Swisscom Ag · SIX:SCMN
Swisscom — Q1 2016 Earnings Presentation
51 slides from Swisscom's earnings presentation, May 3, 2016
Slide 1: Q1 2016 results presentation
Q1 2016 results presentation Conference Call 3 May 2016
Slide 2: Agenda
Agenda 2 1 2 3 4 5 6 7 Intro- Q1 Priorities Q1 Q1 Q&A Backup duction summary 2016 operations financials Louis Schmid, IR Urs Schaeppi, CEO Mario Rossi, CFO All
Slide 3: Agenda
Agenda 3 1 2 3 4 5 6 7 Intro- Q1 Priorities Q1 Q1 Q&A Backup duction summary 2016 operations financials Urs Schaeppi, CEO
Slide 4: Q1 performance in a nutshell: financially solid
Q1 performance in a nutshell Financially solid 2 4 Q1 key figures YoY comments in CHF mn, reported > Group revenue almost stable (-8mn YoY) 2893 2885 3000 – Pleasant performance from Solutions Revenue 2500 60.0% +15mn and Fastweb +13mn – Lower contributions from Service Revenue -10mn 2000 36.3% 37.5
Slide 5: Q1 performance in a nutshell: operationally decent
Q1 performance in a nutshell Operationally decent 2 5 Q1 net adds and customer base YoY comments in k Swisscom RGU 28 > RGU base in Switzerland at 12.5 mn (+120k YoY) Wireless -10 12'532 – Broadband and TV with solid growth in Q1, -43 +120 Fixed voice nearly sufficient to compensate the -47 12'412 a
Slide 6: Agenda
Agenda 6 1 2 3 4 5 6 7 Intro- Q1 Priorities Q1 Q1 Q&A Backup duction summary 2016 operations financials Urs Schaeppi, CEO
Slide 7: Continued focus on our five priorities 2016
Continued focus on our five priorities 2016… … for a solid performance and sustainable shareholder return 3 7 a b c d e Maximise Operational Develop Growth Transformation core business excellence Fastweb focus > Defend market > Focus on cost, speed and > Provide best > Benefit through shares in diff
Slide 8: Maximise core business
Maximise core business Tailored top-quality products key to serve broad range of customer needs 3a 8 Switzerland with saturated markets Portfolio of Swisscom well positioned Swiss penetration 2005-2015 High Best value for the quality sensitive 125.0% 100.0% 75.0% Vivo 50.0% Value 25.0% Best price fo
Slide 9: Swisscom mobile portfolio further amended to stay ahead
Maximise core business Swisscom mobile portfolio further amended to stay ahead 3a 9 Continuing Value Strategy Maxi One Mini One > Natel infinity 2.0 SMS / MMS CH – additional value and new features Calls on-net CH embedded: more speed, more Calls off-net CH roaming, cloud storage and TV Air Surfing
Slide 10: Data roaming prices of Swisscom by far the most affordable
Maximise core business Data roaming prices of Swisscom by far the most affordable 3a 10 Swisscom cut prices for data roaming again … ... and increased price gaps to competitors further > infinity price plans enhanced with EU roaming during Q2 last year. At end of March 2016, 1.1 mn subscribers alrea
Slide 11: High innovation rate drives Swisscom's TV success
Maximise core business High innovation rate drives Swisscom’s TV success 3a 11 Our ambition: deliver the best TV experience The new generation: again a step forward 1 million launch New remote with launch TV Air launch HBB TV launch TV subs voice recognition Bluewin TV Teleclub IPTV leader Play ‘06
