Swisscom Ag · SIX:SCMN
Swisscom — Q1 2020 Earnings Presentation
49 slides from Swisscom's earnings presentation, Apr 30, 2020
Slide 1: Q1 2020 results
Q1 2020 results Analyst and investor presentation 30 April 2020
Slide 2: Agenda
Agenda Introduction Louis Schmid, IR 1. Highlights Urs Schaeppi, CEO 2. Business review Urs Schaeppi, CEO 3. Financial results Mario Rossi, CFO Q&A all Appendix 2
Slide 3: 1. Highlights
In1.aHighlights nutshell
Slide 4: Q1 in a nutshell
Q1 in a nutshell Healthy financials and secured access to enough liquidity also thanks to A credit ratings COVID-19 crisis: Swisscom ESG essential: full business Switzerland with Swisscom awarded continuity ensured new B2C and B2B as one of the most and resilient organisation sustainable performance
Slide 5: Q1 market (share) performance
Q1 market (share) performance Overall solid market position in Switzerland despite promotional dynamics. Continuous growth in Italy Swisscom Switzerland (RGUs in k) Fastweb (RGUs in k) Broadband TV Broadband 53% 37% 16% 2'053 1'555 2'659 4 4 -0.2pp +1.5pp 28 25 27 Stable YoY 11 15 YoY 22 YoY 4 6 0 1
Slide 6: Q1 financial performance
Q1 financial performance Almost unchanged EBITDA thanks to continuous cost management in Switzerland and Fastweb growth EBITDA development YOY changes in CHF mn Net CHF 2'737mn (-4.3% YoY) Underlying performance -3 revenue 1’119 +5 +9 Net CHF 394mn 1’111 (+2.9% YoY) -7 income -5 -10 CHF 516mn CAPEX
Slide 7: 2. Business Review
2. Business Review
Slide 8: Actions taken so far to prevent COVID-19 implications and support customers
Actions taken so far to prevent COVID-19 implications and support customers Pro-active and balanced (risk) management key in this extraordinary situation • Government with • Working from home • Shops: 16 March-25 April >50% open, • Swisscom supportive • specific intervention program policy implement
Slide 9: COVID-19 with possible impacts on business and financials
COVID-19 with possible impacts on business and financials1 … … although Swisscom showed a resilient performance in first two months of crisis B2C B2B Hardware Roaming Fastweb CAPEX • 80% of postpaid subs • Slowdown of • No impact for telco • Inbound • B2C sales with • Network with unlimited data ord
Slide 10: Voice and fixed data traffic up in Switzerland due to COVID-19 lockdown
Voice and fixed data traffic up in Switzerland due to COVID-19 lockdown Network capacities sufficient. No need for extra CAPEX (also for Fastweb) Mobile network Avg. volume evolution and capacity degree # of voice calls avg. call duration +70% +50% • Voice volume significantly up • Data with ordinar
Slide 11: 2019 segment reporting
Swisscom Switzerland with new segmental setup as per 1.1.2020 Segment Retail Customers with transfers of SME customers (to B2B) and field force organisation (to Other) 2020 segment reporting Swisscom Switzerland Residential Business IT, Network Other Customers Customers and Infra- operating Group He
Slide 12: Domestic business with segment restatement for fiscal year 2019
Domestic business with segment restatement for fiscal year 2019 Overview of restated B2C and B2B figures and data as per 31.12.2019 Residentials SME Corporates ~5.4mn customers ~300k firms ~1.5k firms RGUs W- 4'492k BB 1'757k TV 1'491k W- 1'841k BB 301k TV 64k Blended ARPU W- CHF 38 W+ CHF 37 W- CHF
Slide 13: B2C with balanced approach in managing long-term value generation
B2C with balanced approach in managing long-term value generation Non-stop innovation crucial to cement Swisscom's leading position in the Residential market Innovate entertainment further Enable 5G services • Successful rollout of new • Swisscom offering: entertainment OS4 platform S20 and S20+ mod
