Unidata – Business Plan 2025-2027 Analysis

Unidata – Updated Analysis (Business Plan 2025-2027)

Introduction to Unidata

Unidata is an Italian telecommunications company whose main service is providing broadband connectivity to residents, businesses, and the public sector. It’s important to understand that, compared to other major European countries, Italy is lagging in the deployment of high-speed broadband connectivity. Unidata has been one of the first movers in this area, building a proprietary infrastructure of more than 7,400 kilometers of fiber optic, providing access to half a million clients.

In addition to providing connectivity, Unidata competes in fast-growing sectors like Cloud and IoT. The company benefits from recurring revenue and strong margins across all its segments. With over 60% of shares held by an aligned management team, they are capitalizing on emerging opportunities with an aggressive capital allocation strategy, including Joint Ventures and an acquisition that has doubled Unidata’s top line.

In the last four years, their revenues have quadrupled, and they are expected to reach €102 million this year (compared to €23 million in 2020 – we reference 2020 instead of 2019 as this sector was not impacted by Covid).

However, over the past few months, the stock has plummeted as a result of the 3Q24 results, which cast doubt on its growth prospects for the coming years. This week, they presented their strategic plan for 2025-2027, and during the conference call, they went into much more detail than usual, discussing the pillars of their business plan.

Currently, the company has a market cap of €90MM, net debt of €45MM, and an FY24E EBITDA of €27.4MM, which translates to an EV/EBITDA of <5x. The company projects an EBITDA of €40-42MM by 2027, and that’s what we want to independently analyze today—the future economics of Unidata and the scale of this opportunity.

To do this, we explain their business in detail, their growth plan (timelines, required CapEx, and expected returns), and the scenarios we foresee for Unidata over the next 12-18 months. As always, we include a detailed valuation (downloadable spreadsheet) and share our thoughts on the opportunity.

Support Material (Basics to understand the analysis)

Unidata’s Segments & Joint Ventures

Before starting, we believe it might be helpful to provide a detailed explanation of Unidata’s different segments to facilitate understanding of the current situation.

Unidata has two main lines of business: Services and Infrastructure. Contrary to what one might initially think, the Services segment is the one with more stable revenues, as it includes the fees Unidata charges to retail and business customers who use its services. On the other hand, the Infrastructure segment primarily encompasses the development of infrastructure.

Currently, 66% of Unidata’s revenues come from Services, and the company expects this to increase almost 80% by 2027.

Additionally, they are pursuing a very aggressive expansion strategy, with three Joint Ventures involving top-tier counterparties to build a Tier IV data center in Rome, 900 km of submarine cable in the Tyrrhenian Sea, and to bring high-quality networks to the so-called grey areas in the Latium region, providing connectivity to 190,000 homes and 8,000 business units.

Note: An important metric for measuring Unidata’s progress is the amount of fiber optic infrastructure they own and the number of households they provide access to. This is because they commercialize part of it themselves, while they lease the rest under 15-year agreements (Wholesale IFRS) to other companies, who then provide customer access and pay a fee for it.

Joint Ventures

• Unitirreno: This JV has been signed this year and is expected to be operational in 2025. Unidata has partnered with Azimut for the construction of 890 km of submarine optical fibre in the Tyrrhenian Sea to support continuously increasing national and international bandwidth requirements, in this case to Sardegna and Palermo.Unidata will be the operator and the responsible of developing the commercial offering. 33% of the JV is owned by Unidata who will make an investment between €12 and €18 million from a total of €80 million. Unidata has the option to be the major owner once the construction phase is completed.
• Unifiber: Unidata has partnered with CEBF (a fund focused on greenfield fibre infrastructure) to deploy high-quality networks in the so-called grey-areas in the Latium region to bring connectivity to 200,000 homes and 8,000 business units. Unidata will be in charge of building, executing, and in a more advanced stage, of maintaining and selling the network. Unidata will own 30% of the deal with a €7 million investment in equity from a total investment between 2021 and 2025 of €90 million (€37 MM through equity). We like the strategy of targeting grey areas as it is easy to gain a significant market share, and in Italy there are still grey areas with much population to cover. It is worth mentioning that this initiative is very capital intensive.
• Unicenter: This Joint Venture will build a Tier IV Data Center with 20,000 sqm where Unidata will be the operator and will hold 25% of the share capital with a €5.7 million investment from a total equity investment until 2025 of €57 million, with the option to double the project.The trust of such big companies in Unidata’s capability to operate investments that go between 80 and 100 million, is significant and proof of the good recognition of Unidata within the sector.

Services:

• Fibre & Networking: Unidata brings internet connectivity to final customers mainly thanks to their fibre proprietary FTTH network architecture. The growth in customers has been unstoppable during the last few years. As an example, in 2022, the number of Consumer customers grew by 30%. It currently reached 290,000 residential and business units and with one of their Joint Ventures they are continuing to build infrastructure in grey areas. In this source we group the revenues from internet access through optic fibre, XDSL and wireless, but also the voice trading and the wholesale service.Providing internet access is a service with recurrent revenues, a short payback period and that can be scaled. A critical measure in businesses like this is the churn rate. Unidata has a c.12% churn rate, compared to a typical 14.7% in the telecom sector in Italy. However, Intred, the most comparable competitor has a churn rate below 4%.