Slide 12: Cost reduction program on track to achieve CHF 50 mn savings
Operational Excellence Cost reduction program on track to achieve CHF 50 mn savings in 2016 3b 12 Since YE 15 underlying FTE base of Head- Organisa- Swisscom Switzerland reduced by tional New organisation for count One Field Services -105 FTEs. On track to achieve realigment targeted savings (CHF 50
Slide 13: Fastweb announced a new investment plan
Fastweb announced a new investment plan… … to cover 50% of population by 2020 with speed up to 200 Mbps 3c 13 Upgrading Expanding CAPEX > UBB coverage from > From 100 to 200 30% (c. 100 cities) > Approx. EUR 500mn Mbps across the to 50% (c. 500 cumulated from entire FTTS cities) by 2020 2017 to 2020
Slide 14: Compatible with future FTTH infrastructure availability
… and is compatible with future FTTH infrastructure availability … in case economic conditions are favourable 3c 14 Central Office Cabinet Households Primary network Secondary network FIBER COPPER FTTS (STEP 1) ∼1,2 km ∼250 mt FIBER Full re-use FTTH (STEP 2) of primary network ∼250 mt Fastweb FTTS n
Slide 15: The new plan of Fastweb has a compelling investment rationale
The new plan of Fastweb has a compelling investment rationale Proven by the outstanding track record achieved to date 3c 15 LLU vs. FTTS sales penetration FTTS customer base Italian UBB Connections (in k) Higher +26% +23% +23% +80% sales Growth 2015 Market Shares1 penetration Year 0 Y1 Y2 Y3 2014 20
Slide 16: Status of All IP transformation
Status of All IP transformation 3e 1st quarter 2016: +100k connections migrated to All IP 16 40% of transformation completed 1st phase: launch of migration in 2014 # connections in mn • Official All IP migration start 2nd phase: market driven migration in 2015 • Transformation of special application
Slide 17: Agenda
Agenda 17 1 2 3 4 5 6 7 Intro- Q1 Priorities Q1 Q1 Q&A Backup duction summary 2016 operations financials Urs Schaeppi, CEO
Slide 18: Q1 operations with ups and downs
Q1 operations with ups and downs … ... but revenue with CHF 2.9 bn stable YOY - both composition and total 4 18 A balanced ‘bouquet’ of business drivers Q1 revenue of CHF 2’885 mn (-0.3% YOY) in CHF mn 1665 Ups Downs Service Revenue -10 Solutions 277 > Growing TV business > Fixed voice line 16 also
Slide 19: Net adds with diverging trends in Switzerland
Net adds with diverging trends in Switzerland Bundling with growth across all products, wireless with -10k in Q1 2016 4 19 Net adds of Swisscom Switzerland RGUs Swisscom Switzerland 28 24 26 -11 in k (-0.1%) 7 14 15 21 10 in k 18 -10 12’543 12’532 in k 1'331 +36 1'367 Q1 15 Q2 15 Q3 15 FY 15 Q1 16 1
Slide 20: Wireless with weaker volume trends
Wireless with weaker volume trends Swisscom with a solid performance in a saturated market 4 20 Swiss mobile market Net adds of Swisscom Mobile Breakdown of Retail* postpaid subs -84 (-0.8%) 65% 66% 67% 68% 69% 11’180 11’096 28 9 15 33 24 26 2'166 2'167 2'024 2'465 2'424 2'414 7 31% 29% 27% 25% 24%
Slide 21: Steady volume dynamics in Fixed