Slide 14: Stabilise B2C top-line contributions by differentiating on different success factors
Stabilise B2C top-line contributions by differentiating on different success factors ... … and covering max customer clusters with the right offer Manage value base Defend market shares with 2nd and 3rd brands (+11k net adds YTD) (+4k net adds YTD) 68% (+7pp YoY) 71% (+9pp YoY) Keep ARPU level 17% 3
Slide 15: OneB2B transformation a step further and fully on track
OneB2B transformation a step further and fully on track Best-in-class experience with maximum standardisation, digital push and outstanding customer proximity Drive product standardisation Push sales and service excellence and digital experience to the next level to increase competitiveness in the S
Slide 16: Portfolio attractiveness
#1 ICT position in Switzerland further strengthened Strong Solutions offerings support defending market position in Telco and keeping attractive EBITDA margins Maintain service revenue Positive YOY evolution of Solutions revenue 2'496 YOY in CHF mn (+3) 1'419 0 +6 +1 +10 (+7) 35 (-3) -14 Retain EBIT
Slide 17: Financial performance of Swisscom Switzerland
Financial performance of Swisscom Switzerland Cost savings nearly compensate top-line decline. Lower OpFCF proxy also due to high construction intensity in Q1 Net revenue in CHF mn EBITDA in CHF mn OpFCF proxy in CHF mn -95 2’166 2’071 -5 Q1 2020 YOY Others 928 923 EBITDA 398 -33 365 257 +10 267 Sol
Slide 18: Consumer performance
Consumer performance Strong resiliency on wireline, slow-down in mobile Wireline Mobile FM convergence Broadband subs (k) Mobile subs (k) 1) FMC penetration over fixed customer base +3% • Solid +3% CB +24% • Robust CB growth growth vs. 1Q 2019 2.659 • Gross and net adds 1.779 • Commercial Fixed-only
Slide 19: B2B performance
B2B performance Growth in Enterprise mainly driven by private sector, in Wholesale by outstanding performance of core services Enterprise Wholesale Revenues (in EUR mn) Revenues (in EUR mn) 1) +4% +21% • +4% YoY revenues 211 growth mainly due to 52 202 Private sector 7 (-50%) Non-core services • COV
Slide 20: Financial performance
Financial performance +5% EBITDA growth Net revenue in EUR mn EBITDA in EUR mn OpFCF proxy in EUR mn +29 514 543 Q1 2020 YOY +8 43 +9 52 Wholesale 162 170 EBITDA 12 13 Lease expense 1) EBITDAaL 2) 157 (+7) 202 +9 211 Enterprise +7 CAPEX -138 (+5) 150 157 EBITDAaL 2) 269 +11 280 Consumer OpFCF proxy
Slide 21: 3. Financial Results
3. Financial Results 21
Slide 22: Group revenue and changes by segments
Group revenue and changes by segments Divergent top-line evolutions (with Switzerland down and Italy up) in CHF mn Underlying -90 (-3.1%) +32 -123 -32 +4 -17 (-4.3%) -40 -10 -27 -33 Swisscom Switzerland -95 2’860 2’737 1 2 3 4 5 6 Service Hardware Service Solutions revenue and other revenue and othe
Slide 23: OPEX Swisscom Switzerland and YOY changes
OPEX Swisscom Switzerland and YOY changes Operational excellence initiatives with expected impacts lowering OPEX on a recurring basis in CHF mn -90 -40 -5 (-7.3%) -12 -14 -19 -57 direct costs -33 indirect costs 1’238 1’148 1 2 3 4 5 Q1 2019 Goods purch. Q1 2020 SAC/SRC Outpayments Workforce Other re
Slide 24: EBITDA Swisscom Switzerland: YOY dynamics
EBITDA Swisscom Switzerland: YOY dynamics YOY changes fully in line with expectations Service revenue … … and EBITDA dynamics of Swisscom Switzerland YOY changes in CHF mn FY 2019 Q1 19 -6 -15 -32 +78 +194 +127 -11 -23 -290 Q2 19 -6 -14 -8 -54 -121 -290 Service Indirect Device SAC/SRC Wholesale Othe
Slide 25: Group EBITDA and changes by segments
Group EBITDA and changes by segments Underlying performance almost flat thanks to strong cost savings in Switzerland and growing Fastweb in CHF mn Underlying -3 (-0.3%) -8 +9 +34 (-0.7%) +5 -7 -19 -10 -20 Swisscom Switzerland -5 1’119 1’111 1 2 3 4 5 Q1 2019 Adjustment Residential Business Wholesale
