Good noon, ladies and gentlemen, a warm welcome to Swisscom full-year results presentation. Let me quickly introduce to you today's speakers and agenda. On my right, your left, the first person in the row, Urs Schaeppi, our CEO. Urs, as you can see from the slide number two in your presentation, will start presenting with the highlights 2017 before discussing our proven strategy being best in class. Thereafter, he's giving an update on our Swiss infrastructure, presenting the performances and ambitions of our retail and B2B unit before addressing our new cost targets 2018 to 2020 to capture maximum benefits. Alberto Calcagno, the CEO of Fastweb, will then dive into Fastweb's commercial and financial results and its plans going forward. After that, Mario Rossi, our Chief Financial Officer, will discuss in detail our financials, including the outlook for 2018.
Before moving into the second part of today's analyst meeting, we have planned a short break of 10 to 20 minutes. Thereafter, we go into Q&A session of around one hour. May I therefore kindly ask you to keep all your questions until then, so the second part of the meeting. With that, I would like to open the conference and hand over to Urs for his part. Urs, the floor is yours.
Thank you very much for your interest in Swisscom. I would like to start with a short overview on a nutshell what was happening. Overall, we had a successful 2017. We delivered on our financials, and also we have strong and good operational figures also in the market side. On the cost side, we are on track. We attained the cost savings which we announced. Also we made our investments in the infrastructure. Overall, a good year where we delivered in a market which is becoming more and more competitive. Certainly, also a highlight is the market take-up of inOne. We have a very good response from our customer base. I will come later to it. We improved also our TV platform, the user interface personalization which we get very good feedbacks from the market.
In the SME market, we enlarged our product portfolio, more also in cloud-based ICT products so that we can enlarge our footprint in the SME market. On the enterprise segment, we improved our portfolio in the cloud space. We have today a really broad cloud portfolio for our enterprise customers. Fastweb had another successful year with strong financials, but also with strong figures in the market. Here on this slide, you see the net adds in Q4. Overall, a good performance. In Q4, you see we have an increase of 56,000 mobile customers, 41,000 postpaid. Also broadband, we have a small growth in Q4. TV also. Overall, a good performance on the mobile side and wireline side and stable market shares. The only point, but that's a dynamic we had already in the quarters before, is the fixed voice business.
This business is declining also with 81,000 in Q4. If you go deeper in these figures, this is not churn to our customer. Actually, these customers are leaving the market. It's fixed to mobile substitution. Fastweb, you see a growth on mobile and growth also in the broadband market. Alberto will come later to it more deeply. Financial overview, actually quite a boring result. It's flat. If you go deeper in it, you see that there are a lot of changes. We have a stable EBITDA, but you can see that we are losing in the fixed voice business CHF 80 million. Also outbound roaming, we are losing some revenues. We are able to compensate it also over cost and Fastweb so that at the end, the EBITDA of Swisscom is approximately stable. The net debt reduction is strong.
We reduced it by CHF 400 million. Mario will come deeper to it. From the free cash flow side, also a good result. The net profit overall, if you take out all the exceptionals, we are also flat. Good financial results overall, but with this dynamic in the wireline business and roaming. A strategic update on our industry. Actually we have two main points which are influencing our business. The one is the structural one. You know it better than I. We have a trend to a more converging business. Customers are looking for one-stop offers. We see this certainly in Switzerland, but also a trend in Italy, more converged offers. Certainly also some price pressure because competition is running about subscriber market share instead of revenue market shares. The sensitivity for quality is also going up from the customers.
That's clear because you are in a world which is always connected, and if you don't deliver the quality, you actually get a problem on the Net Promoter Score. On the other side, this is a huge chance for a quality-oriented provider like Swisscom because the customers are willing to pay a price premium on the quality side. Digitalization on the other side, that's the second main influencer of our industry, is a chance. We are able to increase our efficiency through digitalization, automation, artificial intelligence, all this topic. On the other side, we are able to improve our products, simplifying the products, personalization of the products. That can bring us additional revenues. In such a world where you are in, let's call it in a sandwich between the structural changes and the digitalization, much more important is the Where is it? Yeah.
Customer experience is becoming extremely important in such an environment, because of the price pressure, also the efficiency. On the market update, I think the important message on this slide is that the Swiss market remains a quality-oriented market. We have a lot of promotions in the Swiss market, at the end, the market remains a quality-oriented market, customers are willing to pay for quality. Convergence is becoming much more important, the regulatory framework in Switzerland, which is, let's say, an investment-friendly environment. There are some discussion in the parliament about the Telecommunication Act, I'm optimistic that we will not have a deterioration of the regulatory framework in Switzerland out of the perspective of Swisscom, this process will last for some years. I think we will not have a new regulatory framework before 2020.
In Italy, the market is certainly driven by an additional price dynamic in the second half of 2017. The main trigger was the market entry or will be the market entry of Iliad. It seems that the competition tries to prepare themselves for the market entry of Iliad. There was price dynamic in the Italian market in the second half. Alberto Calcagno will certainly come deeper to this dynamic. The strategic focus for Swisscom remains unchanged. You see it on this slide. I don't want to go deeper to it. Beside our customer experience, and that means quality on the network, that means quality on the product, but also in the customer service area, efficiency is becoming more important, and growth out of adjacent business opportunities is also becoming more important.
This, as an example, is cloud or is the solution business or the ICT business in the enterprise market. Best customer experience, I don't want to go really deep in it. Our strategy remains here unchanged. The strategy works, we are extending our ultra-broadband footprint. We are improving our 4G network. Today we have a coverage in Switzerland of 99% LTE coverage, 4G coverage, and 80% of the population coverage has a bandwidth up to 300 megabits per second. In 11 cities in Switzerland, we have speed on the mobile network of 1 gigabit per second. That shows actually that we are investing in a performing mobile network. It is astonishing what you can do already on the 4G network if you have the right spectrum, if you have the right network strategy.
We are able to get out up to 1 giga speed on the 4G network. Our technology leader strategy is also proven in the wireline market where we are the first player in the world which is testing now NG.fast. That's, let's say, a new development of G.fast which brings even additional speeds in a hybrid fiber network. On the mobile side, we certainly continue to increase our performance on the mobile network and on the product side, you see some examples what we have done. Operational excellence is becoming more important. That's nothing new. We have to work on different pillars. You see them, these three different pillars. All-IP is certainly also one element which will help us to decrease the cost. The main impact of All-IP will be in the year 2020 and afterwards. New growth opportunities, I don't want to go deeper in it.
You see what we are doing. We are planning quite a lot of new business. If we stay stable, what is our guidance overall? There is a lot of new business which we create to compensate the price erosion in our traditional business. Launching new products is a very important topic. On Fastweb, only very short. Another good year, increased customer base in broadband and in mobile, and a positive or a growth in revenue and EBITDA. Our strategy is to continue to develop Fastweb, and we are optimistic that we can increase our market share in the Italian market. We see it also on the order intake, just as an example in the B2B market, Fastweb has a strong increase of the order intake in the B2B market in the last year. Some information to our network strategy. On this slide, you see the highlights.
Some of these points I already mentioned. We are performing on all these different network tests, but I would like to say that's not the main ambition for Swisscom to only run for network tests. The most important thing for us is to have a good feedback from our customers. The major driver to shape our mobile infrastructure strategy is the NPS, Net Promoter Score. There, it is very important that you get a broad coverage over Switzerland. All these tests which we have, normally they don't really measure the coverage. They are just a partial of the market. But even in the partial of the market, we have good performance. You know it also better than I what were the results of these connect test we had on a scale from 1 to 1,973 points. That's the best ever measured value.
That should only show that we are committed to have a high-quality network in wireline. On cloud, it's interesting to mention that we are rated from neutral agency or market research companies as the leading cloud provider in Switzerland. That's important because we have also an established outsourcing business, and the future of the outsourcing business is cloud-based. You need a strong cloud-based portfolio to migrate the outsourcing business in the cloud, and you can even create additional business. These are our plans on extending the ultra-broadband footprint. You see that today we have a coverage of 55% with speeds above 80 megabits per second today. You see the mix, 27% of this 55 are speeds above 200 megabits and 28% above 80 megabit. On 2021, you see that there a lot of things will change. The Swiss map is becoming dark blue.
That shows that the majority of our customers will have speeds. 75% of the customers will have speeds above 200 megabit. In the cities, you have fiber to the home, you have more than 1 giga. Overall, 90% of the Swiss households will have a speed above 80 megabits. In 2020, we will have certainly a superior good network where we can compete in the full-fledged Switzerland also against cable operators. In a lot of areas, we will have a much more powerful network than the cable operators. On the wireless network side, I don't want to go deeply in it. Important is that we are preparing ourselves for the 5G launch. You need some space in advance to set up also the right architecture so that we are able to be early with 5G.
Also in this year, that's the next slide, we will have the auction of additional spectrum. You see what kind of spectrum will be in the auction. The big parts will be on 700 megahertz and 3.5 to 3.8 gigahertz. That will be the important frequencies, the auction will be in second half of 2018. We are confident that we get a fair share that we can operate a good 5G network. Virtualization is becoming important. Virtualization on the network side, but also on the IT side. There we have quite a big project to migrate our telecommunication networks in the telco cloud, but also the service, the internal service in the enterprise cloud. This will help us to be more agile, more flexible and faster and also a decrease in costs. Virtualization is an important topic for our technical department.