Steady volume dynamics in Fixed Growth in Broadband, TV and bundles continues and compensates voice line losses 4 21 Wireline RGUs Swisscom Switzerland Market shares and TV penetration Bundle penetration of fixed RGUs in k 69% in k 6'000 62% 64% 70% 2'629 -47 67% 66% 59% 63% 55% 57% 2'582 54% 54% 60
Slide 22: Overview of ARPUs by 1P and bundles
Overview of ARPUs by 1P and bundles ARPU infinity impacted by EU roaming enhancement introduced last year 4 22 1P wireless ARPU 1P wireline ARPU Bundles ARPU (blended) 84 84 85 53 53 139 138 139 137 135 81 79 52 51 52 35 35 35 35 35 in CHF in CHF in CHF 37 38 39 37 36 15 14 13 13 13 Q1 15 Q2 15 Q3 1
Slide 23: Changes of service revenue Swisscom Switzerland
Changes of service revenue Swisscom Switzerland 1P wireless ARPU with highest impact on YOY changes 4 23 YOY service revenue effects by 1P and bundles YOY service revenue effects for Swisscom Switzerland RGU ARPU 1P wireless in CHF mn +32 +15 -2 +13 -4 -8 -22 -33 in CHF mn Q1 15 Q2 15 Q3 15 Q4 15 Q1
Slide 24: Fastweb performance 1Q 2016
Fastweb performance 1Q 2016 CB growth driven by UBB take up and churn reduction, positive revenue trend 4 24 Customer Base Wireline Net revenues per segment +5% 2.2 2.1 In EUR mn (mn) 1Q 2015 1Q 2016 > 40k net adds in 1Q representing a share on market net adds of 41% vs. 37% in 1Q last year > UBB pe
Slide 25: Strategic actions reflected in solid first quarter financial performance
Strategic actions reflected in solid first quarter financial performance … … paving the way for another year of robust growth 4 25 In EUR mn Net revenue EBITDA CAPEX FCF 1 +3% +9% +10 % +5% -8 mn 440 429 6 154 7 147 131 120 +3 % 434 422 11 3 WHOLESALE HUBBING 1Q 2015 1Q 2016 1Q 2015 1Q 2016 1Q 2015
Slide 26: Agenda
Agenda 26 1 2 3 4 5 6 7 Intro- Q1 Priorities Q1 Q1 Q&A Backup duction summary 2016 operations financials Mario Rossi, CFO
Slide 27: Revenue breakdown by segments
Revenue breakdown by segments Swisscom Switzerland with price pressure in wireless business, Fastweb growths 5 27 in CHF mn -2 -8 +0 +2 +5 +11 +3 (-0.1%) (-0.3%) -10 -13 -6 Swisscom Switzerland -16 2,893 2,891 2,885 1 2 3 4 5 Service Hardware Service Solutions Revenue & other Revenue & other Q1 2015
Slide 28: OPEX of Swisscom Switzerland
OPEX of Swisscom Switzerland Operational excellence initiatives with first impacts to lower OPEX Switzerland 5 28 in CHF mn -26 -21 +6 +5 (-1.5%) -3 (-1.9%) -12 -4 -13 -15 direct costs -11 indirect costs 1,400 1,374 1,379 1 2 3 4 Q1 2015 SAC/SRC Goods purch. Operational Repair & Other Q1 2016 Excep-
Slide 29: EBITDA breakdown by segments
EBITDA breakdown by segments Cost saving initiatives compensate decline in service revenue business 5 29 in CHF mn +30 +6 +4 +13 -8 +26 +30 -15 (+2.5%) (+2.9%) 1,051 Swisscom Switzerland +7 1,077 1,081 1 2 3 Q1 2015 Residential Enterprise Wholesale, Fastweb Other Q1 2016 Excep- Q1 2016 reported Cust
Slide 30: Net income
Net income Higher EBITDA as well as a better other financial result improves bottom-line 5 30 in CHF mn tax rate EPS 20.2% 7.05 Q1 2016 1,081 -546 535 -39 -40 0 -92 364 +1 365 EBITDA Net Net EBIT Other financial Depreciation income Tax expenses reported Net interest income companies SC Share- Minori
Slide 31: Capital expenditures
