stock has moved an awful long way in a very, very short space of time.”The tower company model is fairly new to Europe, in contrast with the U.S., where American Tower Corp. and Crown Castle International Corp. began buying communication sites in the mid-1990s. Since its initial public offering in 2015, Cellnex has seized the relatively open field with aggressive dealmaking, spending 2.7 billion euros ($3.1 billion) just last month on more than 10,000 towers in Italy, France and Switzerland.The company looks set to continue its acquisition spree -- it announced on Tuesday the issuance of as much as 850 million euros in a nine-year convertible bond to fund purchases. The company has increased the number of network infrastructure sites in its portfolio by six-fold to about 45,000 in the past 4.5 years, including ones it has agreements on building for clients.Cellnex has gained nearly 60% in the first half, taking this year’s estimated price-to-earnings ratio to an eye-watering 131, according to data compiled by Bloomberg. That’s beyond such high-growth companies as the Dutch payments prodigy Adyen NA, or computer-games maker CD Projekt SA, which is about to publish its most-hyped title ever. Cellnex declined to comment on the valuation.While Cellnex’s expected revenue growth is much slower than the other names at the top, the surveyed 12 analysts estimate its earnings per share to nearly double from 2019 to 2021. Tower stocks have showed up on investors’ radar thanks to their stable cash flows and good visibility: smaller Italian peer Inwit SpA has also had a good year with a 43% gain so far. Tower contracts are usually signed for a decade or two.“There is a premium being paid for corporates that offer visibility,’’ Guy Peddy, an analyst at Macquarie, said by phone. “Cellnex is the only clear, European, free-from-ownership-issues, tower-focused operator.”Cellnex’s biggest shareholder is Italy’s Benetton family, which owns about 30% of the stock via its investment company Edizione. The family is said to be backing former Telecom Italia SpA head Franco Bernabe to replace Marco Patuano as chairman, Bloomberg reported Monday, citing people familiar with the matter.During the stellar run of the second quarter, Cellnex shares have mostly traded above the average price target, leaving analysts to play catch-up. The gap became the widest ever this week at 3 euros and currently implies a 4.8% downside to the stock, according to 27 estimates in a Bloomberg survey.In Europe, the share of telecommunications infrastructure held by independent tower companies is low compared with other regions, according to an April report by accounting and consultancy firm EY and the European Wireless Infrastructure Association (EWIA). The share of independent tower firms was a mere 17% in 2017, compared with 67% in North America and 42% in the Caribbean and Latin America. Operators could free up 28 billion euros if that share grew to 50%, the report estimates.Race to BuyOne risk to Cellnex’s tower campaign across Europe is competition for assets. The region’s emerging tower business is “not a one-horse race,” analysts at Kempen warned in a note last month, saying that Cellnex losing out on deals could lead to investor disappointment. In 2016, American Towers teamed up with Dutch pension fund PGGM Fondsenbeheer BV, beating Cellnex to win Antin Infrastructure Partners’ French phone towers.While American Towers has been more focused on emerging markets since, there’s a possibility that a private equity firm such as KKR & Co. Inc. would join the party, Giles Thorne, an analyst at Jefferies said in a note on Tuesday, keeping his buy rating and raising his price target by more than 50%.“The one candidate that has the assets and scope on paper to replicate Cellnex’s march across Europe is KKR,” Thorne said. “Its actions suggest it doesn’t see the regional synergy case for cross-border M&A. This may yet change.”Additionally, some telecom carriers see network quality as an important competitive advantage and are reluctant to relinquish control of their top sites. Tim Hoettges, chief executive officer of Deutsche Telekom AG -- which is not a client of Cellnex -- has spoken of “golden sites” as a category of differentiating network infrastructure locations the company wouldn’t be willing to share.Yet overall, tower companies are well placed to benefit from industry-specific drivers, including increased data consumption, Josh Sambrook-Smith, a thematic equity analyst at Sarasin & Partners, said by phone.“You have all the other super exciting, long-term trends,” said Sambrook-Smith. “This is just a relatively safe way to play it.”(Updates share prices from the 6th paragraph, chart)To contact the reporter on this story: Kit Rees in London at krees1@bloomberg.netTo contact the editors responsible for this story: Beth Mellor at bmellor@bloomberg.net, Kasper Viita, Celeste PerriFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

Telecom Italia (TIM) is considering an option to merge its optic-fiber broadband unit, Flash Fiber, with rival Open Fiber as it looks for ways to create a national broadband network, two sources familiar with the matter said. The option is one of two to be discussed at a TIM board meeting on Thursday, with the other being a takeover of Open Fiber and then a merger of the two networks, the sources said. TIM is under pressure from its state shareholder, Cassa Depositi e Prestiti (CDP), to speed up development of a national network, eliminating duplication of infrastructure with Open Fiber and addressing Italy's weak Internet usage.

