Swisscom Ag · SIX:SCMN
Swisscom — Q3 2019 Earnings Presentation
41 slides from Swisscom's earnings presentation, Oct 31, 2019
Slide 1: Q3 2019 results
Q3 2019 results Analyst and investor presentation 31 October 2019
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: Q3 in a nutshell
Q3 in a nutshell Solid commercial execution and financially on track to achieve FY guidance New inOne mobile in vogue Swisscom one of the Successful 890k subs (Q3 with +320k) since launch world’s 1st provider issue of (25 Feb) driving FM share further up to offer CHF 125mn bond (coupon 0%, 5G abroad
Slide 4: Market performance
Market performance Operationally satisfying with positive momentum within challenging market environment Swisscom Switzerland (RGUs in k) Fastweb (RGUs in k) Broadband TV Broadband 53% 36% (only Retail) 16% 2'027 25 2'610 1'540 11 -0.3pp 11 +1.5pp 32 29 28 YoY 9 9 9 YoY 25 stable 3 2 3 3 6 17 18 YoY
Slide 5: Financial performance
Financial performance EBITDA with stable underlying performance and on track to achieve FY target Key figures in CHF mn Reconciliation of 9m EBITDA and OpFCF proxy in CHF mn Q1/Q1 Q2/Q2 Q3/Q3 Reported figures (YoY change) Q3 19 9m 19 EBITDA 9m 18 3'231 Reconciliation leases +52 +47 +51 +150 Net reve
Slide 6: Swisscom with a bouquet of tailored activities in 2019
Swisscom with a bouquet of tailored activities in 2019 The balance (between value and volume ) matters. Promotions key driver of current market dynamics • Push inOne mobile go and cross-selling • Focus on customer base management to stimulate FMC growth and cement low churn rates to achieve upsellin
Slide 7: Solid postpaid momentum in B2C with increasing FM penetration
Solid postpaid momentum in B2C with increasing FM penetration Positive RGU and stable churn development. FMC discounts and shift of RGU mix weighs on ARPU Wireless net adds in k Penetration ratios as per 30.9.19 Postpaid Postpaid value (+12pp YoY) (+4pp YoY) +122 60.2% 41.2% +36 +50 +19 inOne mobile
Slide 8: Respectable B2C results in fixed with lower BB churns and constant ARPU
Respectable B2C results in fixed with lower BB churns and constant ARPU Mixed RGU trends in fixed: voice line cancellations decreasing, BB again positive and TV strong Wireline net adds in k Penetration ratios as per 30.9.19 Broadband TV Voice (+12pp YoY) (+3pp YoY) +21 +11 +4 65.2% 43.4% -2 -27 Q3
Slide 9: B2B with continuous pressure in connectivity and lighter ICT progress
B2B with continuous pressure in connectivity and lighter ICT progress Unchanged B2B environment and revenue trends Strong proposition … to manage … and top-line with top ingredients … key (market) challenges … contributions Service revenue • Trusted brand • Structural effects from All IP 698 (-11%)
Slide 10: Operational excellence: on track!
