Sunrise Communications Ag Class A · SIX:SUNN
Sunrise Communications Ag Class A — FY2017 Earnings Presentation
40 slides from Sunrise Communications Ag Class A's earnings presentation, Mar 1, 2018
Slide 1: Sunrise Communications Group AG FY 2017 financial results
Sunrise Communications Group AG FY 2017 financial results – 1 March 2018
Slide 2: Agenda
Agenda 1 Summary & 2017 Review O. Swantee (CEO) 2 Q4 Financials A. Krause (CFO) 3 Outlook O. Swantee (CEO) 4Q&A 2
Slide 3: Summary: Strong customer growth - financial stabilization - 20% dividend increase
Summary: Strong customer growth - financial stabilization – 20% dividend increase • FY’17 with successful transformation into Switzerland’s quality challenger • Growth investments paying off, leading to accelerated customer growth and delivering service revenue growth (MTR adj.) and stabilizing gros
Slide 4: 2017: Sunrise became Switzerland's quality challenger by investing into 3 growth priorities
2017: Sunrise became Switzerland’s quality challenger by investing into 3 growth priorities … Connect network score 2017 Max 1000 • Outstanding mobile network with leading dropped call ratios, 44 Mbit/s average experienced download speed, VoLTE launched, and Network 973 973 99.9%/95.0% LTE populatio
Slide 5: Enabling globally leading mobile network quality
… enabling globally leading mobile network quality Leading connect network test 2017 1) Leading BILANZ telecom ranking 2017 2) % reached of max points Mobile: Internet: TV: 100 Sunrise Swisscom Sunrise 22.9 Sunrise 23.4 Sunrise 23.3 90 Salt 80 Sunrise score vs. EU peers Swisscom 19.7 Swisscom 20.8 S
Slide 6: Driving customer growth acceleration
… driving customer growth acceleration Mobile Postpaid subscriber growth YoY (‘000) Secondary SIM (data) +27% Primary SIM 109 • Postpaid with accelerated 80 86 62 10 36 primary net adds in 2017 9 35 53 70 73 • Secondary data SIMs 50 supported by mobile 2014 2015 2016 2017 broadband and Apple watch T
Slide 7: Leading to GP stabilization, with cost savings reinvested into growth
… leading to GP stabilization, with cost savings reinvested into growth Gross profit stabilization 1) Cost savings reinvested into growth 1) GP growth YoY Adj. Opex growth YoY 1.7% Tower 2.5% impact 0.0% -0.9% -4.1% -5.7% -5.9% -9.7% FY’15 FY’16 FY’17 FY’15 FY’16 FY’17 • Gross profit stabilized at C
Slide 8: Successfully transform B2B and launch Sunrise ONE
… to successfully transform B2B and launch Sunrise ONE B2B with positive indications to take off Sunrise ONE driving 4P billed customer base B2B revenue YoY: 0% +36 -4% -9% MTR -2% 144 +15 +13 2015 2016 2017 B2B one year order value YoY 1) : 108 92 79 106% 9% -33% 2014 2015 2016 2017 2015 2016 2017
Slide 9: 20% dividend increase: stabilizing trends and significant deleveraging in 2017
20% dividend increase Stabilizing trends and significant deleveraging in 2017 Service revenue growth 0.5% -4.0% -3.2% MTR Strong customer momentum -5.2% impact 1 driven by growth investments, -2.7% now able to compensate for FY’15 FY’16 FY’17 lower ARPUs Adj. EBITDA growth Dividend per share 20% 0.8
Slide 10: Q4 Financials
Q4 Financials A. Krause (CFO) 10
Slide 11: Financial Overview Q4
Financial Overview Q4 Revenue (CHFm) • MTR1) adj. revenue up +4.3% due to hardware sales Total revenue: Service revenue 2): • MTR adj. service revenue 2) up +0.9% with customer growth +1.7% -2.4% partly offset by lower ARPUs; down from +2.3% in Q3 as Q3 MTR adj. +4.3% MTR adj. +0.9% benefited from h
Slide 12: Accelerated mobile postpaid customer momentum
Accelerated mobile postpaid customer momentum Postpaid mobile net adds (‘000) Prepaid mobile net adds (‘000) 31 26 25 26 27 6 11 -6 10 8 -9 12 Secondary 21 Primary -30 16 19 20 13 -40 Q4’16 Q1’17 Q2’17 Q3’17 Q4’17 -57 Q4’16 Q1’17 Q2’17 Q3’17 Q4’17 • Postpaid driven by primary SIMs, leading to 1.59m
Slide 13: Internet and TV with double digit net adds
Internet and TV with double digit net adds Internet net adds (‘000) TV net adds (‘000) 14 12 12 12 13 13 13 11 12 8 Q4’16 Q1’17 Q2’17 Q3’17 Q4’17 Q4’16 Q1’17 Q2’17 Q3’17 Q4’17 • Internet continues to see double digit net adds: • TV has solid growth: Sunrise now has 214k TV Sunrise now has 422k inter
