Swisscom Ag · SIX:SCMN
Swisscom — FY2009 Earnings Presentation
60 slides from Swisscom's earnings presentation, Feb 18, 2010
Slide 1: Swisscom 2009 results
Swisscom 2009 results Annus “Hurray”bilus – better than feared 18 February 2010
Slide 2: Agenda
Annus Hurraybilus, Agenda 2 1 2009, better than feared 2 Revenue & margin dynamics, 2009 8 1 3 Revenue & margin dynamics, 2010 7 2 4 Cost initiatives 5 FTTH 6 3 6 Fastweb 7 2009 financials, debt and dividends 5 4 8 2010 outlook Q&A
Slide 3: 2009, better than feared
3 1 2009, better than feared 1 2 Revenue & margin dynamics, 2009 3 Revenue & margin dynamics, 2010 4 Cost initiatives 5 FTTH 6 Fastweb 7 2009 financials, debt and dividends 8 2010 outlook Q&A
Slide 4: Q4: better than feared, operationally
1 Q4: better than feared, operationally... 4 x 1000 100 80 60 40 20 - Mobile subs iPhone handsets Broadband Retail subs Digital TV subs Fastweb customers (broadband + mobile) net adds Q1 net adds Q2 net adds Q3 net adds Q4 Q4 2009: again a strong quarter in terms of net adds
Slide 5: Q4: better than feared, financially
1 Q4: better than feared, ... financially 5 CHF mm 1200 800 400 0 EBITDA EBIT Net income OpFCF Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q4 2009 excl specials *) *) Q4 corrected for CHF 48mm of provisions booked in December 2009 plus CHF 20mm extra costs related to TV push/camp
Slide 6: Revenue & margin dynamics, 2009
6 1 2009, better than feared 2 Revenue & margin dynamics, 2009 2 3 Revenue & margin dynamics, 2010 4 Cost initiatives 5 FTTH 6 Fastweb 7 2009 financials, debt and dividends 8 2010 outlook Q&A
Slide 7: Stable YoY: results of Swisscom's 3 pillar strategy
2 Stable YoY: results of Swisscom‘s 3 pillar strategy 7 Maximise Extend Expand -244 -9 +188 (in CHF mm) Comparable Revenue YoY -65mm, i.e. -0.5% 12‘198 -132 FX-impact: - 132 FX- 12‘001 12‘001 impact FWB* - 421 +217 (-1.6%) -9 -29 +196 -19 Volume/ Facility IT services Hosp. Fastweb Price Usage/ Mgmt
Slide 8: 2009 Revenue dynamics, pillar Maximize
2 2009 Revenue dynamics, pillar MAXIMIZE CHF Price (P) Volume (Q) Q one-off Σ Maximize mm 8 Traditional telephony SIMAG Translated into services Facility Mgmt (net -251) Swisscom’s 3-pillar strategy: -302 +51 -19 Structural Pillar “Maximize” Σ -244 Structural price Net volume -225 erosion Growth (BB
Slide 9: Revenue dynamics including other pillars
2 Revenue dynamics including other pillars CHF Price (P) Volume (Q) Q one-off Σ mm 9 Airbites Translated into CEE Swisscom’s 3-pillar -11 strategy: Structural Pillar “Maximize” IT IPTV Σ -244 Services IT Services -212 phase out +15 +25 banking Resource Sourcag Pillar “Extend” Platform Σ -9 -33 +26 Σ
Slide 10: 2009 revenue dynamics over the quarters
2 2009 revenue dynamics over the quarters CHF Σ mm 10 Structural effects improving... Translated into Q1 Q2 Q3 Q4 Swisscom’s 3-pillar 0 strategy: Structural Pillar “Maximize” -20 Σ -244 -212 -40 Σ -9 Pillar “Extend” -60 Σ - 29 Pillar “Expand” ...while cyclical effects are stable at low level Q1 Q2 Q