Operational excellence: on track! Continuous optimisation of cost base and delivering on targets an ongoing key priority Decreasing indirect cost Benefits (in CHF mn) Focus • Service requests • Less is more 107 ~ 100 ~ 100 • Portfolio streamlining • # 418'000 down YOY • Leaner processes • Customer f
Slide 11: Financial performance of Swisscom Switzerland
Financial performance of Swisscom Switzerland Cost savings mostly compensate top-line pressure. OpFCF proxy primarily impacted by spectrum CAPEX Net revenue in CHF mn (YoY changes) EBITDA in CHF mn (YoY changes) OpFCF proxy in CHF mn 6’367 Net revenue 2'745 EBITDA 2) -3.3% -1.5% Q3 2019 YoY change 1
Slide 12: Fastweb: Update on 5G co-investment partnership with WindTre
Fastweb: Update on 5G co-investment partnership with WindTre Strategic agreement in full implementation mode with first key steps accomplished Project roadmap and milestones 25 JUN JUL NOV Q1 Q2 2021 2019 2019 2019 2020 2020 Fastweb MNO NRA Regulatory authorisation authorisation clearance Mobile Who
Slide 13: Consumer performance
Consumer performance Focus on UBB and FM convergence with strong results despite tough market environment Fixed Mobile FM convergence as per 30.9.19 Broadband subs in k (YoY change) Mobile subs in k (YoY change) FMC penetration over fixed customer base 2’600 2’610 • Steady YoY CB 1’742 (+4%) 1'629 (
Slide 14: B2B performance
B2B performance Enterprise growth driven by Public Sector, Wholesale core services accelerating growth Enterprise Wholesale Revenues in EUR mn (YoY) Revenues in EUR mn1 (YoY) 627 138 Both on Q3 and 9m: (-20%) (+12%) • PA segment: double- 211 digit growth for the 7th 47 35 (-55%) Non-core services (+
Slide 15: Financial performance
Financial performance Confirming FY target of 5% EBITDAaL growth, significant OpFCF proxy growth Net revenue in EUR mn (YoY) EBITDA in EUR mn (YoY) OpFCF proxy in EUR mn (YoY) YoY change 1’584 (+5%) Q3 2019 529 EBITDA 1) 138 (+7%) (-35) Wholesale EBITDAaL 3) 181 (+8) 535 (+6%) 627 190 24 (+11) Lease
Slide 16: Revenue breakdown by segments
Revenue breakdown by segments Top-line evolution (with Switzerland down and Italy up) unchanged and in line with expectations Q1 Q2 Q3 +20 +18+25 +25 +19+34 -7 -13 +4 +2 +2 in CHF mn -30 -48 -54 -36 -21 -22 -34 -29 -67 -94 -168 +78 (-1.9%) -233 -85 +63 (-2.7%) -132 +8 -30 -70 -65 Swisscom Switzerlan
Slide 17: OPEX of Swisscom Switzerland
OPEX of Swisscom Switzerland Operational excellence initiatives with expected impacts lowering OPEX on a recurring basis Q1 Q2 Q3 +3 +11 +17 +24 +5 -21 +0 -9 -35 -22 -25 -14 -13 -24 -74 -65 in CHF mn -43 -63 +46 +14 -174 (-4.6%) -127 -61 -46 3’796 -67 direct costs -107 indirect costs 3’622 1 2 3 4 5
Slide 18: EBITDA breakdown by segments
EBITDA breakdown by segments Cost saving initiatives partly compensate top-line erosion in Switzerland. Fastweb up YOY Q1 Q2 Q3 +39 +48 +15 +21 +11+14+13 in CHF mn -18 -16 -31 -27 -29 -29 -4 -10 +1 +129 +38 +5 (+0.0%) (+4.0%) +108 -65 -22 +150 -85 Swisscom Switzerland -42 3’231 3’381 (Q1: -6, Q2: -2
Slide 19: Net income