Slide 26: Net income
Net income Net income up by +3% YOY driven by lower tax expense in CHF mn tax rate EPS 15.8% 7.63 Q1 2020 1’111 -537 -70 504 -12 -11 -14 +1 -74 394 +1 395 EBITDA EBIT Net Net Tax expenses Depreciation Depreciation income income right of use reported companies Minorities Affiliated SC Share- financia
Slide 27: Capital expenditures
Capital expenditures Network continuously improving for customer experience IT systems, All-IP, Wireless: CP equipment, 21% and other: 21% Group CAPEX CHF 516mn (-0.4% YoY) 367 CHF mn Swisscom CHF 367mn (+4.0% YoY) Switzerland Copper access, CHF 148mn backbone & Fastweb* (-8.1% YoY) Fibre (FTTx): tr
Slide 28: Free cash flow
Free cash flow FCF down by 55mn YOY, the higher increase in NWC is partly compensated by different phasing in tax payments in CHF mn 1’111 -75 1'036 -516 -205 Q1 2020 +14 -5 -119 520 -16 189 Δ -8 -7 -15 +2 -13 -164 +2 -2 +123 -1 -55 1’119 -68 1'051 -518 -41 +12 -3 -242 Q1 2019 533 -15 244 EBITDA Lea
Slide 29: Well balanced maturity profile besides ample liquidity
Well balanced maturity profile besides ample liquidity Strong access to financial flexibility in 2020 despite refinancing requirements in 2020 Debt maturity profile as per Q1 2020* • Debt mix: Fix 80% vs floating 20% 2020 771 • Ø interest rate of 0.98% 2021 530 • Ø duration of 5.49 years 2022 500 •
Slide 30: Guidance FY 2020
Guidance FY 2020 1 As communicated on 6 Feb 2020 and without consideration of any possible COVID-19 impacts 2 2019 2020 in CHF bn reported outlook 5 Revenue 11.453 ~ 11.1 EBITDA 3 4.358 ~ 4.3 CAPEX 4 2.438 ~ 2.3 1 Upon meeting its targets, Swisscom plans to propose again a dividend of CHF 22/share (
Slide 31: Questions & Answers
Questions & Answers 31
Slide 32: Appendix
Appendix 32
Slide 33: Key financials
Key financials Reported and underlying revenue and EBITDA in CHF mn 2019 2020 Change Q/Q, FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Revenue, reported 2'860 2'803 2'793 2'997 11'453 2'737 -123 Currency effect 33 +33 Underlying change -90 EBITDA, reported 1'119 1'121 1'120 998 4'358 1'111 -8 Adj
Slide 34: Swisscom Switzerland
Swisscom Switzerland Wireless ARPU and IFRS15 adjustments Swisscom Switzerland Swisscom Switzerland 38 38 38 36 37 35 50 47 49 46 49 46 48 45 47 44 35 35 36 35 in CHF in CHF Q1 19 Q2 Q3 Q4 Q1 20 Q1 19 Q2 Q3 Q4 Q1 20 Blended (reported) Blended (IFRS15) Postpaid (reported) Postpaid (IFRS15) Residentia
Slide 35: Residential Customers
Residential Customers Segment reporting as per 31.03.2020 31.03.2020 YoY Net revenue in MCHF 1) 1'138 -4.4% Direct costs in MCHF -249 -8.8% Indirect costs in MCHF 2) -186 -4.6% Net revenue decreased Contribution margin 2 in MCHF 703 -2.6% driven by a lower service Contribution margin 2 in % 61.8% re
Slide 36: Residential Customers
Residential Customers Wireless performance Subscriptions (in k) ARPU (in CHF) Service Revenue (in CHF mn) 5'000 160% YoY 4'511 4'492 4'457 38 38 37 40 130% 4'500 -54 140% 85% 30 89% 85% 80% 4'000 79% 77% 120%20 700 3'500 30% YoY 76% 10 600 2'930 2'931 100% 520 3'000 2'840 +91 0 -20% 513 497 -23 Q1 1
Slide 37: Residential Customers
Residential Customers Wireline performance Subscriptions (in k) ARPU and ARPH (in CHF) Service Revenue (in CHF mn) 6'000 110% 37 37 37 700 120% 40 130% YoY 91% 90% 90% 5'000 30 600 80% 95% 95% YoY 4'561 4'555 4'536 105% -25 97% 100% 20 30% 514 508 505 -9 10 500 4'000 +29 14 25 23 1'462 1'491 1'491 0
Slide 38: Residential Customers
Residential Customers Performance of fixed and FM bundles ARPB/U (in CHF) and Subscriptions and Bundles (in k) FM penetration (in %) Service Revenue (in CHF mn) 6'300 40% YoY 350 YoY 50% 5'313 5'443 5'448 41% +135 35% 41% 45% 5'300 300 38% 693 685 -8 40% 685 30% 250 4'300 37% 35% 37% 253 249 25% 34%