Capital expenditures CAPEX up by +8.6% YoY due to further UBB extension in Switzerland and Italy 5 31 in CHF mn +8.6% 596 CAPEX split – Swisscom Switzerland Q1 2016 549 Other 682 581 169 Wireless network, Fastweb* 12% 160 13% 11% IT systems, All-IP & other, 18% 25% 26% Fixed network & copper access,
Slide 32: Operating free cash flow
Operating free cash flow OpFCF down to CHF 184 million due to prepayment of the FeAC sanction 5 32 in CHF mn 1,081 -596 -327 Q1 2016 485 +11 +15 0 184 Δ +30 -47 -17 -142 -1 0 0 -160 1,051 -549 -185 Q1 2015 +12 +15 0 502 344 EBITDA CAPEX OpFCF Change in NWC* Proceeds from Change in pension Dividends
Slide 33: Successful CHF bond issuance & renewal of backstop facilities
Successful CHF bond issuance & renewal of backstop facilities Further diversification achieved 5 33 Terms and conditions of new CHF bond Maturity profile after bond settlement as per 31.03.2016 * Instrument rating: A2 by Moody‘s, A by S&P 2'000 Status: Senior unsecured debt 1'500 Amount: CHF 200 mil
Slide 34: Outlook: Guidance 2016 confirmed
Outlook: Guidance 2016 confirmed 5 Net revenue CHF >11.6 billion, EBITDA CHF ~4.2 billion, CAPEX CHF >2.3 billion 34 in CHF mn Upon meeting its 2016 guidance, Swisscom plans to propose an + 256 +50 >0 unchanged dividend of CHF ~150 22 per share to 4,354 >50 4,098 ~4,200 >2,300 the AGM in 2017 A comb
Slide 35: Agenda
Agenda 35 1 2 3 4 5 6 7 Intro- Q1 Priorities Q1 Q1 Q&A Backup duction summary 2016 operations financials All
Slide 36: Agenda
Agenda 36 1 2 3 4 5 6 7 Intro- Q1 Priorities Q1 Q1 Q&A Backup duction summary 2016 operations financials
Slide 37: RGU dynamics
RGU dynamics 7 37 Net adds of RGUs by products (in ‘000) +73 +66 +71 +66 +39 +37 +40 +54 -11 -11k RGUs in Q1 200 161 2016 mainly resulting from1P 150 123 129 116 117 108 wireless losses 91 98 100 75 52 52 44 52 44 48 52 52 50 36 16 14 16 4 0 1P losses 0 accelerating -4 -2 -50 -14 -28 -100 -64 -91 Ma
Slide 38: RGUs
RGUs 7 38 Swisscom Switzerland Access Lines/Subs/Products (000) YTD, (Change to 31.03.2015 in brackets) Number of Fixed Voice products TV & Access Broadband Mobile in Bundle Sum Δ 1P Single Play 127 (-73) 1,500 (-263) 503 (-147) 6,000 (-37) 1 8,130 (-520) (-6.0%) 2Play 280 (-22) 2 560 (-44) (-7.3%)
Slide 39: ARPU
ARPU 7 39 YTD, (Change to 31.03.2015 in brackets) 1,2) Number Weighted of average per Fixed Voice products underlying 1) 2) 3) TV & Access Broadband Mobile in Bundle product 1P Single Play 13 (-1) 53 (+2) 35 (-0) 36 (-1) 1 39 (-1) 2Play 100 (-7) 2 50 (-4) Bundles 3Play 134 (-9) 3 45 (-3) 4Play 197 (
Slide 40: Revenues (RGU x ARPU)
Revenues (RGU x ARPU) 7 40 Net revenues (CHF mn) YTD, (Change to 31.03.2015 in brackets) Fixed Voice TV & Access Broadband Mobile Sum Δ 1P Single Play 13 (-5) 237 (-34) 147 (-16) 1) 649 (-22) 1,046 (-77) (-6.9%) 2Play 82 (-13) 82 (+73) (+13.8%) Bundles 3Play 2) 341 (+63) 341 4Play 180 (+23) 180 Net
Slide 41: TV market Switzerland
TV market Switzerland 7 41 Market volumes (in k) Market digital + analogue Market 4,455 4,489 4,504 share: Market IPTV * 4,324 2) 4,161 11 % Satellite/Terrestrial 4‘033 3% Sunrise 1) 2) Analogue TV 27 % CATV / Net Integrators Market 1) share: 2,275 14 % UPC Cablecom 27 % 15 % UPC Cablecom Premium TV
Slide 42: Handsets & SAC/SRCs