Net income Net income almost on previous year level in CHF mn tax rate EPS 16.3% 9M 2019 22.84 3’360 -1'649 -182 1’529 -44 -24 -51 +1 -230 1'181 +2 1'183 EBITDA EBIT Net Net Tax expenses Depreciation Depreciation income income right of use reported companies Minorities Affiliated SC Share- financial
Slide 20: Capital expenditures
Capital expenditures Network continuously improving for customer experience +13.1% IT systems, All-IP, Wireless network: CP equipment, 18% and other: 21% 1'833 1'621 501 Other* Fastweb** 495 1'128 335 CHF mn Spectrum 196 Switzerland Fixed network, copper access, 1'102 Swisscom backbone & 1'128 Switz
Slide 21: Free cash flow
Free cash flow Cost for new spectrum licenses impacts 9M free cash flow. Without CAPEX spectrum FCF up by +CHF 179mn YoY in CHF mn 3’360 -1’637 -196 9M 2019 -206 -52 +42 -54 -347 -12 1'321 898 Δ +129 -16 -196 -206 -289 +296 -5 +34 -34 -19 -17 3’231 -1’621 0 0 9M 2018 -348 +47 -88 -313 +7 1’610 915 E
Slide 22: Swisscom's maturity profile as per 30.09.2019
Swisscom's maturity profile as per 30.09.2019 * Further improvement of financing costs • Refinancing of CHF 125mn for 25 1'567 years with a coupon of 0% • Average interest rate of debt portfolio further reduced to 0.9% • Debt portfolio actively managed and 817 743 with a duration of 5.3 years 663 54
Slide 23: Guidance FY 2019
Guidance FY 2019 CAPEX guidance including spectrum costs of CHF 196mn, guidance on track Swisscom Group in bn without Fastweb Fastweb 1) Swisscom Group Revenue CHF ~9.0 EUR >2.1 CHF ~11.4 EBITDA 2) CHF <3.6 EUR >0.7 CHF >4.3 CAPEX (spectrum incl. extra cost of CHF 196mn for in Switzerland) CHF ~1.8
Slide 24: Questions & Answers
Questions & Answers 24
Slide 25: Appendix
Appendix 25
Slide 26: Key financials
Key financials Reported and underlying revenue and EBITDA in CHF mn 2018 2019 Change Q/Q Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Revenue, reported 2’885 2’920 2’884 3’025 2’860 2'803 2'793 -25 -117 -91 Currency effect 18 23 24 +18 +23 +24 Revenue, underlying change -7 -94 -67 EBITDA, reported 1’058 1’08
Slide 27: P&L statement with IFRS 16 reconciliation
P&L statement with IFRS 16 reconciliation Quarterly IAS 17 and IFRS 16 considerations Q1 18 Q1 19 Q2 18 Q2 19 Q3 18 Q3 19 9M 18 9M 19 reported IAS 17 reported IAS 17 reported IAS 17 reported IAS 17 reported IAS 17 reported IAS 17 reported IAS 17 reported IAS 17 Net Revenue 2'885 2'860 2'920 2'803 2'
Slide 28: Swisscom Switzerland: Wireless ARPU and IFRS15 adjustments
Swisscom Switzerland Wireless ARPU and IFRS15 adjustments Swisscom Switzerland Swisscom Switzerland 53 50 54 50 54 50 52 48 50 47 49 46 49 46 39 36 39 37 39 37 38 36 38 35 38 35 38 36 Q1 18 Q2 Q3 Q4 Q1 19 Q2 Q3 Q1 18 Q2 Q3 Q4 Q1 19 Q2 Q3 Blended (reported) Blended (IFRS15) Postpaid (reported) Postpa
Slide 29: TV market in Switzerland
TV market in Switzerland Swisscom #1 with 36% market share (+10pp since YE 2014) Market subscriptions in k 4’455 4’489 4’410 4’396 4’316 4’261 1) 540 12 % 512 397 344 318 240 6% Satellite/others 107 3% 134 163 214 244 272 7% Sunrise 1) 59 1% Salt 1) 1256 28 % 1210 1180 1170 1152 26 % Cable operators
Slide 30: Retail Customers
Retail Customers Segment reporting as per 30.09.2019 Q3 2019 Q3/Q3 30.09.2019 YoY Net revenue in MCHF 1) 1'402 -5.1% 4'220 -4.6% Direct costs in MCHF -332 -5.7% -915 -8.8% Net revenue decrease driven by 2) lower service revenue. Indirect costs in MCHF -227 -9.6% -712 -6.4% Service revenue decreased