On All-IP migration, if you looked at, let's say, the amount of customer which we have migrate to All-IP at the end of 2017, you see that 90% of the customers are migrated now on IP. There is still 10% left. These are mainly voice-only customers which are in this 10%. We have to do now the last step in 2018 to migrate them all on All-IP. We will have first benefits of the All-IP migration in 2018. But the big part will come in 2020, and this is the figure of approximately CHF 100 million, which we always communicated. Some messages to the sunset of the 2G network. We announced it already several years ago that we planned to switch down our 2G network in 2020.
This needs a lot of time in advance because there are some business applications, as example, elevators, which are on the 2G network. We have to give the corporate time to find solutions on LTE or on 5G networks. 2020 will be the time to switch off the 2G network. Evolution of our CapEx. You certainly remarked that we have a lower CapEx than in 2016. We didn't reduce our ambition on the rollout of the networks. We were able to decrease CapEx on the project side. We have a bit less project CapEx because we are developing today in a more efficient way through DevOps approaches. We were able to decrease a bit our project CapEx. We have some lower CapEx in the backbone and transport area and some lower CapEx on the customer-driven side. This results in this minus CHF 100 million CapEx.
On wholesale Switzerland. We have an attractive portfolio on wholesale Switzerland. You see some customers of us which are using our wireline network. We are also the biggest and leading wholesale provider in Switzerland. That's nothing new. Regulatory framework. As I mentioned it, we will have this discussion in the parliament on the revision of the Telecommunication Act. There is one part which is important, really important for us, that's the access regulation. The parliament is discussing about technology neutrality on the access network. We are against this, we are also lobbying against this because it will actually reduce the CapEx investments in Switzerland. I think we have good chances that the success model of infrastructure competition, which we have in Switzerland, will remain.
I think we will have, also in the future, let's say for Swisscom, a good regulatory framework. This will take time. As I mentioned it before 2020, there will not be really changes. Now to the retail business. Some figures of the retail business are in a nutshell. You see that the figures in the retail market. Overall, a good market performance. Some pressure on the service revenue. If I compare this with, let's say, other countries or other incumbents, I think it's still satisfying. We have these structural changes. We have this substitution in the voice line area to mobile. We have the roaming pressure. Overall, our market share are stable in the retail business. Also ARPU are on a stable level.
I think that is a good performance if you are able to keep ARPU and market share stable in an environment which is more and more promotion-driven. On the financial side, we have an EBITDA decline of CHF 40 million. We compensate the part of the service revenue decline through lower costs. At the end, a slight decline of CHF 40 million on the EBITDA level. Overall, a good performance in financial performance in the retail business. One of the main or one of the most important thing in the retail business is actually to maximize our core business. What does this mean? That means that we have to keep our market share stable, that we have to try to increase our share of wallet, and that we have to protect our ARPU. How we do it?
We have a, let's say, a mix of a defense and attack strategy. In the value segment of Swisscom, we have this defense strategy, and there the idea is more for more. We bring more value in our products that we can keep the ARPU high, the churn low, and stabilize the market. That is primarily the brand of the Swisscom products. There we have a value strategy to have a high customer satisfaction, and we have a high customer satisfaction in this value segment. On the other side, and that is the attacker approach, more in the lower end of the market, we have an attacker strategy through second and third brands. This strategy works. It works. You can see in the figures. Coming to the importance of the market of convergence. Convergence is really knocking at the household doors.
We see a strong increase or a strong growth in this converging business bundling products. You see here on the chart some figures that we are able to increase the penetration of these quadruple play offers. inOne is certainly here the main product which drives this dynamic. Here you see where we are with inOne. The performance of inOne is positive. Overall, it is also according our expectation. You see the penetration of inOne. For mobile, it is at 30%, and for broadband, it is at 34%. We have 1.3 million customers which are inOne customers. We have, from a revenue-generating point of view, 2.7 million customers in this inOne offer. So it is a successful offer. We were also able to improve our market performance through inOne. Interesting is also that we are able to increase through inOne the Net Promoter Score.
Net Promoter Score is extremely important for the customer loyalty. You see in the old bundles which we had, these Vivo bundles, triple play offers, we had a Net Promoter Score of 27, and with inOne, we are at the Net Promoter Score of 32. 32 is a good Net Promoter Score in the telecommunication industry, and it is important because this has an impact on churn. We also see that customers which are on inOne have a lower churn. Therefore, if you make the whole calculation of inOne, we have a positive impact. ARPU development is certainly important to see. In the wireless segment of inOne, we see that we are able to have a slightly higher ARPU than before. We are able to upsell according our expectation or even a bit above our expectation, CHF 3.5 ARPU increase on mobile.
The wireline area, we are able to reduce the decline which we had in the beginning because of optimization. The revenue decline which we have in the last month is much smaller, we have a positive trend on the declining ARPU in the wireline business. Overall, good performance and according our expectation is the development of inOne. Some remarks to our TV platform. We have today a market share in TV of 33% increasing, still increasing market share. We are actually always in, let's say, release cycles on the way to further develop this platform. We made some improvements this year through UI, let's say, the usability, the personalization of the product, with a good response from our customers.
The main goal is to make it easier to our customer to make the product more personalized so that he find in the big world of content, the right content very fast according his demand. We have a content aggregator strategy which easy-to-use product. That's the main idea behind our TV strategy. On the content side, we have certainly the broadest content portfolio, there were some rumors that now if we lost the hockey rights, maybe you remember it. They were absolutely overpaid, if I now see the impact on our product portfolio or our churn rate, I would say, I don't think that our competitor have a business case on it. We had not a lot of churn through the sport rights, that shows once more that content alone is not the driver in this business.
The driver in this business is to have a full-fledged portfolio, a good TV platform in a bundle with content and a good experience. That makes the difference in this market and not a single sport rights. On the loyalty, we are working on different areas to increase the loyalty of our customer base. We don't have a churn problem. Our churn figures are low, but it's our intention to further decrease or increase the loyalty of the customers. This we do through several things, through smart home products. This give you a kind of differentiation. Sometimes these are small things, but customer likes it. Also, Wi-Fi routers are becoming extremely important. In a connected home, normally one of the big pressure points of customer is the Wi-Fi connection.
That's why we developed our own Wi-Fi box, we had a very good launch and very good feedbacks from our customers. Here some remarks to our multi-brand strategy. I explained it before that on the value segment, we are operating with the Swisscom brands and in the lower segments with second and third brands. The Swisscom brand is the high-value brand. Wingo is a brand for smart shoppers. It's a niche product, still a niche product. It's not our idea to push it hard. It's more, let's say, an element or a brand to react of aggressive price dynamics in the Swiss market. We have M-Budget, which has quite a good reach, which is in the upper discount segment. For the lower discount segment, we have The Simply Mobile or mobile brand.
We have quite a broad multi-brand portfolio so that we can really have also a fencing between these different brands. Smart ICT is important in the SME market. The market in the SME, there we see potential for us because today we are mainly in the telecommunication business. But through ICT, through cloud, there are opportunities to grow in the SME market and that's why we enlarged our SME product portfolio as you can see it on this chart. Good response and good take-up from this new SME product portfolio. This is important because the SME market is still, let's say, the market with the highest ARPU. It's a really attractive segment and we have here very good market shares. We have to differentiate ourselves to keep the market shares.
Multi-channel approach is becoming more important so customers, they don't only want to go to a call center or in a shop. Online interfaces are becoming more important and our ambition is to have really a seamless experience between these different channels. Just to give you some flavor how these channels are visited by our customers. We have inbound calls, let's say, in the call centers of 13 million. A bit more than 1 million calls per month in the call center. We have 5 million visits in the shops. That's a lot. Only in the shops we have-- and you know the population of Switzerland is 8 million. 5 million visits in our shops, that's important from the customer service side, but also from the image side. Then outbound calls, we have a lot of outbound marketing contacts, over 50 million.
A lot of them are also driven by marketing campaigns. But multi-channel is important. Digitalization will help us also here to decrease our costs and improve the Net Promoter Score. Some words to our B2B business. Actually, a good performance in the B2B business. We are able to even slightly increase our market share in mobile in the B2B market. We had win-backs. A good performance on mobile side. The mobile ARPU is slightly under pressure. We lost three CHF on the mobile ARPU and this is also strongly driven by roaming because all with these roaming dynamics we have some ARPU pressure in the B2B market. In the solution business, we are able to grow. We had a successful year in the segment banking. It's a vertical where we deliver solutions for the banking segment. We are a kind of outsourcer for Swiss banks.
We won important deals on the security side and cloud side. Order entry in the B2B business was very strong in 2017, that we overall have a good result in 2017. If I compare this with other incumbents, and it shows also the broad positioning of Swisscom in the B2B market. Solution business, I don't want to go deeper in it. Important is to mention that we had in October the first time more solution revenues than telecommunication revenues in the B2B market. That shows also the transformation which we have in our B2B business. Wireless connectivity. As I mentioned it before, we were able to increase our market share through win-backs. That's actually impressive if you see our market shares which we have in the B2B market and the attacks of some of our competitors. It's not the case that we only lose customers.