Slide 11: 2009 Revenue dynamics within the pillar Maximize, mobile and fixed
2009 Revenue dynamics within the pillar ‘Maximize’, 2 split in mobile and fixed business CHF mm Price (P) Volume (Q) Σ 11 Price erosion Usage/volume growth Translated into Wireless Traditional New data Traditional New data Swisscom’s 3-pillar strategy: -137 +114 +200 Pillar “Maximize” -244 Σ -244 Of
Slide 12: 2009 revenue impact on contribution margin
2009 revenue impact on contribution margin 2 Avg. Revenues x gross = Contribution Margin 12 Wireless Change YoY in CHF mm margin 12 month change in CHF mm Price erosion Volume driven Handsets Total -85 n/m +77 -400 -300 -200 -100 0 100 200 300 400 -400 -300 -200 -100 0 100 200 300 400 Q1 Q2 Q3 Q4 Wi
Slide 13: Revenue & margin dynamics, 2010
13 1 2009, better than feared 2 Revenue & margin dynamics, 2009 3 Revenue & margin dynamics, 2010 4 Cost initiatives 3 5 FTTH 6 Fastweb 7 2009 financials, debt and dividends 8 2010 outlook Q&A
Slide 14: Expected 2010 Revenue dynamics, pillar Maximize
Expected 2010 Revenue dynamics, pillar Maximize 3 CHF Maximize Price Volume bln Σ 14 Translated into Wireless Swisscom’s 3-pillar strategy: --- -0.25 trad. +++ +0.1 trad. -0.25 Pillar “Maximize” -0.1 new data +0.2 new data Handsets +0.15 Pillar “Extend” flat Σ -0.35 +0.3 -0.05 0 Pillar “Expand” non-
Slide 15: Expected 2010 Revenue dynamics, pillar Extend
Expected 2010 Revenue dynamics, pillar Extend 3 CHF Extend Price Volume bln Σ 15 Translated into Swisscom’s 3-pillar IPTV ++ strategy: -0.25 Pillar “Maximize” IT - ++++ +0.15 Pillar “Extend” Especially Resource and Sourcag Pillar “Expand” 0 non-Fastweb Large Accounts + Σ-0.1 Total w.o. Fastweb (proj
Slide 16: Expected 2010 Revenue dynamics, Expand: Fastweb
Expected 2010 Revenue dynamics, Expand: Fastweb 3 Expand, CHF Fastweb bln Price Volume Σ 16 Translated into • Consumer -- ++ + Swisscom’s 3-pillar strategy: • SME -- ++ ++ -0.25 Pillar “Maximize” +0.15 Pillar “Extend” • Executive including -- + -- 0 Pillar “Expand” non-Fastweb wholesale Total Σ-0.1
Slide 17: Overall expected 2010 Revenue dynamics, incl. Fastweb
In summary: overall expected 2010 Revenue dynamics, Swisscom incl. Fastweb 3 CHF bln Price Volume Σ 17 Maximize Translated into Swisscom’s 3-pillar Total -0.4 + 0.15 -0.25 strategy: -0.25 Pillar “Maximize” Extend Total 0 +0.15 +0.15 +0.15 Pillar “Extend” Pillar “Expand” 0 Expand non-Fastweb non- 0 0
Slide 18: Summary revenue dynamics, 2009 versus 2010E
Summary revenue dynamics, 2009 versus 2010E 3 CHF mm CHF bln 18 Change YoY (CHF mm) 2009 Actual vs. Trend: 2010 Expected 2008 Actual vs 2009 Actual Pillar “Maximize” -244 Î -0.25 Pillar “Extend” -9 Ò +0.15 Pillar “Expand” -29 Ò 0 Total w.o. Fastweb Σ -282 Ò Σ – 0.1 Fastweb in constant CHF +217 Ô +0.