Telecom Italia has signed a non-disclosure agreement with state lender CDP and utility Enel to kick off talks on ways of integrating its fiber optic network with that of smaller rival Open Fiber, including a possible merger. "The objective of the discussions is to verify the feasibility of such operation... based on the will of the parties and on the legislative and regulatory frameworks," TIM said in a statement. The Italian government is pushing to create a single ultrafast broadband operator by merging TIM's network with Open Fiber to avoid duplicating costly investments.

MILAN/MADRID (Reuters) - Italy's Ferrero is famous for its red-and-white Kinder chocolate eggs. The confectionery giant, which runs its own gas-fired power plant near its factory in northern Italy, is in early talks to help finance a new clean energy plant, possibly a solar farm in the sunnier south, according to three sources familiar with the matter. Like other companies in Europe, Ferrero is under growing pressure from investors and authorities to shift toward greener energy.

Brazilian telecoms regulator Anatel approved on Thursday a plan to coordinate investments among public and private players aimed at increasing access to broadband in Latin America's largest economy. Brazilian units of Telefonica SA, Telecom Italia SpA, and Oi SA, rush to expand their fiber-to-home (FTTH) broadband service in Brazil. According to Anatel, the plan, named as PERT, coordinates both public and private initiatives, in order to widen the access to fiber and, in cities where this is not possible, allows connections via satellite or other technologies.

Italy's biggest phone company, Telecom Italia (TIM), plans to extend 5G services to six more Italian cities as well as dozens of tourist spots and business hubs by the end of the year. TIM has already begun 5G services in Rome, Turin and Naples, is testing them in southern cities of Matera and Bari and plans to move next in Milan, Bologna, Verona and Florence by year-end. The group plans to cover 120 Italian cities within two years, or 22% of the population, it said in a statement.

A group of banks is set to lend Telecom Italia unit INWIT up to 2.5 billion euros ($2.8 billion) to help it merge its towers with those of Vodafone, two sources said. Telecom Italia (TIM), which controls 60% of INWIT, agreed with Vodafone in February to study the idea of combining their 22,000 telecom masts in Italy in a single unit. UniCredit, Intesa Sanpaolo, Mediobanca, Goldman Sachs and BofA-Merrill Lynch are among the banks finalising the bridge-to-bond loan but other lenders could join the deal, the sources said.

While the Italian people have been on lockdown, its digital businesses have been spared the brunt of the recession, as companies continue providing vital services to the quarantined. Just before the COVID-19 pandemic assailed the Mediterranean country, Italy’s Hype bank, a mobile-first challenger bank, sealed a deal with bitcoin startup Conio to add BTC support. […]

(Bloomberg) -- Elliott Management Corp. is preparing to compromise with Vivendi SA on board representation at Telecom Italia SpA to end their battle for influence over the indebted phone carrier, people familiar with the matter said.The agreement between two of Telecom Italia’s biggest shareholders will come with a pledge to pursue a common strategy, said the people, who asked not to be named as the plans are not public. The board changes are slated to be discussed by Telecom Italia’s directors later this month, they said.Telecom Italia shares were briefly suspended from trading after rising as much as 5.6%, their biggest intraday gain in four months. The stock was up 2% as of 3:54 p.m. in Milan.Details of the agreement have not been finalized and could still change, the people said.“We do not wish to comment apart from advising extreme caution on any such rumors,” Vivendi said in a statement. Representatives of Elliott and Telecom Italia declined to comment.Elliott’s allies wrested control of the board from top shareholder Vivendi in May last year and in November they forced out the company’s CEO, a Vivendi appointee. The French media company spent the following months publicly attacking Paul Singer’s New York-based activist fund in an attempt to regain control.Elliott hit back by criticizing Vivendi’s governance record and Vivendi backed down in late March when it became clear it lacked support for another boardroom coup.Since then, the two have sought privately to align around a common approach and turn the uneasy truce into a lasting peace, said a person familiar with the matter.Depressed SharesTen out of Telecom Italia’s 15 board directors are aligned with Elliott and the rest with Vivendi. Elliott wants to maintain its overall influence on the board, the person said.There is no clear answer to Telecom Italia’s problems. Competitive threats to both its legacy fixed-line network and wireless business are undermining the profits it needs to service one of the European industry’s biggest debt loads. The Milan-based carrier’s shares, which haven’t paid a regular dividend for the past six years, tumbled to a record intraday low in January.The biggest strategic flashpoint has been Elliott’s call for a full spinoff of the landline network to help pay down debt, an idea that Vivendi resisted. Chief Executive Officer Luigi Gubitosi has focused for now on cutting costs and doing deals to share the burden of new network spending, and results in May showed those efforts were starting to pay off.The CEO has pushed for some form of tie-up with fixed-line rival Open Fiber SpA to shore up the landline business. Any combination or spinoff of the landline business is fraught with regulatory and political risks.(Adds Vivendi response in fifth paragraph.)\--With assistance from Tommaso Ebhardt and Daniele Lepido.To contact the reporters on this story: Angelina Rascouet in Paris at arascouet1@bloomberg.net;Scott Deveau in New York at sdeveau2@bloomberg.netTo contact the editors responsible for this story: Rebecca Penty at rpenty@bloomberg.net, Thomas Pfeiffer, Ben ScentFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.