We have a lot of win-backs and that shows the performance of Swisscom. IoT is becoming also an opportunity for Swisscom and here the positioning of Swisscom is to be a platform provider for all these different IoT application providers so that we can scale on it. We have a good product portfolio for IoT and also the networks. We have a low-power network, but we have also the 4G network and in the future, the 5G network for IoT applications. Wireline connectivity business, I don't want to go really deep in it. Here we are also migrating customers in the IP world from the TDM world in the IP world. This migration is gaining track. We are not at 90% as in the retail market, we are in the region of 50%.
In the B2B market, if it begins to move, then it goes fast because you have the big project which are migrating to All-IP. We are on the way of software-defined networks also here, which will give us the, let's say, the chance to be more competitive on MPLS networks. Cloud services, I don't want to go deeper in it. We made a lot. We have a broad product portfolio for cloud solutions for Swiss corporates. Also security. Security is becoming more and more important. That's like a 7/24 race, because the attacks are becoming more and more sophisticated each day. You have to ramp up your whole security level. This you have to do internally, but this is also a business opportunity for Swisscom in the security segment because we can deliver security solution for our corporate customers.
New opportunities we see in the banking segment. Also through blockchain technologies. We have a small company which has a small spinoff for blockchain technologies. This technology you can use very broad, not only in the financial industry, but also everywhere where you need secure, trustful processes, you need blockchain technology. The ambition of Swisscom is to be one of such a blockchain platform factory. Digital solutions in the B2B market is also an important differentiator on one side, but on the other side, it's also a growth opportunity. You see that with digital solutions, we can actually address these four pillars on this chart, new business models, improve the customer experience, process efficiency. That's why we have today also a consultancy department in the B2B market, which works very well, which grows fast, where we actually do consulting business with our B2B customers.
This is normal. Consulting is normally a pre-sales for connectivity and cloud business. It's important to have such an element like consulting in the B2B market. Operational excellence, some very short remarks. These were our cost targets in 2017. We delivered what we announced. The savings in 2017 were in the region of CHF 75 million. We increased our ambition for cost reduction to CHF 100 million per year for the next three years. We have the plans how to do it. A lot of different actions on it, but we think that we are able to even increase our cost-saving targets. You see how we do it here. These are these different pillars to reduce the costs. Now I would like to hand over to Alberto to give us some inputs on Fastweb. Alberto.
Thank you, Urs, and also welcome from my side. Good afternoon, everybody. I would start with 2017. That has been a very strong and solid year. We have been performing significantly in every market, basically, in every segment, and also in our infrastructure project. If we start with that, I think that by far it's very clear, and also I think it will be even more clear in a couple of minutes because there will be a slide dedicated that we are the second ultra-broadband network in Italy by far. Also, for us, it's extremely important the quality positioning. There are a lot of, let's say, competitor that are focusing on price. We rather think that quality will be the key to succeed and lead the market in the next years, especially also in convergence.
Third, Fastweb has a strong history in fiber, but also is building very strong capabilities in mobile, specifically in the 5G. We are very proud that we have been awarded with one of the 5G trials, and this is not guaranteed because there are also other big competitors in Italy. The fact that we have been chosen among all the others shows our seriousness in investing in innovation. Four, very important also, I think this is a kind of disruptive move in Italian market. We launched our Un-carrier strategy. Be inspired by T-Mobile in the U.S. I think that we share the same philosophy that quality is extremely important, but also transparency in tariffs, transparency in the relationship with customers, and this is something that definitely will pay off in Italy in the future. Basically, in the corporate market, also another year of success.
Basically, probably it's the 18th, let's say, year in a row that we are developing with a very strong growth the corporate market. Also here in 2017 specifically, we have been hitting one very good ratio because we have increased our order book by 30% year-on-year, which is something that you don't find as a common, let's say, result normally. Also in the wholesale market, we are definitely by far the second operator. It's a fragmented market. There are new player coming in this market, but definitely, I think that Fastweb has a very strong and solid position also in this specific segment. Now, if we drill down a little bit, financially, I think, again, very strong here, a consequence of very strong results in the market. I would say that revenues have done very strong performances.
EBITDA double-digit growth, even if we consider the pure industrial, so excluding litigation, we have performed a double-digit growth. Actually, this is the 18th quarter in a row that the company is exploiting steady growth, I don't think you can find something like that, at least in Italy, but maybe also in Europe. Also, free cash flow, it's a very strong performance, almost plus 40% if compared with last year. As I said, in the overall market, I think we perform very well. Plus 4% is just the broadband. If we see in a second, the ultra-broadband performance is much higher, and it's basically where we focus. We are not really interested in just the broadband. We want to be the leader in the ultra-broadband and the target that we achieved in 2017.
For mobile, this is a confirmation that our strategy to become also a very strong player in mobile has been very well accepted by customers. We increase our performance by 60%. Also, we see it's not just an absolute outstanding performance, but also vis-à-vis the relative performance and competitor is a very strong one. In terms of profitability and growth, I think that also this is a consistent story with our company. As you can see, the EBITDA growth is something that is consistently shown and exploited, and there is quite a difference if compared with competitors. We had not the possibility to add also 2017 because some of the competitors will, let's say, report later on. I think that the outlook will confirm the trend that you see in this page. Here is just a confirmation of our full infrastructure strategy.
Fiber is just a piece, we have also a wireless ambition through Wi-Fi, through mobile, and also in the cloud business through our data center. We are a one-stop shop for the infrastructure for our clients. Here, we start to dig a little bit, and here, basically, it stands very clear that we are the second operator in Italy when it comes to UBB and NGN footprint. I think that overall, we have been nicely upgrading our network this year and also in 2018. We'll be focusing in upgrading, and dedicating our effort to the fiber to the home network. I think that also in terms of performance, roughly, we are able to increase our fiber to the home network by 1 million home passed ready to serve each year.
I think this is quite a difference if compared with what others are doing in the market, like Open Fiber. After two years, basically, they have built 500 ready-to-serve home, which means that they have a different pace, and we are much more, let's say, quicker in developing and most importantly, connecting customers to our network. This is, again, a little bit a drill down on the overall network. As I said, for 2017 and 2018, it will be extremely important to build and upgrade our fiber to the home network in the 30 main cities in Italy, where we think that we can make definitely a difference vis-à-vis the competitors. We are upgrading in other areas of Italy our network. The idea here is to give to the customers the best technology which is possible.
Having said that, definitely, we will focus it on our ultra-broadband network, where we have a much broader addressable market in terms of giga, for instance, than anybody else in Italy. In terms overall, also in the strategy, we will continue to accelerate on the penetration of ultra-broadband because we really see a very good momentum, a very good take-up. Our ultra-broadband market share, the increase is largely positive, we will see in a second, and I think we can further exploit the leadership on ultra-broadband that we have on the market. The good thing is that we are building also a strong competitive advantage also in the wireless, because we really believe in the 5G opportunities. As we said many times, 5G relies on three important, let's say, ingredients.
Fiber, because at the end of the day, the huge traffic needs to be conveyed through a fiber network, and we have a huge amount of fiber ducts that can be exploited. You need FTTS cabinets that can host and power the small cell rollout. Here we have 22,000 customers that are already ready to serve any type of small cell development. Most importantly, we have already a lot of spectrum because we have 40 MHz at 3.5, which is one of the best spectrum that you can think for the 5G development. As I anticipated, we have been granted with the 5G trials. We have other 100 MHz that we can use in the next four years in Bari and Matera. For us, the strategy is very clear.
Today, we have already strong operations in mobile and also the results in the market are confirming that story, and we will discuss it in a second. Definitely, the trials will build and are meant to build a very strong knowledge and expertise in 5G. As a matter of fact, we are not developing our expertise just in the cities where we have been awarded by the government of the 5G trials, but we have already, and we are the only operator that reached an agreement with the municipality of Rome. I think also that other municipality in the future, in the short future, will come because it's our interest to test this technology and also train our muscle in the most extended addressable market possible. In terms of performance, consumer, as I said, has been another year of growth.
Clearly, there is a difference between simple broadband subscribers and ultra-broadband subscribers. Our goal is definitely the ultra-broadband because, and we will see also in the NPS performance, we think that the way we can differentiate Fastweb in the market and the way we can really intercept the customer needs is to focus on ultra-broadband. As a matter of fact, you see also the result, we were able to grow almost 30% our customer base. We reached now 45% ultra-broadband penetration over our customer base, and this is a trend that will be further accelerated also in the future. Quality is definitely confirmed, and actually what the customers think about our services in terms of quality is confirmed by the NPS.
It's an NPS that is growing, and the most important thing, astonishing thing, is the difference and the gap that our competitors are exploiting in their relationship with their customer base, with their clients. As you can see, there is quite a huge difference. We are basically the only steady, positive NPS operator in Italy, and this is simply a consequence of our infrastructure, a consequence of our focus in upgrading our network. Netflix is just an external reference because sometimes operator tends to be auto-referential, and in this case, we can use also external reference. We are definitely, since the beginning, since when Netflix came to Italy, the best operator.
