Good morning, ladies and gentlemen, and welcome to the Third Quarter Results twenty seventeen presented by Ursz Getti, Mario Rossi and Louis Schmied. Louis, the floor is yours.
Good morning, ladies and gentlemen, and welcome to Swisscom's third quarter results presentation 2017. My name is Louis Schmid, Head of Investor Relations, and with me are our CEO Paul Scheppe and Mario Rossi, our Chief Financial Officer. The first part of today's presentation, hosted by our CEO, consists of three chapters, a quick overview of Q3 highlights, our market and financial performance, some explanations on Swisscom Switzerland and finally, an update on Fastweb. In the second part of the presentation, Mario runs you through the financials and the unchanged guidance for the full year. With that, I would like to hand over to Urs to start his part of the presentation on Slide four.
Urs? Good morning, ladies and gentlemen. If you go to Slide four, you see the highlights of Q3. So we have a financially solid Q3. And also operationally, we are well on track.
You can see that we have slightly increased EBITDA by EUR 47,000,000 and slightly lower CapEx, but this is more a seasonal effect on a phasing effect on CapEx. Revenue generating units, overall good momentum on postpaid, mobile postpaid and growing slightly growing TV customer base broadband, better momentum in Q3 and same dynamic on fixed voice lines, so cancellation of about 80,000 customers in Q3. Fastweb is well on track, good momentum on mobile and slightly increasing broadband customer base. We launched successfully in one, we have already today after several months more than 1,000,000 customers. We had new offers in our corporate business unit.
So we offered a decent cloud portfolio. We are well positioned in the cloud business B2B. And also we have news on blockchain activities where we see mid long term certainly potential in it. Some words to our revision of the Telecommunication Act, there we don't expect changes before 2020. Cost savings, are on track and the guidance is stable as Louis before mentioned.
On Slide four and on Slide five, you see the dynamic on our revenue generating units. So the market performance, Q3 is, I would say, overall from the performance, a better one than in the first half year. Strong momentum also on fast track in the mobile area as you can see on the chart. But no big changes compared to the previous quarter. Financially, we have a solid quarter.
If you go to the revenue generate to the revenue, net revenues, you see that we have a stable revenue. Swisscom Switzerland is suffering a bit on the service revenue. We will explain it later. But in a same region as in the previous quarter and the growth on Fastweb with EUR105 million growth on the net revenue side. The EBITDA, you see that Swisscom Switzerland is able to compensate the majority of the decline on voice lines and outbound roaming through cost measurements, through cost reductions, mainly in the area of indirect costs.
So the impact on the declining voice lines is minus EUR 58,000,000 on an EBITDA level and outbound roaming has an impact on minus EUR42 million. And this results in an overall increase, slightly increase of the EBITDA by EUR47 million. So financially, solid figures despite an intensive competition. On Slide eight, I don't want to go deeper in it, but you see the main pillars of our strategy, unchanged quality to differentiate ourselves in the market and have a stronger focus on costs to compensate the impact of the service revenue in Switzerland. Slide nine gives you some figures on our rollout strategy in the networks.
You see the big increase of the ultra broadband footprint on wireless networks. We have a coverage of 60%, which have a bandwidth up to four fifty megabits per second, 80% population coverage, which speed up to 300 megabits and then more than 99% POP coverage, which is speed up to 150 megabits. So we will continue to expand our footprint on fast mobile speeds. On wireline, 45% of our customers have a speed of more than 100 megabits per second and more than 3,800,000 customers has more than 50 megabits per second. Our goal for 2020 is to have 85% coverage with more than 100 megabit per second.
On Slide 10,
some information to our market approach.
So we have a multi brand approach, you see the different brands. The Swisscom brand is the value based quality brand to be pricing wise much more competitive. We have our brand Winko, where we would react if aggressive offers also in the fixed market would enter in Switzerland. On the right side of the chart, IN1, that's our convergence flagship. We have a very successful launch after several months, already more than 1,000,000 customers.