Slide 19: Expected 2010 profitability dynamics
Expected 2010 profitability dynamics, Swisscom incl. Fastweb 3 Third party Revenues CM1 Indirect & EBITDA CHF bln 19 capitalised cost Maximize Wireless -0.05 -0.25 -0.2 -0.1 -0.1 Wireline -0.2 Extend IPTV IT +0.15 +0.1 + + Large accts Expand non Fastweb = = = = Swisscom w/o Fastweb -0.1 -0.1 <-0.1 <
Slide 20: Reconciliation of dynamics to expected 2010 results (Guidance)
Reconciliation of dynamics to expected 2010 results (Guidance) 3 Revenues CM1 Indirect & EBITDA 20 capitalised cost Swisscom w/o Fastweb CHF 9.22 bln CHF 3.84 bln 2009 Actual change in 2010 -0.1 -0.1 <-0.1 <-0.1 Swisscom 2010 ~ CHF 9.15 bln ~ CHF 3.75 bln Guidance Fastweb 2009 Actual € 1.85 bln € 55
Slide 21: Regulatory Outlook
Regulatory Outlook 3 CHF Cases brought: Potential impact*): Risk 21 mm of before 2009 in 2009 2010 later Σ occurrence Access proceedings: > 50% 220 Covered by (fully covered provisions • LRIC by provisions, • ULL i.e. no EBITDA (but FCF) 250 impact should • Other these cases regulatory 30 materialis
Slide 22: Cost initiatives
22 1 2009, better than feared 2 Revenue & margin dynamics, 2009 3 Revenue & margin dynamics, 2010 4 Cost initiatives 5 FTTH 6 Fastweb 4 7 2009 financials, debt and dividends 8 2010 outlook Q&A
Slide 23: Achieved in 2009: indirect cost savings
Achieved in 2009: indirect costs savings of 128 MCHF 4 23 Swisscom (excl. Fastweb) Total comparable -128 total +157 -7 -58 -72 - +0 +9 +29 - - Savings (mainly FTE - - - 3'700 3'671 - reductions, repair & maintenance IC activations -Savings IC profits savings) + Provisions + Transformation in MCHF pr
Slide 24: Achieved in 2009: direct costs decrease
Achieved in 2009: direct costs decrease of 272 MCHF 4 24 Swisscom Total comparable (excl. Fastweb) -272 total +60 -105 -159 2'163 - - -212 -8 in MCHF - - Lower handsets sales excl. - 1'951 iPhone - Following revenue trend in project business Volume and prices of traditional business (mainly wireline
Slide 25: Achieved in 2009: EBITDA conversion from lower costs
Achieved in 2009: EBITDA conversion of 72 MCHF from lower costs 4 Swisscom 25 (excl. Fastweb) comparable EBITDA +72 -337 +128 +9 -162 +272 -90 3'925 - 3'997 - - 3'835 - - -30 EBITDA impact iPhone in MCHF (+30 revenue -60 direct costs) -127 Special items indirect costs (excl. M&A) -5 M&A -282 Net rev
Slide 26: Further cost reductions planned in pillar Maximize
On top of realized savings in 2009, further cost reductions in 4 the pillar Maximize are planned starting in 2010 26 Base line (cost level 2008) > MCHF 100 achieved in 9 Restructuring 2008 2009... ..with - 300 1 Simplification customer interaction further cost MCHF reductions 2 IT system rationaliza
Slide 27: Cost reduction plans not jeopardizing customer experience
Cost reduction plans not jeopardizing customer experience 4 27 Improved customer experience Simpler All IP Faster processes & systems product design transformation Cost Efficiency
Slide 28: FTTH
28 1 2009, better than feared 2 Revenue & margin dynamics, 2009 3 Revenue & margin dynamics, 2010 4 Cost initiatives 5 FTTH 6 Fastweb 5 7 2009 financials, debt and dividends 8 2010 outlook Q&A