Slide 39: Business Customers
Business Customers Segment reporting as per 31.03.2020 31.03.2020 YoY Net revenue down -6.4%, Net revenue in MCHF 1) 779 -6.4% decrease in service revenue Direct costs in MCHF -197 -14.7% (-8.4%) due to price erosion and 2) lower volume. Indirect costs in MCHF -246 0.4% Contribution margin 2 in MCHF
Slide 40: Business Customers
Business Customers Subs and revenue performance Subscriptions (in k) Service Revenue (in CHF mn) Solutions Revenue (in CHF mn) YoY 550 86% YoY 86% YoY 2'623 477 86% 80%300 61 2'493 2'496 -127 278 64 64 444 437 -40 267 +10 381 +3 450 16 287 291 70% 257 15 15 -90 314 301 299 60% -15 350 244 226 226 50
Slide 41: Wholesale
Wholesale Segment reporting as per 31.03.2020 31.03.2020 YoY External revenue in MCHF 164 3.8% Intersegment revenue in MCHF 61 -3.2% Net revenue in MCHF 225 1.8% Direct costs in MCHF -89 2.3% Revenue from external Indirect costs in MCHF 1) -4 -50.0% customers up by 3.8%, driven by higher revenue fro
Slide 42: IT, Network and Infrastructure
IT, Network and Infrastructure Segment reporting as per 31.03.2020 31.03.2020 YoY Net revenue in MCHF 22 -4.3% Direct costs in MCHF -3 0.0% Workforce expenses in MCHF -208 -2.3% Contribution margin 2 Maintenance in MCHF -46 9.5% improved by 10.2% driven by lower IT-cost and lower IT expenses in MCHF
Slide 43: Fastweb
Fastweb Segment reporting as per 31.03.2020 31.03.2020 YoY Consumer revenue in MEUR 280 4.1% Enterprise revenue in MEUR 211 4.5% Wholesale revenue in MEUR 1) 52 20.9% Consumer revenue up by Net revenue in MEUR 1) 543 5.6% 4.1% YoY driven by the OPEX in MEUR 2) -373 6.0% increase in customer base. EB
Slide 44: Other
Other Segment reporting as per 31.03.2020 31.03.2020 YoY External revenue in MCHF 109 -21.0% Net revenue in MCHF 1) 243 -8.3% External revenue down by OPEX in MCHF 2) -201 -6.5% 21% YoY, as the close- EBITDA in MCHF 42 -16.0% down of Billag has yet an impact in Q1. EBITDA margin in % 17.3% Depreciat
Slide 45: Our strategic framework and achievements in corporate responsibility (CR)
Our strategic framework and achievements1 in corporate responsibility (CR) … … to transform people's mindset and embrace progress along the sustainability development goals (SDG) More for people More for environment More for Switzerland • 1'330k people supported to improve • 100% renewable energy •
Slide 46: Sustainability ambitions 2025
Sustainability ambitions 2025 Bringing progress with a keen sense of both responsibility and curiosity More for people More for environment More for Switzerland • Training media use • Limit CO2 emissions from • 30%-40% coverage of fixed-line • Promoting media skills operations and in the supply chai
Slide 47: Awarded as one of the world's most sustainable companies
Awarded as one of the world's most sustainable companies External recognition of Swisscom's ESG commitments and achievements Member of several CR Ratings Global Compact SBTi: Science-based Target initiative RE100: Initiative 100% renewable energy* VBE EnAW: Energie-Agentur der Wirtschaft * Since 201
Slide 48: Investor contact
Investor contact Bild Louis Schmid Tamara Andenmatten Head Investor Relations Investor Relations Manager louis.schmid@swisscom.com tamara.andenmatten@swisscom.com +41 58 221 62 79 +41 58 221 12 79 48
Slide 49: Cautionary statement
Cautionary statement Regarding forward looking statements • "This communication contains statements that constitute "forward-looking statements". In this communication, such forward-looking statements include, without limitation, statements relating to our financial condition, results of operations