The development of IN1 is in line with our expectations and customers are benefiting from certain discounts on quadruple play and Swisscom is benefiting from lower churn where we don't have actually a problem, but the churn will even be lower than it is today. And because we have a higher we'll have a higher loyalty on this quadruple play bundles. Page 11 shows you gives you some flavors on the marketing activities, which Swisscom made. We were able to keep our market share stable. We defended them successfully.
On Page 12, some information to IL-one. On the left side of the chart, see the revenue generating unit. So today we have 1,870,000 RGUs in IN1. And we have a penetration of IN1 in the region of 21% to 24%. So you see strongly increasing penetration of IN1.
The ARPU dynamic is the following, you see it on lower part of the chart. Mobile, we have a slightly higher ARPU, so an uplift in the ARPU. On broadband,
we
have a small rate grading in the beginning of the launch, it's like normally case, it was bigger than now, now it's bit flattening out. It is effect of rate grading on broadband. And then we have the converged smaller impact because of the convergence. But overall, as planned and the blended ARPU so far negligible. If you go on Slide 13, the performance, wireless performance, you see a good performance on postpaid.
So we were able to have 47,000 additional customers on postpaid in the third quarter. And interesting is also to see that 27% of the postpaid customers are in bundles in quadruple playbunk. ARPU overall blended ARPU is stable. ARPU of Infinity in One, the effect of it is actually an impact of dilution because the customer base of Infinity is always increasing or in one, and so we have a dilution on the ARPU. That's the main impact.
And the second point is roaming. But overall, the ARPU on wireless is stable. And you can see those as a result that service revenue in mobile is stable. I think we have a good momentum and good performance in wireless. On wireline, the wireline performance on Page 14, there are actually approximately the same dynamic as in the previous quarter, declining voice line customers, increasing TV, increasing broadband subscription.
So ARPU for blended ARPU is stable. And you see also that the fixed ARPUs per household is slightly increasing. So we are now at 2.18 ARPUs per household, which shows the dynamics to more and more bundles. The service revenue on wireline is slightly going down minus EUR 40,000,000 on a year on year base and the main effect is the voice business, voice line business. Bundle revenues are increasing.
On Page 15, some information to our converged performance. So an ongoing positive momentum on top line, so we have a growth of €80,000,000 with our bundles. The big growth is coming out of triple play and quadruple play bundles. You see that also the revenue generating units are increasing in the bundles. And the ARPU per bundle
is you can
see that in middle of the chart is now at it's slightly approximately stable, let's say, it's approximately stable. And the penetration of the bundles, fixed mobile bundles is increasing, so we have a household penetration of 29%. On Page 16, some information to our enterprise business. So overall, a good performance on the subscription side, you see that we are able to grow on mobile still on the customer base. Broadband is approximately stable, so we have also stable market share in broadband.
And voice business is slightly decreasing because of optimization, the cost optimization in the customer base. But overall, stable situation on the subscription side, which also leads to approximately stable service revenue. And if you look to the price pressure, which we have in some accounts, I think that's a good performance. And the solution revenue is slightly going up. Interesting is also to see that the service revenue and the solution revenue are approximately on the same level.
So we have, let's say, a mix of 50% service revenue and approximately 50% solution
revenue.
So good overall good performance in the Enterprise segment. And on Page 17, you see some innovation, which I wouldn't like to go deeper in it. Page 18, some information on our cost focus. So we are on track to our goals. Our indirect costs are reduced by million on a year on year base and also the FTEs are as expected lower.
On Page 20, some information on Fastweb, first the wireline business, the customer base increased by 6%. The ultra broadband customer base increased by plus 29% and this shows our focus to migrate more customer on our ultra broadband network. And today, have a penetration of 40% ultra broadband in the broadband customer base of Fastweb. The lower part of the chart, see our new product portfolio from a single play to Internet voice and mobile kind of triple playoff. Page 21, our performance in mobile fast web.
So we have now 1,000,000 wireless customers. You see the strong growth of our wireless customer base. Interesting is to see that today, the penetration of wireless in our wireline customer base is 22%. And we see a lower churn in this bundled offers, so four percentage points lower churn for converged customers. And also the Net Promoter Score is increasing on mobile, so good momentum on mobile.
