Sunrise Communications Ag Class A · SIX:SUNN
Sunrise Communications Ag Class A — FY2018 Earnings Presentation
41 slides from Sunrise Communications Ag Class A's earnings presentation, Feb 28, 2019
Slide 1: 2018 Financial Results
1 2018 Financial Results 28 February 2019
Slide 2: Agenda
2 Agenda Summary 2018 Review Q4 Financials Outlook Q&A
Slide 3: Summary
3 Summary Olaf Swantee CEO Entering growth mode in 2018, after stabilization in 2017 – 5% higher dividends proposed
Slide 4: Summary
4 Summary • FY’18 confirms Sunrise’s transformation into • FY’19 guidance with revenue and adj. EBITDA growth Switzerland’s quality challenger • Cash flow volatility due to spectrum and landline • Growth investments paying off, leading to strong access investments, as highlighted previously customer
Slide 5: 2018 Review
5 2018 Review Olaf Swantee CEO Growth investments driving market share gains and EBITDA growth
Slide 6: 2018: Confirmed quality challenger position by continued growth investments
6 2018: Confirmed quality challenger position by cont’d growth investments … • Outstanding mobile network with leading • NPS strongly up since introduction in 2013, • FY’18 with balanced mobile tariff refresh dropped call ratios, 43Mbit/s average evidenced by No. 1 ranking of ‘large and ‘more for mo
Slide 7: Enabling one of the world's best mobile networks
7 … enabling one of the world’s best mobile networks Outstanding connect network test 1) Strong BILANZ telecom ranking 2018 2) 100 % reached of max points Swisscom Sunrise Mobile: Internet: TV: 90 Salt Sunrise 22.5 Sunrise 23.0 Sunrise 23.0 80 Swisscom 20.8 Swisscom 21.0 Swisscom 21.0 70 Salt 19.7 U
Slide 8: A diversified landline access
8 … and a diversified landline access Fiber xDSL/Copper MBB • ~30% fiber coverage • ~98% xDSL coverage via • 5G roll-out expected to • Closed 20 years 3.5 years agreement with support use of mobile agreements with utilities Swisscom broadband (MBB) and 3.5 years agreement • Own LLU with above 600 •
Slide 9: Driving market share gains in 2018
… driving market share gains in 2018 Mobile Postpaid net adds 2018 1) 135 In ‘000 Sunrise Swisscom UPC Salt 35 Internet net adds 2018 1) Sunrise Swisscom UPC 30 TV net adds 2018 1) Sunrise Swisscom UPC 1) Salt: no internet/ TV net adds published by Salt; Salt and UPC net adds are based on actuals (Q
Slide 10: Leading to GP increase, partly reinvested into growth
10 … leading to GP increase, partly reinvested into growth Gross profit entering growth Gross profit partly reinvested into territory 1) growth GP growth YoY Tower effect 617 591 628 2.5% 581 35 Adj Opex 15 0.0% -4.1% -5.9% 576 593 FY’15 FY’16 FY’17 FY’18 FY’15 FY’16 FY’17 FY’18 • Gross profit impro
Slide 11: To turn B2B into growth
11 … to turn B2B into growth Major B2B customer wins translated B2B product strategy refreshed in into positive GP momentum Q4’18 B2B gross profit YoY WLAN (excl. IFRS 15): Switch 7% Firewall Mobile Inhouse PBX Call Router Server -7% -6% FY’16 FY’17 FY’18 Sunrise Network • Positive momentum confirme
Slide 12: Sunrise with EBITDA and dividend growth
Sunrise with EBITDA and dividend growth Strong B2B and customer 2.3% Service revenue growth 1 0.5% momentum driven by growth investments, now MTR 4 -3.2% impact able to over compensate for -4.0% Dividend per share -5.2% lower ARPUs -2.7% +40% FY’15 FY’16 FY’17 FY’18 2.3% Reached organic growth 0.8%
Slide 13: Q4 Financials
13 Q4 Financials André Krause CFO Adjusted EBITDA growth and highest postpaid net adds since 2010
Slide 14: Strongest postpaid net adds since 2010
14 Strongest postpaid net adds since 2010 Postpaid mobile net adds (‘000) Prepaid mobile net adds (‘000) 42 14 Secondary 31 31 30 31 (data) -10 11 11 9 8 Primary 28 -30 20 20 21 23 -40 -39 Q4’17 Q1’18 Q2’18 Q3’18 Q4’18 -50 Q4’17 Q1’18 Q2’18 Q3’18 Q4’18 • Postpaid with strongest net adds since 2010,
Slide 15: Growing internet and TV customer base
15 Growing internet and TV customer base Internet net adds (‘000) TV net adds (‘000) 12 11 13 9 9 9 7 7 8 6 Q4’17 Q1’18 Q2’18 Q3’18 Q4’18 Q4’17 Q1’18 Q2’18 Q3’18 Q4’18 • Internet continues to grow customer base: Sunrise • TV with solid growth: Sunrise now has 244k TV now has 457k internet subscripti
Slide 16: ARPU trends continuing
ARPU trends continuing Blended mobile ARPU • Blended mobile ARPU stable YoY, as increasing postpaid Blended mobile ARPU: (CHF, incl. IFRS 15 1)) subscriptions have higher ARPU than decreasing prepaid -1.6 31.5 32.3 32.9 31.7 30.5 subscriptions YoY -1.1 -1.1 -2.1 YoY -1.6 -1.1 • Postpaid down CHF -1.