Slide 29: Fibre – the sole solution to be competitive long term
Fibre – the sole solution to be competitive long term 5 29 Bandwidth requirements double every 20 months. This development is possible only on the basis of fibre optics with symmetric bandwidths of up to 100 Mb/s. Fibre optics have more than 1000 times the capacity of copper. With cable operators so
Slide 30: Fibre – investments
Fibre – investments 5 30 Investments for fibre are dominated by civil works in the last meters and the in-house cabling. Swisscom‘s share in the overall investments in fibre until the end of 2015 will be around 2 bln CHF To-house and In- house Distribution cabling area Core area CAPEX 43% 42% 15%
Slide 31: Fibre – network rollout
Fibre – network rollout 5 31 Swisscom ramps up the FTTH roll-out, focussing on the major Swiss cities, and including also pilot projects in rural areas Building co-operations already exist in Berne, Fribourg, Geneva, Lausanne, Pfyn, St. Gall, and Zurich FTTH extension Winterthur from autumn 2008 Pfy
Slide 32: Partnerships concluded so far
Partnerships concluded sofar 5 32 Swisscom’s share in the overall investments is similar to its (retail + resellers) market share, whilst having access to the entire footprint City Number of Constructed Marketshare Marketshare Marketshare households until Swisscom * Cable Resellers * operators * Zür
Slide 33: Fastweb
33 1 2009, better than feared 2 Revenue & margin dynamics, 2009 3 Revenue & margin dynamics, 2010 4 Cost initiatives 5 FTTH 6 6 Fastweb 7 2009 financials, debt and dividends 8 2010 outlook Q&A
Slide 34: 2009 – Effective Management of a Tougher Environment
2009 – Effective Management of a Tougher Environment 34 FASTWEB response to 2009 challenges External Factors FASTWEB Response Confirming price Ä Ä Weak cycle Focus on high premium spender net adds positioning Adverse regulatory Ä Ä Cost control Margin protection environment Higher retention Focusing
Slide 35: 2009 Results at a Glance
2009 Results at a Glance 35 Revenues EBITDA Net Result FCF Capex/Sales FY FY FY FY FY Target Target Target Target Target €1,800 Mln €560 Mln >0 >0 23% FY Actual FY Actual FY Actual FY Actual FY Actual €1,853 €551 Mln €36 Mln €39 Mln 23% Mln Actual Vs Actual Vs Actual Vs Actual Vs Actual Vs Target Ta
Slide 36: 2009 Broadband and Mobile Customer Base Evolution
2009 Broadband and Mobile Customer Base Evolution Broadband Customer Base 36 Mobile Customer Base Growth Growth (‘000) (‘000) Customer Net Adds Customer Base Customer Base Net Adds Customer Base EoP 12M 2009 EoP 2009 EoP 2008 12M 2009 Base 2008 EoP 2009 162 1,644 180 210 1,482 * 30 +11% 162k new bro
Slide 37: 2009 Revenue and EBITDA Trend – Total FASTWEB
2009 Revenue and EBITDA Trend – Total FASTWEB FY Revenue Evolution (€ Mln) FY EBITDA Evolution (€ Mln) 37 551 518 * +8.5% 1,853 +6.4% 1,707 FY08 FY09 FY08 FY09 Ä Execu E SME 22% 40% Executive FY Revenue Mix Ä Consumer Business Consumer 38% 38% 62% FY revenues increased 8.5% and were 3% above target
Slide 38: 2009 Capex and FCF Evolution – Total FASTWEB