Slide 14: ARPU trends continuing
ARPU trends continuing Blended mobile ARPU (CHF) Blended mobile ARPU: • Blended mobile ARPU up CHF +0.5 YoY (MTR adj.1)) due to growing postpaid -1.1 subscribers, which have a higher ARPU than decreasing prepaid subscribers MTR adjusted: +0.5 • Postpaid down CHF -0.6 YoY (MTR adj.1)) mainly due to 2
Slide 15: Service revenue up, driven by postpaid, internet and TV
Service revenue up, driven by postpaid, internet and TV Revenue bridge (CHFm) Q3’17 YoY Q4’17 YoY Q4’16 Revenue 501 Δ hubbing -6 2 • Hubbing: international trading business which is volatile by nature +4% Low margin Δ mobile HW -9 16 • Mobile HW: Revenue depends on handset innovations / launches, wh
Slide 16: Q4 gross profit confirming stabilization trend
Q4 gross profit confirming stabilization trend Gross profit (CHFm) Adjusted Opex (CHFm) +9% 154 +0.3% 151 Tower 149 9 effect 145 144 144 145 301 302 143 142 6 81.0% 78.8% 145 143 Q4’16 Q4’17 Q4’15 Q1’16 Q2’16 Q3’16 Q4’16 Q1’17 Q2’17 Q3’17 Q4’17 Service Gross Margin 1) • Gross profit +0.3% in Q4, con
Slide 17: Equity FCF down 5% due to growth investments
Equity FCF down 5% due to growth investments Equity free cash flow (CHFm) eFCF 2016 230 • Reported EBITDA down due to higher network service fees after tower disposal in August 2017 Δ EBITDA (6) • Tax up due to higher statutory profit 2017, partly offset by tax repayment for 2015 and lower tax payme
Slide 18: Significantly reduced leverage
Significantly reduced leverage Improved net debt (CHFm) • Net debt decrease, due to organic eFCF -1,147 and proceeds from tower disposal 446 219 -150 -1,663 FY’16 eFCF Dividend Deleveraging FY’17 2017 with tower net debt net debt proceeds, FX, other Improved leverage ratio +0.1 -0.8 • Reducing net d
Slide 19: Securing long-term access to fibre infrastructure
Securing long-term access to fibre infrastructure Landline access via utilities • Entered into new 20 year agreement with SFN, SIG and IWB, replacing previous wholesale agreements; SFN, SIG, IWB and EWZ with fibre population coverage of 22% 1) • CHF 56m upfront investment (Capex) for initial access
Slide 20: FTTH and own MBB expected to gain importance for landline access
FTTH and own MBB expected to gain importance for landline access Outlook: improve unit costs and grow customer base through best Customers per landline technology 1) price/performance 100% MBB • Expected increasing share of own mobile broadband (MBB) primarily in rural/suburban areas, as speeds will
Slide 21: Growth investments driving momentum
Growth investments driving momentum Capex (CHFm) European network quality leadership 2017 connect score: Sunrise vs. European peers 2) 315 283-323 21 44 56 213 46 47 31 37 34 Sunrise 205 147 Incl. 30m 164 from tower proceeds Accelerated customer net adds FY’16 FY’17 FY’18 Guidance mid-range 3) 109 8
Slide 22: Outlook
Outlook O. Swantee CEO Sunrise 22
Slide 23: 2018 outlook: 2017 achievements and 2018 objectives
2018 outlook 2017 achievements 2018 objectives • Repositioned Sunrise as the real quality challenger • Innovate and invest into network and service with strong propositions in convergence Operational quality, in order to become the most loved Telco • Mobile network leadership for 2nd consecutive in
Slide 24: Progressive dividends supported by improved leverage
Progressive dividends supported by improved leverage Improved leverage ratio Progressive dividends per share 4-6% growth p.a. +0.1 20% -0.8 11% 2.61 2.72 1.97 4.00 3.00 3.33 FY’15 FY’16 FY’17 FY’15 FY’16 FY’17 FY’18 FY’19 FY’20 Guidance • Improved leverage ratio to 1.97x • Long-term dividend policy
Slide 25: Financial outlook 2018
Financial outlook 2018 Stable revenue • Cont’d customer momentum in mobile postpaid, internet, and TV driven by Sunrise ONE, ‘connect’ test win, and B2B Guidance 2018 recovery; supporting service revenue development CHFm • Revenues of low-margin hardware and hubbing to remain Revenue 1,830 – 1,870 v
Slide 26: Q&A
oid y Q&A ~ Sunrise 26
Slide 27: Appendix