Slide 17: Financial Overview Q4
Financial Overview Q4 excl. IFRS 15 1) • Revenue down -4.6% due to hardware and Total revenue: Service revenue 2): Revenue hubbing (both low margin) (CHFm) • Service revenue up +1.9% driven by customer -4.6% +1.9% growth in postpaid and internet/TV; Q4 above Q3 509 486 373 380 run rate (+1.4% YoY),
Slide 18: Service revenue growth driven by postpaid and internet/TV
18 Service revenue growth driven by postpaid and internet/TV Revenue bridge (CHFm) Q4’17 Revenue 509 • Mobile hardware: depends on handset innovation, launches and Δ mobile hw -12 pricing; variations across quarters lead to revenue volatility (low-margin) -6% Δ hubbing -18 • Hubbing: international t
Slide 19: GP growth partly reinvested into operational momentum
19 GP growth partly reinvested into operational momentum Growth YoY Gross profit Growth YoY excl. tower Adjusted Opex 3.7% 4.9% 2.9% 2.2% 3.1% 2.5% 2.4% 1.4% FY’18 1.6% 1.5% 0.3% Q4’17 Q4’18 Q4’17 Q4’18 11,2 313 +7,6 302 In CHFm In CHFm 162 154 82.4% Service GM 1) 81.0% Q4’17 Q4’18 Q4’17 Q4’18 • Gro
Slide 20: Equity FCF down driven by non-recurring NWC effects
20 Equity FCF down driven by non-recurring NWC effects Equity free cash flow (CHFm) 1) eFCF 2017 219 • Reported EBITDA up driven by organic growth, partly offset by higher network service fees after tower disposal Δ EBITDA 10 • NWC: Non-recurring positive effects last year (roaming discounts & tower
Slide 21: Growth investments driving momentum
21 Growth investments driving momentum Capex (CHFm) Top 3 international network quality 315 303 21 2018 connect scores: Sunrise vs. international peers 2) 44 60 46 38 47 205 157 Sunrise FY’17 FY’18 Driving customer net adds • Landline access includes upfront investment for landline Internet access a
Slide 22: Outlook
22 Outlook Olaf Swantee CEO Growing EBITDA and taking it to the next level with 5G
Slide 23: 2019 outlook
23 2019 outlook 2018 achievements 2019 objectives • Market share gains confirmed Sunrise as the • Use acquired spectrum to roll out 5G quality challenger; achieved balanced mobile tariff • Further diversify landline access via MBB, which refresh despite competitive environment Operational has attrac
Slide 24: Taking it to the next level with 5G
24 Taking it to the next level with 5G 4G leadership led to great momentum Continue success story with 5G • Dec 17: speed record • Record breaking 96% 4G 5G demo area coverage • Jun 18: 1st Swiss 5G • Solid base for 5G trial live network • Nov 18: 1st ski resort live with standardized 5G • 31 Mar 19
Slide 25: Sunrise is now optimally equipped to win 5G race
25 Sunrise is now optimally equipped to win 5G race Spectrum in place (MHz) Sunrise Swisscom Salt New: 700 MHz SDL 10 unpaired Low frequency: New: 700 MHz 10 30 20 paired 35% 800 MHz 20 20 20 paired • New spectrum acquired for favorable CHF 89m 1) in 900 MHz Feb 19, leading to an excellent starting
Slide 26: 5G financial impact
26 5G financial impact 2019 Capex driven by accelerated 5G monetization 5G roll-out CHFm; Capex excl. spectrum and landline access 1) • Customer momentum driven by network leadership 295 • 5G smartphone customers will be charged an extra fee 44 243 252-292 • Mobile broadband (MBB) roll-out 45 46 38
Slide 27: Dividends supported by normalised eFCF
27 Dividends supported by normalised eFCF Normalised eFCF and leverage ratio Progressive dividends per share CHF m Net debt / adj. EBITDA 1) Tower disposal 4-6% growth p.a. -25 214 2.61 2.72 +40% 189 1.97 1.99 4.00 4.20 3.00 3.33 3) FY’18 Proposed FY’15 FY’16 FY’17 FY’18 FY’15 FY’16 FY’17 FY’18 FY’1
Slide 28: Financial outlook 2019
28 Financial outlook 2019 FY’19 guidance 1) • Service revenue supported by B2B and cont’d customer momentum in mobile postpaid, Higher internet, and TV • Revenue CHF 1,860 - 1,900m revenue • Revenues of low-margin hardware and hubbing to • Adj. EBITDA CHF 608 – 623m remain volatile • Capex CHF 420–