Also in terms of customers, we underline this typical aspect that sometimes we forgot to underline, but we also believe definitely in the media and in the broadband convergence, and we are exploiting this opportunity through the partnership of Sky. As a matter of fact, we have 500,000 pay TV customers through our partnership, which is extremely important also for churn dynamics and also for loyalty of our customers. Sky is definitely a traditional and historical partnership, and also in the future, we will be adding other partnership. One will be the one with Eni, where we will bundle broadband and energy together, but others also will come in the future. In terms of mobile, this is where the company has done one of the most, let's say, solid and strong performances. We have been growing 60%.
I think that what is astonishing, it's not just the absolute growth per se. Also the relative one. These are the data at the end of 2017, but actually, when there will be also the data available for all operator for Q4, the outlook will be confirmed. Basically, we are the only player that is significantly growing in the market, where all the others, excluding some other MVNO, but there are more than one included in this role. All the big three players are losing in the market. Also here, interesting enough, we are the company with the highest NPS. Here, it's a combination certainly not only of technology or technological performance, but also it's the Un-carrier strategy that is paying off.
NPS is not only an expression of technological solidity, but also I think a good sign of a very transparent and strong performance with the customer base. Here, I think we've been able to double the performance if compared with the last year, also because of our new strategy in the mobile. The new strategy on the mobile relies basically on a very simple thing, to be completely transparent, fair and simple vis-à-vis our mobile customer base. This could, let's say look something normal, but if you look at what's happening in the mobile Italian market, actually this is not normal at all. Let's say in a world where the above the line mobile prices in Italy are decreasing significantly, the ARPU of the market of the big players are increasing. This is something that it's not really logically consequent.
The reason is that there are a lot of hidden charges, and basically, customers are subscribing for an offer of, let's say EUR 10 a month, but at the end of the day, the bill is much higher and sometimes significantly higher. As Fastweb, we want to play, let's say a kind of champion for the customers. So we are abolishing, and actually we have never used these hidden charges since we launched, really the mobile operations in May. Actually every quarter we are delivering a new feature that goes in the direction of transparency and fairness versus our competitor. Every quarter also in 2018, we will build on this trustful relationship with our customer. Just a quick look on the B2B leadership. This is a story of a very strong success.
We could have had also other 10 years or 14 years before, this is a story of steady, constantly growth in the private and in the public. The reason of success relies again on the NPS. Here on the NPS, we have almost 60%, which is the highest NPS that you can find for a corporate. Apple has a 60% or used to have 60% NPS, these type of companies. This where Fastweb is making the difference. This is why our order book growth by 30%. Today, Fastweb has a unique proposition because in the public administration sector, for instance, we are the only one that has won, basically all the big framework contract. I think we represent in front of public administration, but in customer in general, really one strong and one-stop-shop partner for our clients.
The last slide, basically, it is shaping our ambition. I think also for you it's important not just to have next quarter or next three, four quarters, let's say outlook, but also something more. We think that in the broadband we will be able to boost significantly our operation by leveraging definitely on the ultra-broadband adoption and clearly to leverage with the new partnership. I'll say that the vast majority will come from the ultra-broadband adoption. In mobile, this is something that we already anticipated in the past, but definitely we see that Fastweb has a strong momentum in the market. We are rightly positioned also in the future, there will be room for growth independently by what will happen in the short term in the market. For corporate, this is an easy story. In a sense, it's another chapter of growth.
We will continue to delivering, to increasing by increasing our share of wallet of our customer base through also the new services, the new cloud services, the overall value-added services, where we are building also a competitive advantage versus all the other company and competitor. Lastly, wholesale. I think that wholesale has been traditionally for us, a very strong market. Traditionally we have been always delivering project and infrastructure project. We will continue also in the future. We do think that in the future there will be very nice and important opportunities. Clearly, the BTS fiber connection are hanging fruit for us, we will do our best to get it. Thank you, I leave the floor now to Mario. Thanks.
Thanks, Alberto. I'm happy to give you some details on the financials. You saw it this morning. Overall, I think we delivered our financials in line with the expectations. A few words on the reconciliation. We had in both years 2016 and 2017, some one-offs. Litigation at Fastweb. You see that, CHF 102 million in 2017, CHF 60 million in 2016. Restructuring charges, CHF 61 million this year. We benefited from a strong EUR exchange rate of CHF 17 million. Maybe the level of restructuring charges might be a bit surprising, that reflects the impact of the increased cost reduction targets we announced. Details on the CHF 61 million, CHF 45 million will be on the segment Swisscom Switzerland and CHF 16 million in the segment [inaudible]. They have included CHF 10 million for the restructuring of the Billag. This facturation company, which we won't have anymore in 2019.
The underlying EBITDA was flat, -0.5% or CHF 23 million. Fastweb increased EBITDA by Industrial by close to 10%, we had a decrease in Switzerland of 2.3% or CHF 88 million. Some details on revenue. The revenue decline in Switzerland for the full year was CHF 200 million or 2.1%. On retail, the main drivers for the decline of CHF 150 million was, as was mentioned, loss of voice access line, CHF 70 million, their revenue is also impact on EBITDA. Roaming impact on revenue of CHF 24 million. Discount for conversions, CHF 38 million and less activation fees of CHF 20 million. We had a slight acceleration in Q4 of conversion discounts, CHF 5 million more Q4 than Q3. Also slight acceleration of the access losses, CHF 4 million more in Q4 compared to Q3.
Enterprise customers, the overall service revenue went down by around CHF 40 million, more or less 50% on fixed, 50% on mobile. We saw there a slight acceleration in Q4 due to the All-IP migration in fixed. Solution business increased by CHF 24 million. I think we had a quite strong performance in the second half, mainly in the banking area. As I mentioned, Fastweb revenue up by 8%. Despite the price decrease or the price competition and all the promotions we had in the market because all operator already anticipated the market entrance of Iliad. I think it's clear for you, we benefited from the four weeks billing in the second half. We had also an overall strong performance in wholesale and in the B2B segment. A few words on the OpEx.
On direct costs, direct cost in this acquisition and retention costs in Q4 were CHF 20 million below prior year. We had less retention cases, nothing alarming. We had more SIM-only customers in Q4 2017 compared to 2016. The outpayments went down for the full year by CHF 40 million. There are two effects. We had lower MTR tariffs which have no impact on EBITDA, CHF 58 million. These effects were compensated in the second half by higher outpayments for roaming because in our inOne subscriptions, roaming is included for our customers in Europe. 80% of all data traffic is not billed anymore, therefore we have higher outpayments, that has a negative impact on EBITDA. On the indirect cost, our CEO mentioned it, we delivered our targets. Net savings of CHF 62 million. Maybe a few words on Q4.
There we had a net increase of CHF 15 million after we were able to reduce for three consecutive quarters the costs. We had some seasonal effects in Q4. We had higher marketing and communication expenses of CHF 15 million in the residential segment. You saw that also we had a better market performance in Q4. We had some extra pension costs of CHF 15 million for early retirement. We had a huge amount of early retirement in Q3, we had some project costs in enterprise of CHF 4 million in Q4. If you take these three effects out, I would say we would have a normal quarter with a reduction of about CHF 15 million-CHF 20 million of indirect costs. The EBITDA breakdown by segments. Retail customers, EBITDA suffered a bit by 3.8% or CHF 139 million, not CHF 39 million as it was mentioned before.
We have, let's say, three main elements. Service revenue went down by CHF 154 million. We have higher roaming outpayments, what I mentioned before, CHF 27 million, but we were able to reduce indirect costs by CHF 42 million. Of course, was not possible to fully compensate these effects on service revenue and roaming. I mentioned it, in Q4 we had this acceleration of discount and line loss amounting to CHF 9 million and the higher marketing expenses of CHF 15 million. If you compare the decline of CHF 67 million in Q4 to the CHF 36 million in Q3, if you take these effects out, it is more or less a stable development. On enterprise segment, I think it was a strong performance in 2017. EBITDA going down by CHF 16 million or 2% on the full year.
The service revenue decline of CHF 43 million was nearly compensated with cost reduction and additional margin for the solution business, which was always the target to contribute additional margin in the solution business to compensate the structural losses in the service revenue. I mentioned it at Fastweb, despite the price pressure, promotions, et cetera in the market, we have a steady growth of EBITDA. I think that is also thanks that we serve all three segments, retail market, B2B segment, and wholesale, and there we clearly benefit on our investments in the fiber infrastructure. Maybe back to the underlying structural changes in Swisscom Switzerland. That is for both segments, mass market and enterprise. You see fixed voice line overall 80 million. I expect that to come down in 2018 to 60 million. Outbound roaming CHF 66 million, that will come down next year to CHF 20 million-CHF 30 million, this effect.
Discounts on conversions impact of CHF 37 million, that will increase because inOne will be penetrated within the customer base also in 2018. We expect that CHF 70 million-CHF 80 million. Indirect cost savings, this target has been increased by CHF 40 million to CHF 100 million. We expect for the next year some B2B price pressure, et cetera, of about CHF 40 million negative. We will come back to that again on the guidance. That shows also the importance of the cost management and the growth of the B2B solution business. These structural changes need to be compensated by these two effects. There is not much to say below net income. We had last year extraordinary income in financial income. We had the benefit from the sale of MetroWeb that amounted to CHF 41 million in 2016. We do not have this anymore this year. That is the reason why net income goes slightly down.