Handsets & SAC/SRCs 7 42 sold handsets postpaid Smartphone share 96% 97% 88% 74% 76% 70% active user postpaid Handsets (in k) 491 484 332 346 369 337 283 303 356 SAC/SRC in CHF mn * (mobile and wireline products together) 22 Corporate 21 Segments 26 23 27 18 19 14 18 136 124 Residential 84 96 106 91
Slide 43: Reported vs. comparable revenue and EBITDA
Reported vs. comparable revenue and EBITDA 7 43 in CHF mn 2015 2016 Change Q1 Q2 Q3 Q4 Q1 Q1/Q1 Revenue, reported 2’893 2’865 2’893 3’027 2’885 -8 o/w M&A impact -8 -8 Currency effect 2 +2 Revenue, comparable change -2 EBITDA, reported change 1’051 1’082 966 999 1’081 +30 o/w Provision for FeAC sanc
Slide 44: Segment 'Residential'
Segment ‘Residential’ 7 44 31.03.2016 YoY 1) Net revenue nearly flat, Net revenue in MCHF 1'287 -0.3% higher service revenue Retail compensated by lower Direct costs in MCHF -295 -5.1% 2) hardware revenue. Indirect costs in MCHF -237 -5.2% Contribution margin 2 in MCHF 755 3.4% Service revenue incre
Slide 45: Segment 'Small & Medium Enterprises'
Segment ‘Small & Medium Enterprises’ 7 45 31.03.2016 YoY 1) Net revenue in MCHF 336 2.8% Net revenue up by 2.8%, Direct costs in MCHF -40 -4.8% higher revenue from 2) localsearch.ch partly Indirect costs in MCHF -72 5.9% compensated by lower Contribution margin 2 in MCHF 224 3.2% service revenue (CH
Slide 46: Segment 'Enterprise Customers'
Segment ‘Enterprise Customers’ 7 46 31.03.2016 YoY 1) Net revenue in MCHF 656 -0.2% Net revenue nearly flat, Direct costs in MCHF -143 1.4% decrease in service revenue Indirect costs in MCHF 2) -301 1.3% compensated by higher solutions revenue. Contribution margin 2 in MCHF 212 -3.2% Service revenue
Slide 47: Segment 'Wholesale'
Segment ‘Wholesale’ 7 47 31.03.2016 YoY Revenue from external customers in MCHF 139 -6.1% Intersegment revenue in MCHF 81 -1.2% Net revenue in MCHF 220 -4.3% Revenue from external customers down 6.1% due to Direct costs in MCHF -123 -0.8% lower tariffs on inbound Indirect costs in MCHF 1) -4 n.m. ro
Slide 48: Segment 'IT, Network and Innovation'
Segment ‘IT, Network and Innovation’ 7 48 31.03.2016 YoY Net revenue in MCHF 30 -11.8% Direct costs in MCHF - - The segment includes also revenues from rent of real Personnel expenses in MCHF -222 1.8% estate (down CHF -4 mn). Rent in MCHF -48 -2.0% Maintenance in MCHF -39 -7.1% Reduced maintenance
Slide 49: Segment 'Fastweb'
Segment ‘Fastweb’ 7 49 31.03.2016 YoY Consumer revenue in MEUR 223 3.2% Net revenues increased 2.6% Enterprise revenue in MEUR 171 1.8% YoY, all segments report an 1) increase in revenue. Wholesale revenue in MEUR 46 2.2% 1) Net revenue in MEUR 440 2.6% 2) OPEX in MEUR -309 0.0% Consumer revenue up
Slide 50: Segment 'Other'
Segment ‘Other’ 7 50 31.03.2016 YoY External revenue in MCHF 76 -15.6% 1) Net revenue in MCHF 129 -10.4% Net revenue down by 10.4% 2) YoY due to lower revenue OPEX in MCHF -107 -16.4% out of the sale of companies EBITDA in MCHF 22 37.5% partly compensated by higher revenue out of EBITDA margin in %
Slide 51: Cautionary statement
Cautionary statement regarding forward-looking statements 51 “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