Slide 31: Retail Customers: Wireless performance
Retail Customers Wireless performance Subscriptions (in k) ARPU (in CHF) Service Revenue (in CHF mn) YoY 50 42 130% 40 41 6'000 -17 40 87% 5'126 5'114 5'109 140% 30 87% 84% 80% 5'000 78% 20 YoY 120% 30% 700 662 78% 10 619 622 -40 4'000 78% 100% 0 -20% 600 3'468 3'504 Q3 18 Q2 19 Q3 19 3'385 +119 ble
Slide 32: Retail Customers: Wireline performance
Retail Customers Wireline performance Subscriptions (in k) ARPU and ARPH (in CHF) Service Revenue (in CHF mn) 50 130% 41 41 41 6'000 110% YoY 40 110% 91%90% 701 YoY 5'187 -114 5'085 5'073 30 90% 91% 70% 642 637 93% 628 120% -14 5'000 105% 50% 601 42 20 65 36 1'510 30% 100% 1'529 1'540 +30 10 -29 10%
Slide 33: Retail Customers: Performance of fixed and FM bundles
Retail 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) YoY 6'154 +159 39% YoY 5'995 6'071 38% 6'300 35040% 40% 35% +21 813 837 834 5'300 30035% 38% 35% 36% 34% 30% 4'300 25030% 328 321 -15 336 25% 21
Slide 34: Enterprise Customers
Enterprise Customers Segment reporting as per 30.09.2019 Q3 2019 Q3/Q3 30.09.2019 YoY Net revenue in MCHF 1) 559 -4.6% 1'722 -4.2% Direct costs in MCHF -185 -0.5% -582 5.2% 2) Net revenue down -4.2%, Indirect costs in MCHF -197 1.5% -608 -3.2% decrease in service revenue Contribution margin 2 in MCH
Slide 35: Enterprise Customers: Subs and revenue performance
Enterprise Customers Subs and revenue performance Subscriptions (in k) Service Revenue (in CHF mn) Solutions Revenue (in CHF mn) 400 300 YoY 80% 1'482 YoY 350 79% 82% 70% +6 81% 248 251 -96 300 245 1'405 YoY 162 1'386 256 60% 250 14 233 227 -29 119 -56 14 50% 106 15 200 200 37 128 40% 32 31 -6 150 1
Slide 36: Wholesale
Wholesale Segment reporting as per 30.09.2019 Q3 2019 Q3/Q3 30.09.2019 YoY External revenue in MCHF 169 14.2% 489 12.7% Intersegment revenue in MCHF 116 11.5% 260 6.6% Net revenue in MCHF 285 13.1% 749 10.5% Direct costs in MCHF -139 7.8% -333 3.1% Revenue from external 1) Indirect costs in MCHF -5
Slide 37: IT, Network and Infrastructure
IT, Network and Infrastructure Segment reporting as per 30.09.2019 Q3 2019 Q3/Q3 30.09.2019 YoY Net revenue in MCHF 21 10.5% 65 10.2% Direct costs in MCHF -2 0.0% -8 0.0% Workforce expenses in MCHF -187 -5.6% -588 -5.2% Maintenance in MCHF -55 5.8% -147 6.5% IT expenses in MCHF -40 -14.9% -120 -12.4
Slide 38: Fastweb
Fastweb Segment reporting as per 30.09.2019 Q3 2019 Q3/Q3 30.09.2019 YoY Consumer revenue in MEUR 277 4.9% 819 4.3% Enterprise revenue in MEUR 211 11.1% 627 12.4% 1) Wholesale revenue in MEUR 47 -7.8% 138 -20.2% 1) Net revenue in MEUR 535 5.9% 1'584 4.5% OPEX in MEUR 2) -345 5.5% -1'055 3.4% Consume
Slide 39: Other
Other Segment reporting as per 30.09.2019 Q3 2019 Q3/Q3 30.09.2019 YoY External revenue in MCHF 117 -15.2% 383 -6.1% 1) Net revenue in MCHF 225 -2.2% 687 4.7% 2) Net revenue up by 4.7% YoY OPEX in MCHF -179 2.9% -543 6.9% driven by higher revenue at EBITDA in MCHF 46 -17.9% 144 -2.7% Cablex for cons
Slide 40: 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 40
Slide 41: 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