On accounting, IFRS 15, as all tell, because we have a certain impact from these new accounting rules. We have a positive impact on the net equity of CHF 400 million. On the EBITDA 2018, we expect a negative impact of CHF 50 million. You will see that impact in the retail segments of Fastweb and Swisscom. There is no cash flow impact. Coming to the ARPU, we will provide ARPU in line with old IFRS rules and new IFRS rules. The reason is because we steer the day-to-day business for simplicity reason with the existing old methodology. We will provide you also in order to be comparable with other telcos, both ARPUs. On CapEx, Urs gave you the split up of our CapEx.
As was mentioned, the savings were done on project CapEx and lower unitary costs in the FTTS, FTTH rollout because we used our new approach to roll out the so-called total contractor model and that helped us to reduce the cost per unit by 10%-15%. We did not cut our rollout targets. On cash flow, we had an excellent cash in in Q4 2017. As you know we paid in 2016 the sanction of CHF 186 million and if we compare the two years we have a double effect which boosts the free cash flow from CHF 1.1 billion in 2016 to CHF 2.2 billion in 2017. One extraordinary effect in 2016 and second extremely high cash in in Q4 2017. How we use this cash flow? We have quite low interest payments. I will come back to that later.
Paid taxes of close to CHF 300 million and after the dividend payment it allowed us to reduce the net debt by around CHF 400 million which brings us to a leverage ratio to 1.7. Last year we stood at 1.8. This free cash flow of course covers the dividend well. We pay out about 2/3 of the running free cash flow this year. On financing, we were able to refinance during this period of low interest rates quite an amount of all our outstanding bonds. We have still one big one outstanding in 2018. It's a 10-year-old bond with a coupon of 3.25%, we will have some savings there. We need to refinance in 2018 approximately CHF 1 billion to CHF 1.1 billion. We will come to the Euro market, also come to the Swiss bond market.
You see we are well-protected against potential interest hikes, 84% of our debt portfolio is fixed. If you would see interest hikes wouldn't mean a problem for our debt portfolio and our interest cash outs. Nothing new on the dividend front, stable and predictable. We'll propose the AGM of this year a dividend of CHF 22 as anticipated. That brings me to the guidance, which targets again a dividend of CHF 22. If we will meet the guidance, of course we will keep this stable dividend. The overall guidance is revenue at around CHF 11.6 billion, EBITDA around CHF 4.2 billion, CapEx slightly below CHF 2.4 billion. Say without the impact of IFRS 15, negative CHF 50 million on EBITDA can say it's a fairly flattish development, a fairly flattish guidance. I can give you some explanations to the guidance.
Swisscom without Fastweb will be at around CHF 9.2 billion on revenue. Again, loss of fixed voice lines, CHF 60 million; roaming, CHF 20 million to CHF 30 million; converged discount, around CHF 80 million negative impact; B2B price pressure and All-IP effects, approximately CHF 40 million. Total negative impact of CHF 200 million on revenue, and we will see the impact of cost reduction of CHF 100 million. That means in Switzerland a declining revenue of around CHF 100 million. Fastweb in our guidance, the guidance implies an exchange rate of 1.16 for the EUR. The average rate 2016 was 1.11. We will see again a revenue and EBITDA growth. You see there the numbers excluding litigations, revenue north of EUR 2.0 billion and an EBITDA of around EUR 700 million. CapEx, we will see in Switzerland a decrease because of CapEx efficiency and more or less stable CapEx in Italy at Fastweb.
Of course, these numbers do not include any CapEx for spectrum. With that, I think I hand over to Louis.
Great. Thank you. Thank you Urs, Alberto, and Mario for the presentations. Let us stop the first part of the meeting right now here and have a short break. Outside the room, there will be coffee and cakes available. I suggest as we are a little bit ahead of time to restart a little bit earlier. I would suggest 3:15 P.M. we restart, the presentation starts 3:15 P.M. sharp. Thank you.
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Just in my phonics, huh? Huh? The Italian is on time. All right. Before opening the Q&A session, let me quickly also welcome the two new people on stage, Dirk Wierzbitzki, our Head of Products and Marketing, and Urs Lehner, Head of Enterprise Customers. The difficult questions will be on my left side. They will support the management during the Q&A session. One additional remark, which is key, there are two people around. Please ask for the microphone because there are also people on the webcast. They would like to follow our discussion. An additional remark, please let us know your name and bank representing, so we also know to whom we are talking to. Now let us start. Who can I give the floor for the first question? Jakob?
Hi. Jakob Bluestone from Credit Suisse. Maybe just if we can follow up a little bit on some of the guidance assumptions you mentioned. If you could maybe elaborate a little bit on some of the things you outlined, in terms of sort of changes, financial drags and tailwinds for next year. I think you mentioned you expect the fixed voice line drag to moderate from, I think it was CHF 80 million to CHF 60 million. Why is that? I don't think your line loss is sort of necessarily coming down. And then also, if you could maybe just talk through what was it that actually drove the change in your cost-cutting targets? The increase from CHF 60 million to CHF 100 million. And then just sort of link to that as well. Urs, I think you mentioned that CapEx in Switzerland was going from about CHF 1.65 down to about CHF 1.6.
Again, what's driving that reduction in the run rate of CapEx going forward? Thank you.
Shall I start with the fixed voice lines?
In 2016, we lost 80,000 per quarter, and that had the impact of CHF 80 million. For next year, we think that we will lose around 60,000 per quarter. I know this year, in 2016, we were not 100% correct with our prediction, but we are confident that the 60,000 per quarter are okay if you look at the customer base, if you look also at the voice-only customers, which over time disappear. Today we feel confident with this CHF 60 million. On the cost side, why came we to the conclusion to increase the cost target? Just when we looked at these structural changes to secure, let's say, a healthy EBITDA level in Switzerland, and also secure the ability to further invest in our infrastructure. We reviewed our cost reduction plans.
Looked at the different processes as we did in the past, looked at the IT organization, which system we can turn off, et cetera. It was, let's say, a reassessment of the management of the cost base, which you have to do every second, third year. I think it's normal that we gave us a five years target, and after two years we came to the conclusion to push a bit harder in the organization.
On the CapEx side, as I explained it, there are three elements. The one is that the cost of rollout, we are able to decrease them slightly because of another setup with a partner in the rollout, a more efficient rollout process. The second is a bit less investment in the core network. That's a bit, let's say, a phasing topic. Then, the other is lower customer-driven CapEx. No reduction of the ambition of the rollout of our networks. Okay, next question. Fred?
Hi. Thank you. It's Fred Boulan from Bank of America. Quick question on your ultra-broadband targets for 2021. If you can elaborate a little bit the technological mix you have embedded in those assumptions. In particular, are you doing a bit more fiber to the home? Then within your fiber to the street, or to building, if you can elaborate a bit more the mix, the cost associated, that would be very useful. Thank you.
Good. The mix is actually approximately 30% of the footprint is fiber to the home. In the next year, we will not build a lot on fiber to the home. The majority of the rollout will be on fiber to the street, and the cost for a fiber to the street rollout are much lower than fiber to the home. It's less than 50%. That's the main dynamic, and important for us is that we are going fast in a broad coverage. That's much more important than speed, because with fiber to the street, we are able to get normally above 100 to 500 megabits, and that's enough for the next years. Then you can upgrade fiber to the street long-term, and you could also go from fiber to the street to fiber to the home, or GPON technologies.
There are a lot of ways to go then. Okay. Next question, please. Luigi.
Thank you. It's Luigi Minerva from HSBC. Firstly, on the regulatory debate in Switzerland, you did say you were confident, especially on the wholesale access terms for fiber, not to go towards cost orientation. Maybe can you tell us a bit more what makes you confident that the debate will go in the right direction? A second question is on Italy. Clearly, your pace is faster than Open Fiber, and so I'm wondering whether you would still be interested in any circumstance to cooperate with them. Also, just to get your views on a comment from a former minister this morning, Gasparri, saying that it makes sense in Italy to have all the networks in one company and that parallel deployment are non-rational. Again, are you interested, and what's your view on that statement? Thank you.
Good. I will take the question to the Telecommunication Act and then Alberto for Fastweb. What makes me confident on the access regulation, that the actual Telecommunication Act is a success model. We have a very high investment ratio. We have the highest investment ratio per-
Capita
per capita in Switzerland, or let's say Switzerland in the world. The parliament is very aware of it, for them it is important that we have a fast rollout of a new generation network in Switzerland. I think this is a very strong argument, this investment dynamic. The second point is that we have a well-functioning competition in Switzerland. That's also even the parliament say this, that we have a good functioning competition. I think there are a lot of arguments against such a regulation, we will see the debate.
Okay.
Okay. Alberto.
Luigi, I think that our strategy is very clear. We want to have control over quality. We want to have control over infrastructure. We believe the difference is going to be not just based on advertising and on price. The difference and the differentiating factor will be, for our point of view, mainly on services. Definitely we will continue to focus on our rollout. Open Fiber is doing their project. I think that in terms of, let's say, speed of the rollout, it's pretty clear that we are on another order of magnitude in terms of rolling out network, and it will take some time for them to fulfill their ambition to get 10 million, almost 10 million household passed, ready to serve in the next years. For commenting the politicians, I think that this is a long story.
