Review of the FDC-HCA/CCA Regulatory Cost Accounting System of the broadcasting Spanish incumbent operator – Cellnex

Project executed on behalf of Spanish Comisión Nacional de los Mercados y la Competencia (CNMC)

Project Objective

The Spanish markets and competition regulator (Comisión Nacional de los Mercados y la Competencia, CNMC) had to ensure the robustness and soundness of the results provided by Cellnex in its Regulatory Cost Accounting System (CAS) as these would provide the main input for the evaluation of the existence of competition within the market concerned.

Project Description

Axon executed a thorough review of Cellnex’s CAS, which consisted of the following main activities:

  • Reconciliation between the CAS results and the Audited Financial Accounts presented by Cellnex.
  • Ensuring the reasonability and causality of all the revenue and cost allocations performed, from the financial accounts to the final services.
  • Reviewing all the calculations and approaches followed under the Current Cost Accounting (CCA) Standard, focusing in particular on:
    • the reasonability and completeness of provider offers used for valuating, via an ‘absolute approach’, several network elements;
    • the reasonability and appropriateness of the indexes applied for revaluating, via an ‘index approach’, several network elements;
    • all the calculations, estimations and assumptions used to identify overcapacity that should be eliminated to perform a fully consistent Current Cost Base.
  • Preparing specific conclusions and recommendations to ensure the alignment of Cellnex’s CAS with the Accounting Principles generally accepted in the industry and best international practice.
  • Preparing a ‘replica’ model of the Cellnex CAS to test the impact of the recommendations resulting from all reviews.

Key Takeaways

  • Full compliance with the EU regulations and procedures in the broadcasting sector.
  • Full, reliable and corrected CAS results, ready for use in any regulatory evaluation.
  • Specific, fit-for-purpose, CAS Replica Model for evaluating revenues, costs and margins under any scenario the CNMC might define.