w a ho r= 3 7) Appendix 27
Slide 28: Income Statement
Income Statement P&L (CHFm) FY 2017 FY 2016 Q4 2017 Q4 2016 Mobile services 1'231 1'264 341 331 thereof mobile postpaid 768 768 194 192 thereof mobile prepaid 122 161 28 36 thereof hardware 256 253 95 79 Landline services 378 419 103 114 thereof landline voice 137 152 33 37 thereof hubbing 128 132 4
Slide 29: Cash Flow Statement
Cash Flow Statement Cash Flow (CHFm) FY 2017 FY 2016 Q4 2017 Q4 2016 EBITDA 592 599 148 155 Change in net working capital 32 (68) (11) (34) thereof handset receivable factoring impact - (42) - (40) Movement in pension and provisions (1) (5) (2) (2) Interest paid (39) (51) (11) (10) Corporate income
Slide 30: 2017 deleveraging driven by tower proceeds
2017 deleveraging driven by tower proceeds December 31, September 30, December 31, Net debt (CHFm) 2017 2017 2016 Senior Secured Notes issued February 2015 500 500 500 Term loan B2 910 910 1'360 Total cash-pay borrowings 1'410 1'410 1'860 Financial lease 9 11 17 Total debt 1'419 1'421 1'877 Cash & C
Slide 31: Illustration of fibre access models
Illustration of fibre access models Payments in a 5 years example (illustrative) 1) Upfront inv. model impacting GP and Capex • Upfront investment model with short-term Capex in ‘t’, followed by better recurring payment terms (COGS) benefiting gross profit • Upfront investment models tend to have lo
Slide 32: Sunrise with leading mobile network quality in Europe
Sunrise with leading mobile network quality in Europe Mobile network quality across EU countries in 2017 1) Max 1000 Pt. Sunrise; CH 973 Swisscom; CH 973 T-Mobile; NL 956 A1; AT 941 Vodafone; NL 931 KPN; NL 930 Telia Sonera; SE 924 Tele2; NL 919 H3G; AT 906 Vodafone; ES 902 Telekom; DE 901 TMA; AT 8
Slide 33: Revenue bridge FY'17
Revenue bridge FY’17 Revenue bridge (CHFm) FY’16 YoY FY’17 YoY FY’16 Revenue 1897 Δ hubbing -9 -4 • Hubbing: international trading business which is volatile by 0% nature Low margin Δ mobile HW -7 2 • Mobile HW: Revenue depends on handset innovations / launches leading to revenue volatility Service
Slide 34: IFRS 15 update
IFRS 15 update IFRS 15 accounting standard Impact at Sunrise 1) • Introduced as per Jan 2018, replacing • Revenue: no significant impact expected previous standards; impact on: • EBITDA 2018: a mid single digit upside • Revenue recognition: reallocation of is expected for 2018, which becomes service
Slide 35: Update on spectrum allocation
Update on spectrum allocation Spectrum in place (MHz) Incremental spectrum to be allocated (MHz) Competitors 150 300 Sunrise 130 120 110 80 70 60 100 40 45 91 40 60 40 50 45 30 15 10 20 20 0 700 MHz SDL 700 MHz 1400 MHz SDL 2600 MHz 3500 - 3800 800 MHz 900 MHz 1800 MHz 2100 MHz 2600 MHz 2600 MHz unp
Slide 36: Bridge adjusted to reported EBITDA
Bridge adjusted to reported EBITDA Q4’17 EBITDA bridge Adj. EBITDA Q4’17 148 • Share-based payment provisions for multi-year compensation plans Share based payment (1) expenses • Prior year related events mainly include Prior year events 2 adjustments of provisions/accruals based on Non-recurring /
Slide 37: MTR change impacts revenue, but is largely neutral on gross profit
MTR change impacts revenue, but is largely neutral on gross profit Total revenue (CHFm) 2) 1.7% MTR adj: +4.3% • Mobile Termination Rates 1) change as per 509 501 1 January 2017 negatively impacts revenue, 21 (13) but is largely neutral on gross profit level – as announced on 20 Oct 2016 Q4’16 MTR U
Slide 38: Thank you
Thank you Sunrise
Slide 39: Contact information
Contact information Investor contact Uwe Schiller Stephan Gick uwe.schiller@sunrise.net stephan.gick@sunrise.net investor.relations@sunrise.net +41 58 777 96 86 39
Slide 40: Disclaimer
Disclaimer This document and any materials distributed in connection herewith (including any oral statements) (together, the “Presentation”) do not constitute or form a part of, and should not be construed as, an offer for sale or subscription of or solicitation of any offer to purchase or subscribe
Sunrise Communications Group — FY2017 Earnings Presentation on 6ix