2009 Capex and FCF Evolution – Total FASTWEB FY Capex (€ Mln) and Capex/Sales FY EBITDA-Capex Evolution (€ Mln) 38 529 Evolution 544 117 79 * 439 434 FY06 FY07 42% FY06 FY07 FY08 FY09 38% 26% 23% -130 FY06 FY07 FY08 FY09 -212 * Based on 2008 pro forma EBITDA CAPEX TO SALE CAPEX TO SALE FY Capex Mix
Slide 39: Consumer – 2010 Strategy
Consumer – 2010 Strategy 1 – Pricing 39 Favorable price environment expected in 2010 (Vodafone re- pricing in November 2009…) Confirming FASTWEB premium price positioning 2 – Service Extending FASTWEB Joy concept Expanding the broadband market by targeting “no-pc” segments 3 – Distribution Investing
Slide 40: SME – 2010 Strategy
SME – 2010 Strategy 40 1 – Service Positioning FASTWEB as a “360 degrees” solution provider Ä Enhancing the ICT and VAS portfolio (focus on Unified Communication and Data centers) Further pushing of mobile services Single line (voice only) to address the low end segment 2 – Sales Channels Developing
Slide 41: Executive – 2010 Strategy
Executive – 2010 Strategy 41 1 – Service Focusing on corporate data and VAS to support revenue growth and customer stickiness Ä Further strengthening of Unified Communication services Launching mobile data services Launching Network Managed Services 2– Wholesale Managing a further reduction of low m
Slide 42: 2010 Guidance
2010 Guidance 42 2009 Actual YoY Change 2010 Guidance € Mln € Mln Revenues 1,853 +5% 1,950 Industrial EBITDA 551 +5% ∼ 580 Capex-to-Sales 23% 21% FCF Proxi (EBITDA -CAPEX) 118 ∼ 170 Solid industrial growth in 2010 and beyond
Slide 43: 2009 financials, debt and dividends
43 1 2009, better than feared 2 Revenue & margin dynamics, 2009 3 Revenue & margin dynamics, 2010 7 4 Cost initiatives 5 FTTH 6 Fastweb 7 2009 financials, debt and dividends 8 2010 outlook Q&A
Slide 44: Cockpit – customer trends over last 7 quarters
7 Cockpit – customer trends over last 7 quarters Ups and downs, however stable overall 44 Subscribers Wireless Market Switzerland Subscribers Broadband Market Switzerland Subs DigitalTV - Swisscom vs. Cablecom #k 8393 8545 8681 8756 8871 8954 ? Total #k 2464 2493 2556 2610 2649 2692 ? Total 401 424
Slide 45: Segments - Residential Customers
7 Segments - Residential Customers 45 Financials and operational data 12m 2009 31.12.2009 YOY • Price erosion, lower termination rates 1) Net revenue in MCHF 5'013 -2.0% and lower handset sales main drivers of Direct costs in MCHF -1'253 -5.5% lower Mobile revenue, despite subs/new 2) Indirect costs
Slide 46: Segments - Small & Medium-sized Enterprises
7 Segments - Small & Medium-sized Enterprises 46 Financials and operational data 12m 2009 31.12.2009 YOY • Net revenue stable YoY (price 1) Net revenue in MCHF 1'156 0.2% erosion compensated by higher Direct costs in MCHF -173 -14.8% number of subscribers) 2) Indirect costs in MCHF -133 -1.5% Contri
Slide 47: Segments - Corporate Business
7 Segments - Corporate Business 47 Financials and operational data 12m 2009 31.12.2009 YOY • Revenue decline YoY due to lower Net revenue in MCHF 1) 1'825 -4.2% wireline and projects/outsourcing Direct costs in MCHF -443 -16.6% revenue. Mobile revenue almost stable Indirect costs in MCHF 2) -431 -0.