Slide 29: Q&A
29 Q&A ?&!
Slide 30: Appendix
30 Appendix
Slide 31: IFRS 15 update
31 IFRS 15 update Q4 FY IFRS 15 impact Excl. IFRS 15 Incl. IFRS 15 Excl. IFRS 15 Incl. IFRS 15 Revenue Revenue • At Sunrise, the 2018 impact of IFRS 15 is mainly related to the capitalization of costs to obtain a contract, resulting -4,6% -4,6% +1.2% +1.2% in a positive Opex effect 509 486 509 486 1
Slide 32: IFRS 16 update
32 IFRS 16 update IFRS 16 accounting standard Impact on Sunrise 1) • Introduced as per Jan 2019, replacing previous • EBITDA: CHF +40m to CHF +45m positive impact is standards (e.g. IAS 17); impact on: expected in FY’19 • P&L lease recognition: reallocation from COGS • Net debt: A CHF 275-285m incre
Slide 33: Sunrise has one of the world's best mobile networks
33 Sunrise has one of the world’s best mobile networks T-Mobile; NL 977 Swisscom; CH 973 Sunrise; CH 972 Vodafone; NL 962 KPN; NL 940 T-Mobile; AT 933 A1; AT 926 Telia; SE 924 Tele; NL 908 Vodafone; ES 904 Salt; CH 902 Telekom; DE 888 Telstra; AU 884 EE; UK 879 International mobile network quality 2
Slide 34: Revenue bridge FY'18
34 Revenue bridge FY’18 Revenue bridge (CHFm) FY’17 Revenue 1854 Δ mobile hw • Mobile hardware: depends on handset innovation, launches and 21 (low-margin) -1% pricing Δ hubbing (low-margin) -33 • Hubbing: international trading business which is volatile by nature Service Revenue 1843 • Postpaid: st
Slide 35: Bridge adjusted to reported EBITDA
35 Bridge adjusted to reported EBITDA Q4 EBITDA bridge Adj. EBITDA Q4’18 152 Share based payment (0) • Share-based payment provisions for multi-year compensation plans expenses • Prior year related events mainly include adjustments of Prior year events 1 provisions/accruals based on newly available
Slide 36: Income Statement
36 Income Statement 2018 2018 2017 P&L (CHFm) incl. IFRS 15 excl. IFRS 15 excl. IFRS 15 Mobile services 1’271 1’271 1’231 thereof mobile postpaid 802 805 768 thereof mobile prepaid 96 96 122 thereof hardware 279 277 256 Landline services 325 325 378 thereof landline voice 126 126 137 thereof hubbing
Slide 37: Cash Flow Statement
37 Cash Flow Statement 2018 2018 2017 Cash Flow (CHFm) incl. IFRS 15 excl. IFRS 15 excl. IFRS 15 EBITDA 602 596 592 Change in net working capital (49) (42) 32 Movement in pension and provisions (9) (9) (1) Interest paid (30) (30) (39) Corporate income and withholding tax paid (50) (50) (31) Cash flo
Slide 38: Leverage ratio
38 Leverage ratio December 31, September 30, December 31, Net debt (CHFm) 2018 2018 2017 Senior Secured Notes issued February 2015 0 0 500 Term loan B 1’410 1’410 910 Senior Secured Notes issued June 2018 200 200 0 Total cash-pay borrowings 1’610 1’610 1’410 Financial lease 5 5 9 Total debt 1’615 1’
Slide 39: Have a sunny day
Have a sunny day
Slide 40: Contact Information
40 Contact Information Investor Relations Uwe Schiller uwe.schiller@sunrise.net Stephan Gick stephan.gick@sunrise.net Contact www.sunrise.ch/ir investor.relations@sunrise.net +41 58 777 96 86
Slide 41: Disclaimer
41 Disclaimer • This document and any materials distributed in connection herewith (including • Statements made in this Presentation may include forward-looking statements. any oral statements) (together, the “Presentation”) do not constitute or form a These statements may be identified by the fact
Sunrise Communications — FY2018 Earnings Presentation on 6ix