A lot of people are saying that we should have just one fixed network. I think that this kind of comment are quite instrumental because I could say also, why nobody has ever mentioned something like that for mobile? Why all mobile operators are developing their own mobile technology every time, three, four, five times, depending on the operators, but on the fixed, there is always this necessity to find synergies. I believe that at the end of the day, everybody should follow their strategy. From our point of view, we will continue. It makes sense to have different network. I think that to have different infrastructure network helps competition, helps the innovation, helps the quality of the services, and it's very healthy for the country.
Okay. Next question, please.
Hi, Simon Coles from Barclays. I had a question on Enterprise. I think last year you said that margins on your cloud business are four times lower than traditional telco, but you said that's upfront cost because you have to have a lot more customer service ready for the new solutions, but then it improves. Are we seeing that improve already? Because I think you said margins were improving in Enterprise. How can we expect that to trend going forwards? Then in mobile or competition in general in Switzerland, it looked like SAC and marketing came down in the retail division this year. I was just wondering, has competition eased or is digitalization allowing you to be more efficient on the second marketing side? Thanks.
Thank you.
Good. On the cloud side, on the margin side of the cloud, that's clear. The margins for the cloud business is lower than for the telecommunication business. It's a bit too early where the long-term margins will be because we are in an early phase of this business. We gain now attractive customers and we will gain scale, and then the margins will becoming better. The margins are certainly better, or they must be better than in a system integration business because it's infrastructure-based business to cloud. That was a bit my message. The second one on Mario?
SAC and also acquisition and retention costs, I think the decline on a year-on-year basis was not dramatic. We had a decline in Q4 of CHF 20 million. As I mentioned it, less retention cases, but that's because of seasonality. We had more SIM-only customers. If I look at the overall number of acquisition and retention cases, it's more or less stable. The average costs per new customer are also overall stable. I think we have the pure SIM-only customers, they go to Sunrise. We have the main part of our customer base still wants to have a subsidized handset. We offer SIM-only. We have a part of the customer base on SIM-only, but the main part of our customers wants to have a subsidized handset.
We don't see a dramatic change, and I don't know whether you want to add something regarding eSIM or something like that, Dirk, what to expect there?
eSIM?
eSIM in the future.
eSIM we look more as an opportunity to provide more SIMs per customer, not necessarily as any disruptor in change to our disadvantage. If anything, then to our advantage because it lowers down certain logistical costs that we would have. In the meantime, I think mobile network operators have managed to make it a process that is favorable to our business model. Be it for the core business model also most particularly as we enter into multi-device types of businesses where we want to make a push in 2018 into.
Okay. Thank you. Is it good, Simon?
Yes, good.
Okay, next question here. David?
Thank you. David Lopez from New Street. My first question is on Switzerland. What do you expect for service revenue trends in Switzerland in 2018? Are you expecting the trends to improve a bit or to deteriorate compared to 2017? Second question about Italy. You had a decent EBITDA growth of 9% this quarter, but given the price rise, why this was not better? Also the broadband net adds were down 50% year-on-year. What's the main driver behind that? Last one on IFRS 15. You mentioned a drag of CHF 50 million on EBITDA this year. I was just not sure I understand well, but given that should imply a revenue boost, I would expect a positive impact on EBITDA from IFRS 15. Can we already assume for 2019, if this is only temporary, that the EBITDA guidance will have a CHF 50 million positive impact?
Okay, Mario will take the IFRS question. Alberto for Fastweb, and I will say something on this service revenue development. The main drivers of service revenue in 2018, Mario explained during the guidance. We will have an impact from roaming. It will be in the region of CHF 20 million on the service revenue side. This voice losses, which is slightly lower than in the last year, in the region of CHF 60 million, and then the converged discount in the region of CHF 80 million. Some pressure on B2B, and as compensation, lower costs, which leads to a lower EBITDA, as we mentioned it in the guidance in Switzerland. That's approximately the story. We will have an erosion in service revenue in 2018.
Okay. Alberto?
On IFRS-
Oh, sorry.
No, go ahead.
On IFRS 15, you have this negative impact because we did not restate 2017. If you would have formally restated 2017, you would have seen a flat development. In 2019, if we have, let's say, the same composition of the business, the effect will be neutral. You won't see any more positive impact. Assuming same new customers, same retained customers, same channels, because you have to account differently for commissions and revenue from handset, it will be flat in 2019 compared to 2018. We don't have a reason that we'll have other assumption for 2019.
Okay. I take the question first on the net adds performance. The answer is quality. We wanted to focus on ultra-broadband. We really think that this is the right strategy. Our competitor are targeting to maximize the number of customers. If you dig down into this assumption, you will see that a lot of these customer are connected through technologies that are not really performing. We have a completely different strategy. We prefer to upgrade our network and to migrate our customer base to best technologies. For us, clearly, we want to do as many customer as possible, but we want to do ultra-broadband. In fact, if you check, we progress in our ultra-broadband and actually performance, we accelerate the number of customers acquisition. The gap, if compared with last year, is just on broadband, but non-performing technologies.
It's just focusing on delivering the best technology possible. Second, I have to say that on EBITDA margin, I would say that overall, a 10% industrial growth for the fourth year in a row is not bad. I think that during the quarter, there might be some fluctuation. Remember that we are a combination of different business. We have retail revenues, we have enterprise revenues. Within enterprise, we have connectivity, value-added service revenues, we have wholesale revenues. The overall marginality depends very much about of the mix of the revenues. I think that overall, you should expect always a strong growth year after year.
Thank you.
Carola?
Yes, good afternoon, Carola Bardelli from Deutsche Bank. A question on Italy. I was wondering what market size is implied on the Italian broadband market share that you are targeting 20%-25%. What size for the Italian broadband market do you see there? Same question on mobile, when you are targeting 3 to 5 percentage points of market share, what assumptions are you making for Iliad? The very last one on Italy, if we could have an idea of how much you spent on advertising in 2017, that should be a good indicator for how much Iliad should spend in 2018 for their launch. Moving to Switzerland, if I can, I was interested to understand something about the MVNO contract with Salt that, if I'm not mistaken, is moved from-
Sorry
sorry, with UPC, that is moved from Salt to Swisscom. What is the order of magnitude in terms of a benefit for you? What do you expect that they will do in terms of behavior on the market when they improve the quality of the network? Lastly, maybe there is a read across on the potential consolidation on the Swiss market, on UPC potential buyer rather than seller or whatever. Thank you.
Okay, I start with Italy, then I'll say that roughly you can assume around CHF 3 million for the wireline market. Whilst on the mobile, as we always said, we stay between, let's say CHF 3-CHF 4.5, CHF 3 million-CHF 5 million, something like that. CHF 3.5 million to CHF 4 million, let's say, sorry. Regarding the Iliad impact, this is a big question. I do think that they will have an impact in Italy. Definitely, it will be difficult that they will repeat the performance that they have exploited in France because I would say that the three conditions that were important for their success in France. The fact that they have a huge wireline customer base to upsell, a very good, let's say, network to exploit, I mean the Orange one, the fact that the prices were very high. Those are three conditions that they will not find in Italy.
Having said so, I think that there is an opportunity to disrupt the market in Italy, and I think they will have an impact, but clearly not the one that they have in mind at the beginning of the story when they got the remedies. In terms of advertising, I think that every company is doing its own strategy. I think that we relatively invest much lower than if compared with the three big players. I think that Iliad will have to invest more than what we invested because the brand of Fastweb is already very strong. I think that they will need to invest in the setup, I would say, of the brand, the setup of the position in the setup of the company. Definitely, I think that they will invest much more.
I don't know how much they will invest, but I think it's reasonable to say in amount of CHF 50 million, something like that, but it's something that you should ask them.
Good. On the MVNO contracts with UPC, it's certainly one of the bigger MVNO contracts in Switzerland, but we don't disclose the figures. The contract will be in place in 2019. For 2018, there will be no impact. On the influence on competition, because UPC has now access to our network, we think that this will be handleable, this impact. At the end, quadruple play is becoming more important, certainly for a company like UPC. To have a standalone strategy on mobile for UPC, in my view, will not be an easy one. You have to touch the whole portfolio on quadruple play, and there we have a strong proposition. We are gaining market share there. I don't think that we will suffer. Consolidation, that's another topic. Actually, I'm not the consolidator in Switzerland. I can't be the consolidator.
For Swisscom, we are well-positioned to handle different kind of consolidation in Switzerland. I think we have the size, we have the skills to do it, and more important for the competitiveness is actually what is the behavior of the consolidator at the end. I think that's the most important thing. If it is a rational player, I think this would be good for the Swiss market. At the end, I think a consolidator must behave rational because he has an established customer base. We see what is happening if you take down the prices too fast in Switzerland. We have an example from Salt. Didn't win market share, but lost some ARPU.
Okay. Thank you, Urs. Perhaps on the third row. Lower. Third row, yeah.
Hi, thanks very much. It's Nick Preserne from Jefferies. When you announced your inOne launch last year, you talked about 1 million mobile SIMs in Swisscom homes that you weren't currently serving. We're now sort of 10 months post the launch of inOne, I guess I'm just wondering how successful you've been in cross-selling into this mobile opportunity. Do you still see it as an opportunity, and how many of the adds you've been adding are actually new to Swisscom? Secondly, in terms of peak cost cutting, once we get to 2020, do you think we'll be past or through the peak cost-cutting phase? It sounds like there are some fairly material opportunities from the likes of the 2G switch-off and virtualization, digitalization, that might start to have a larger impact from 2020 onwards.