Slide 48: Segments - Wholesale
7 Segments - Wholesale 48 Financials and operational data 12m 2009 31.12.2009 YOY • Third party revenue decreased by 98 Revenue from external customers in MCHF 877 -10.1% MCHF (lower inbound roaming and Intersegment revenue in MCHF 568 -18.0% wireless termination as well as Net revenue in MCHF 1'445
Slide 49: Segments - Networks and Support Functions
7 Segments - Networks and Support Functions 49 Financials and operational data 12m 2009 31.12.2009 YOY • Maintenance cost significantly Personnel expenses in MCHF -657 2.5% down, in line with increased focus Rent in MCHF -229 0.0% on NGN (and less on TDM) Maintenance in MCHF -203 -17.8% IT expenses
Slide 50: Segments - Fastweb
7 Segments - Fastweb 50 Financials and operational data 12m 2009 31.12.2009 YOY • Revenues increased by 8.5% YoY – mainly Consumer revenue in MEUR 697 5.9% driven by the Executive segment (+78 SME revenue in MEUR 406 7.1% 1) MEUR) and its public administration Executive revenue in MEUR 750 11.8% 1)
Slide 51: Segments - Other operating segments
7 Segments - Other operating segments 51 Financials and operational data 12m 2009 31.12.2009 YOY • 12m external revenue down -64 MCHF (- Swisscom IT Services in MCHF 435 0.0% 7.1%): Swisscom Participations in MCHF 324 -9.7% Hospitality Services in MCHF 74 -19.6% – IT Services stable (+26 MCHF from A
Slide 52: Group YTD: P&L breakdown
7 Group YTD: P&L breakdown Despite lower EBITDA, net income increased y-o-y by ~10% driven by lower depreciation 52 (adjustment of useful lives of cable in 2009), lower net interests as well as extraordinary items in 2008 . 4‘666 -1‘830 (4‘789) tax rate 19.2% -158 EPS CHF 2‘678 -268 -68 +43 -460 37.
Slide 53: Group Y-o-Y: CAPEX breakdown
7 Group Y-o-Y: CAPEX breakdown 53 Consolidated CAPEX – stable YoY (in CHF mm) 2009 1'219 657 111 1‘987 2008 1'171 691 188 2‘050 Swisscom Switzerland Fastweb Others CAPEX of Swisscom Switzerland – trend to invest more into NGN continues 28% • Continue FTTx, VDSL, HSPA 26% 32% Next generation • ALL IP
Slide 54: Optimising net debt under constraint of max. limit 2xEBITDA
7 Optimising Net debt under constraint of max. limit 2xEBITDA Outlook 2010: aiming for modest flexibility of CHF 1 bln 54 Net debt Operating FCF 2009 Net debt EBITDA 10.3 CHF 2.67 bln (CHF bln) 2.5 1.1 9.9 1.0 0.7 Max. 2.0x ~ 9.3 CHF 1 bln 8.9 4.7 strategic 1.0 ~ 8.3 flexibility ~ 1.8x 2.0 by YE 201
Slide 55: CHF 20 dividend per share proposed for 2009
CHF 20 dividend per share proposed for 2009, allowing for creation ~25 CHF of CHF 1 bln financial flexibility by YE 2010 (= 50% OpFCF) 55 Outlook 2010: in minimum the same DPS Dividend / share (CHF) CHF 20 dividend 2009 to be paid on 4.5.2010 20 CHF 20 (ex-div date on 29.4.2010) 19 19 18 + 17 cancel
Slide 56: 2010 outlook
56 1 2009, better than feared 2 Revenue & margin dynamics, 2009 8 3 Revenue & margin dynamics, 2010 4 Cost initiatives 5 FTTH 6 Fastweb 7 2009 financials, debt and dividends 8 2010 outlook Q&A
Slide 57: Outlook 2010
8 Outlook 2010 57 Expect Group results – without potential FCF impact from regulatory rulings – to be flat YoY Net revenues 2009A 2010E Swisscom excl. Fastweb bln CHF 9.22 ~ 9.15 Fastweb bln EUR 1.85 ~ 1.95 EBITDA Swisscom excl. Fastweb bln CHF 3.84 ~ 3.75 Fastweb MEUR 551 ~ 580 Capex Swisscom excl.
Slide 58: Q&A
58 1 2009, better than feared 2 Revenue & margin dynamics, 2009 3 Revenue & margin dynamics, 2010 4 Cost initiatives 5 FTTH 6 Fastweb 7 2009 financials, debt and dividends 8 2010 outlook Q&A
Slide 59: Questions & Answers
Questions & Answers $ swisscom
Slide 60: Cautionary statement regarding forward-looking statements
Cautionary statement regarding forward-looking statements 60 ”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