Just on that, how big do you think the opportunity is from turning off the 2G network? Thanks.
Good. On inOne, we are certainly able to increase the penetration in the household on mobile. This doesn't change in one day, this needs time. If you look to our net adds, which we have in the value segment, you see that we had a good momentum on mobile. Actually, it's working. We will not be able to get 1 million in just two or three months. It needs time, and we will not have all of them. The penetration is increasing. On costs, you're right. Virtualization, artificial intelligence, and all such things can help a telecom operator to decrease costs long term. We have to attain now our goals of this 100 million. I think we have enough to do.
2G switch-off, that's not the cost case. That's just the reason to free up space on the frequencies. That's not the cost case at all.
You will not gain a lot.
A few CHF millions. That's it.
Right.
Okay. Thank you, George.
Hi, it is George Just from Citi. I have got three questions, please. The first one is on the spectrum. When do we get details on the auction terms? One of your competitors has gone out publicly saying they want caps on price and caps on amount of spectrum that one player can acquire. Do you mind just giving us your views on this? What are you asking for, and when we find out effectively what the framework will be? My second question is on Italy and some information perhaps on the wholesale and business opportunities. Obviously, now with the Tiscali acquisition, you have the sub-selling opportunity in the public administration. If you can talk us through the dynamics there and what you are seeing, how long before the impact comes through the numbers? On wholesale, you have a significant market share increase embedded.
If you can talk us through what is driving that.
Sure.
Then maybe a clarification on the guidance. In the slide, you show that you expect the revenues outside of Fastweb to decline from CHF 9.5 billion roughly to CHF 9.2 billion, then EBITDA to decline around CHF 100 million, with CHF 100 million of cost savings. I was just wondering the other, is it reduction in SAC? Is it other drivers in cost that make the delta? Thanks.
Okay. I take the question to the spectrum, then Mario to the guidance. On spectrum, actually, we are lobbying for an auction. I think the likelihood is very high that we will have an auction. We are lobbying in the direction of caps that everybody can get a fair amount of spectrum, and an auction which will place in this year. That is a bit the main goals we have. It is a bit too early to say what will be the result, but I think it goes in the direction what I said.
When do we find out?
Now we will have the last consolidation. I would say maybe in April we have clarity on the criteria.
On the guidance, we explained this CHF 200 million on service revenue and the rest of fluctuations in trading revenues, MTR, stuff like that, is no margin. Please take the CHF 200 million service revenues, deducted by the CHF 100 million cost savings, giving CHF 100 million EBITDA loss or reduction.
Okay.
Italy wholesale.
Yeah. Wholesale and also he mentioned public administration. There are two different things. Public administration, we are talking about corporate enterprise type of revenues. I think there we can exploit a very strong competitive advantage because, yes, it's through the Tiscali acquisition, we got one contract related to the public administration, but actually we want many other contract. Today, effectively we cover each single services that the public administration could look for, like voice, connectivity, security, infrastructure, maintenance, and also equipment, and basically we want all of them. I think we are definitely in terms of, let's say, offer, we have the broader offer if compared with all our competitor. Remember that also in this sector, I think Telecom Italia is out from the all main, let's say, framework contract.
It's a very strong and huge opportunity for us, and also say that the other competitor are not as focused as we are in this. I would say that overall, you look at the market share in the public sector, but also in the private sector, shows that we can make really a difference between the expectation and the needs of the customers if compared with all the others. You could, let's say, apply similar growth or similar increase of market share also in the next year. It's just really a very simple model for us. In terms of wholesale, I think that as in the past, remember that we are operating the wholesale market since the beginning, so it's 18 years that we are doing wholesale type of services.
If I look in the future, I think that definitely the BTS dark fiber backhauling will be one very good opportunities. There are one new player that is coming into Italy, the French one, that they will need definitely once they will build their network to have dark fiber backhauling. Actually, we start to get the first order from them. I think it shows that we are much more flexible than a competitor as most importantly, quick and reliable in delivering. Also, I would say that beyond the BTS, also in the merger of Wind and Three, they will have need of clearly, of dark fiber backhauling. They have an ambition to increase the quality of their network, so definitely they will need dark fiber backhauling, and the moment is now because you will need to be well prepared for the traffic increase in the next years.
I think the good opportunity will be in 2018 and 2019. Another opportunity will be on the access network because as we have seen before, we have by far the largest attacker UBB network, and this is something that we can make it available also for competitor, and it's an opportunity that we want to exploit in the future as well.
Thank you. Next question. Marcus, Oh, okay. Usman.
Great. Thank you. It's Usman from Berenberg. I've just got three, four questions, please. The first one is just on B2B. You said that you're expecting around a CHF 40 million impact or a headwind this year. Is that in mobile or in fixed? Then just related to that, I see that you've got around CHF 300 million of business connectivity revenues. Are you seeing any impact on those from pushing software-defined wide area networks? Is there a deflation going on in that revenue stream? Or are you managing to hold the revenue stream flat? So that was on the business segment. Then on convergence, on slide 30, there's some encouraging trends shown where you're being able to upsell in wireless and in wireline, the headwind from convergence isn't getting any worse.
When I look at that, I look at the guidance, which implies that the convergent headwind is going to go from CHF 30 million to CHF 70 million to CHF 80 million, I don't know whether you're being conservative or what's driving that. My final question was just again, on when I look at the KPIs, the convergent household, the big additions in the convergent households are actually coming from 2P, rather than 4P, which has declining trends. Again, just any color on that would be interesting. Thanks.
Okay. I will take the B2B question and Mario then on the rebate or discount on convergence. This CHF 40 million price pressure is coming out of connectivity on, let's say, broadband networks and mobile. It's the sum of both. We will have some pressure on mobile, but we will also have some pressure in the wireline business. The software-defined network approach, that's more an opportunity because we will be able to deliver in a more efficient way, networks.
Okay.
Okay. Maybe I make a few comments around inOne and convergence and how all that plays out, yeah. On page 30, as Urs had shown, initially, we got some optimization in the wireline side of inOne Home, which is due to the fact of how the portfolio was constructed. It was basically like a pick and choose. Initially, there were certain customers that they're trying to seek for a deal. Over time, we got that under control, and we actually recommended the customers not actually to save on price, but to increase in value. Yeah. By now, let's say our operations in terms of sales and hotlines and so on and so forth are quite well trained to give the customers the right guidance as they migrate from whatever they have into the inOne portfolio.
On the wireless side, the way the portfolio is constructed is that the eligibility for the convergence advantage only kicks in when you are on the inOne mobile S tariff. On the XS tariff, yeah. It basically means that CHF 20 uplift on the monthly subscription, and only then you're actually eligible for the discount. Yeah. With respect then to the outlook for 2018, I think, the financial impact that we see, obviously, is mostly a net impact that you see on many more customers are entering into inOne and therefore eligible to the discount advantage. At the same time, we also make quite some big efforts around customer base and value management. There's quite a few customers that we think we can develop, let's say, from lower tier tariffs of the inOne scheme into higher tier tariffs.
There's a lot of potential for instance, the broadband side, where people right now could easily get 100 or more megabits but only are sourcing 40 megabits. Similarly on TV, they are on an entry TV package and can be developed into higher tier TV packages. Yeah. To the point around, is it a 2P play or a 4P? Obviously, it's increasingly less a 4P play. On new attaches, we see roughly a sort of customers take a voice landline. Which by the way, is also one of the biggest effects as customers leave, roughly two-thirds take a landline with them and not signing up anywhere else. Or if they sign up anywhere else, they're mostly into schemes where the landline is provided for free. That gives an RGU, but there's no value behind the RGU that is presented by competitors that take up these customers.
Those customers that come in then only to a certain take a landline. I think that is a effect that is playing in there. On TV, we have an opt-out rate of roughly 25-ish% or so. Yeah. These are the effects. In a way, that is due to the flexibility of the portfolio, yes, it is true that for certain customers, convergence means a 2P, which is broadband and mobile. The vast majority actually takes also the TV with us. Yeah. The vast majority. Then, to a smaller proportion, it's a 4P play.
Thank you.
You see it also in the backup on page 82, you see that the number of bundles we have, or the number of RGUs we have in the 3P and in the 4P, both were growing and both are the main part of our RGUs. It's still 3P and 4P growing.
All right. Thank you, Mario. Next question. Baptiste?
Yes. Matthias Follé, Swiss Capital. One quick follow-up on this move to convergence. You make it easier for the customer to opt out. In that context, why are you assuming that the fixed voice lines will decline? Or actually, the decline will become less the coming year?
Well, you see, there's one correlation here, which is not a big correlation, but there is a correlation, for instance, towards All-IP. Yeah. As Urs explained, we are like to 90% through with it. It is not so that customers come just out of the blue and ring up and say, "By the way, please cancel my voice line." Actually, that is almost not happening. It's only 10% of the cases where that happens. Mostly it is when, for one way or the other, you have an interaction with a customer. With All-IP, you do have an interaction with a customer or when a customer cancels. As I said, many of the voice cancellations come with when people leave. They don't leave then for voice, they leave all together. As you know, we have churn.
What looks as static there are still on broadband 200,000 people that leave, and they take with them to 70% of voice line and another 220,000 come, so it gives you the 20K net adds, but they only then take to 30%. That spread alone is vast. That's the majority of what is happening in terms of voice line losses. Yeah. It is that change in terms of customers leave and as customers come. Then there's an element that is associated with All-IP, and then on business-to-business, there's a prism element where actually we are stating that we lose voice lines, but we are not losing the customer, which has to do with the way you count as a customer. In the future, we're counting the customer as a site, irrespectively how many channels as a voice line there.
It can easily be that, and that is obviously true only for small, medium enterprises and business-to-businesses, where you think you lose like whatever, 20 voice line and you count only one, but the customer is actually still there. That process, by the way, is mostly revenue neutral. Yeah.
Okay, thanks.
One other question. Maybe difficult to answer, but it's regarding the upcoming spectrum auction. I believe there were some discussions in Switzerland regarding the shareholding of the government in Swisscom. Can you give some color or shed some light on the commitment of the Swiss government?
No. The Swiss government has nothing to do with this auction. That's actually the commission who has to set the rules for this auction.
Yeah, what I understood is that some people were saying in Switzerland, "Well, maybe the Swiss government shouldn't have stake in Swisscom anymore.
Okay.
Different
law, that's another story. There are some political parties who say that the government should go in a minority. If this would be the case, there would be a referendum because that would mean to change the Telecommunication Act and then there would be a referendum, and this would be a very long process, and I don't think that this has a likelihood to pass in an election. That's a political discussion.
Okay. Clear. Thanks.
Well, we have another question here in the first row.
Thank you. It's [Romana Buzas] from JP Morgan. The first question is on cost. You showed on one of the slides how you have a lot of customers calling in, and you have a lot of customers going into shops, and given how quality-focused the Swiss consumers are, do you think you have a small opportunity to take out to reduce the customer interaction cost compared to some of the other operators in Europe? Or would you actually think, for example, you have more opportunity because by moving online, for example, you will further improve NPS? The second question is just a refresher on the potential launch of Salt in the wireline market. Can you just remind us how would you think about it, please?
Good. On multichannel, you know that to have a strong, convenient online channel is not only a cost initiative, that's also a customer experience initiative. There are a lot of customers who like to have an online channel because it's convenient and fast. Our strategy is to have different channels and to let them work in a seamless way. We don't just go for one channel. We try to bring an integrated proposition to our customers. Not each customer has the same demand. Younger people are more keen on online. Older, they want to go in a shop. We have to deliver both. On Salt launch of wireline, you have the wrong people to ask, huh? That's already last year and one and a half years ago, we had this question. We are prepared, and that's one point.
A second point is we would certainly observe what is happening, and we would not get nervous, or we would observe what will be the impact reaction. I think with inOne, we have a flexible tool to be competitive in the market because customers can actually optimize their product portfolio.
If I may. The customer movement on mobile between Swisscom and Salt nets out to zero. Yeah. Some have gone and most of them are now coming back and saying, "I've been there, I've seen it. Thank you very much. I come back." Yeah. I think, broadly, the Swiss consumer is still oriented towards great quality in network and products and customer service, and they're just not offering that. Yeah. Even at price discounts towards our prices of 50% and 60% and more, it doesn't move the needle substantially. It's kind of fundamentally the wrong strategy. It's fundamentally the wrong strategy in our view. Yeah.
Okay. Thank you, Dirk. Perhaps one last or the second last question.
Hi. Two separate questions. Firstly, to come back on Fastweb, we had a very nice pickup in consumer growth in H2 on the 28-day billing, et cetera. Wholesale reestablished itself at a higher level. When we look at 2018, 28-day billing is supposed to go. I think all the operators are talking about mitigating measures. What's the outlook here in terms of consumer, wholesale, and overall growth perspective for Fastweb? Secondly, at the Swisscom level, it's more a long-term question on 5G, but at this stage, if you could share with us what you've identified in terms of use cases, business case, implications for your CapEx, architecture, densification, so where you stand on that. Thank you.
Take, Alberto.
Fastweb, Alberto, and then I will take 5G.
Yeah.
Do you like to, and I will take 5G.
Okay.
Otherwise, you create a new product.
On the spot.
I would say that-
It's too dangerous, yeah.
I would say that overall, again, the impact on the four weeks billings on Italy was very limited. Remember that we were the last one to adopt it, differently from our competitors where they have exploited at least for this type of strategy for 18 months. We were forced because at the end of the day, it was not comparable. Our offer were not any more comparable in the market. I would say that in 2017, the impact, I would say that in the overall performance, is contributing but is not definitely the only growth, let's say, engine. Also in 2018, we will continue to grow basically based on the volumes, which is the most important driver for our revenue growth.
Okay, Dirk?
On 5G. My question was another one.
Yeah.
We should have one more question for B2B, because we have a very competent manager on the left side. That was my remark. On 5G. 5G, what can you do with 5G? On one side, you get more bandwidth. I would say that's the biggest application, mobile broadband. You can also do IoT. That's the second, I would say, the second big use case is IoT for a lot of devices. The third point is slicing, network slicing. That means you can deliver much more segment-specific solutions for, let's say, for a specific industry, for a security organization or such things. I think you have some topics to do. The big advantage of 5G is also the latency. On real-time application where you need a low latency, you can use it.
It's for real-time application, there are a lot of new use cases also in the consumer market. The CapEx, they will be slightly increasing, but don't think that we will have per year a substantial increase, because this will be also an evolutionary path and we already today are rolling out 4G, and then we compensate this with 5G. The overall CapEx envelope will not increase.
Okay.
Maybe to ride on the investor question. We had around 4%, 5% revenues in consumer in H1. We at 13%, 14% in H2, we had a very strong acceleration. I'm just trying to put that in perspective with the degree there was some 28-day billing or it's just Because we haven't seen a step-up in broadband subs.
Yes. I would say that you take the average growth also for, it's fine.
Thank you, Alberto. Usman? The B2B questions.
Hi. Usman from Berenberg again. I guess two questions. One is kind of B2B. How far does your guidance take into account an improved GDP environment in Switzerland? I guess you would see that in B2B more than anything else. That was the first question. The second question was just on Italy. I find it slightly confusing when you say that you think Iliad will have an impact, will have to spend around CHF 50 million, given that Fastweb's own mobile ambitions with the brand, spending the money over the midterm is only 3%-4% from 1% today. Either your guidance on mobile is too conservative or Iliad won't have an impact. Just any comments on that? Thanks.
Okay. I start with the GDPR question. Within our guidance, we don't have any special uptake in 2018, I'm fully convinced that it is an opportunity on two sides. First of all, to be able to deliver such environments for our customers. I definitely see an uptake on this opportunity, perhaps slightly in the second half in 2018 in our revenue figures, coming with some additional services. There is no special, let's say, uptake in the guidance for 2018 based on GDPR.
For Italy, my sentences are perfectly consistent because you don't have just to consider Iliad or Fastweb, there are other players in the market. I do think that Iliad will have an impact, it will have an impact on the three big players, much more than they could have on ours. There is a perfect story of growth for Iliad, which will have an impact, also for Fastweb, which will have an impact. Our estimate, our growth is not, we think, overlapped with the Iliad one.
Thank you, Alberto. The very last question, I would say, before we close the conference. George?
It's not going to be on B2B. I remember 2 years ago when EBITDA was -10, all the questions were on B2B. That's a good sign, I would say. I wanted to ask about the subscriber retention costs, because both the volume of answers and the costs have been coming down, and especially this quarter with the iPhone X, given that Switzerland is relatively high-end, you would have expected to see some impact from this. Is it a shift in behavior and the renewal cycles? Is it the SIM-only tariffs you have that make a difference? Is it going to continue next year? Any indications on that will be great.
For Fastweb, all year I would assume the same amount of acquisition and retention costs. We had a high number of SIM-only, I think about 30,000 more SIM-only new customers subscriptions in Q4. I think it's too early to see a trend in customer behavior. If I look at the overall customer base, we had an increase in SIM-only, but it's not so significant. As I mentioned before, major part of our customer base really wants to have the subsidized handset, and it helps us also to differentiate in the market.
I think the other thing that sort of helps, if you wish, is that people are keeping even in subsidized tariffs, their devices longer than they used to. Which is just due to the fact that for many people, there's not any more substantial, significant new innovation. Devices have a big screen, you touch upon them, and that's it. We don't think it's our mission to have the iPhone X to sell, to be honest. We look at that from a flat subsidy perspective. Yeah. If there is additional cost to the device, then the consumer will need to bear it if they fancy the device. It's not on our bill.
Okay. Thank you, Dirk. Thank you to everyone contributing to the questions, but also to the answers. Before closing this year's analyst and investor presentation, two last remarks. First, we would like to invite you for some drinks and snacks outside. Most of the people will be around, so you can do some informal chatting. Secondly, for those who need a transfer to the airport, we kindly recommend to take simply a taxi. At this point, it is from our side. Thanks again for attending, and looking forward to seeing and hearing you soon. If not here, then certainly on the phone. Have a nice evening. Thanks.