The Corporate segment on Page 22, a good momentum on Corporate segment. The order book increased by 33%. We have a lot of nice new contracts. And interesting is to see the market share, which we have in the enterprise business. Today, have 29% market share in the B2B market and that shows our strong position in this segment.
Financially, on Page 23, so increased service revenue by 7%, increased EBITDA by 17%. If you take out exceptionals, it's plus 10%. So a good dynamic on the financial figures. CapEx approximately stable and which results in an increased operating free cash flow. So now I would like to hand over to Mario to give some more flavor on the financials.
Thank you, Urs, and also good morning from my side. We are on Page 25, I can give you some additional information to the financials. On the revenue side, in the Swiss business, we have more or less unchanged dynamics on the top line on a quarterly basis, except for the retail segment. You see there in Q3, we had a higher decline on service revenue. That's a seasonal effect because of the roaming season in July and August.
For Q4 in the Retail business, I expect a slightly higher decline of the revenues because of the impact of the bundle discount related to the in one introduction. We have a fairly stable business in the B2B segment. You see the decline of service revenue is around 3% per quarter, two third is related to mobile, that's always coming from roaming. So that shows that we have a very stable business there and we can keep our market share. In the solution business, we had a weak start in Q1 and now you see a good growth in Q2 and Q3.
Q3, we had quite good dynamics in the banking business, where the workplace business stayed under a certain price pressure. In the wholesale business, you have two different effects. First of all, we have the reduction of the MTR rates, which you are aware, the impact is on a cumulative basis, 42,000,000. On the other side, we have a higher revenues from inbound roaming, there is the effect CHF 29,000,000. On Fastweb, on the top line, strong performance in Q3.
That's mainly coming from two reasons. One is in the Consumer segment, we have increased revenues by EUR31 million or 12%. And then on the wholesale in the wholesale segment, we have higher revenues of CHF 25,000,000 or 40%. The next page to the operational to the OpEx of Swisscom Switzerland. As it was mentioned, overall, we are on track to deliver our CHF75 million savings in the indirect costs.
If you go to different elements on the direct costs, SRC, there we have two different dynamics. First of all, have higher subsidized cost for TV boxes and routers, 36,000,000, also changing in the commercial offerings in the last year that are booked as CapEx and this year as OpEx. And then we have less wireless retention volume. We had very strong retention numbers last year. And then you see also a certain trend towards SIM only customers.
The impact of the less of the retention volume is minus CHF28 million. The out payment in Q3, there was no positive impact on that side that the reason is the lower MTR tariffs were compensated by higher out payments for roaming costs, that's also a seasonal effect. Then as I mentioned on the indirect costs, we are on track. We reduced the FTEs in Switzerland in the first nine months by around five seventy FTEs or 3%. You see there an impact of CHF24 million in indirect costs, although there are some seasonal effects that's not the running that's not the run rate of savings which you can take also for Q4.
So it's more or less one of this CHF24 million. The EBITDA by segment, only a few remarks. You see that the impact on retail that's coming from roaming that the higher negative EBITDA impact in Q3 compared to Q2 and Q1. Then on the Enterprise segment, after the decline in Q1, we had a very stable business development in Q2 and Q3, or even possible to slightly increase the EBITDA. In the segment, Wholesale, we are benefiting from the inbound roaming and cost savings in IT, Network and the OWAP department.
In Q4, the higher revenues Fastweb in Q3, the higher revenues at Fastweb were partially compensated by higher advertising costs which we needed for the mobile offering. On the next page, eight, below EBITDA, there are no exceptionals to comment. Net income increased in the next in the first nine months by 5.9%. Coming to the CapEx, in Switzerland, we are still below our plans, which we already discussed after Q2. We had quite a slow start in the FTTH rollout because we changed the way we do the construction, the event in a total contracting model.
But we are confident that we can fulfill our we can meet our plans in the old rollout, and I expect in the FTTH area CapEx of around CHF600 million for this year. On the free cash flow, there are no new exceptionals, except one item below the operating free cash flow, are able to sell a minority stake of Arwynn Limited, which had a cash impact of CHF 71,000,000. This investment was still is coming from the takeover of the Puppy Group in 2014. And for us, it was always clear that we wanted to sell this product. That brings me to the outlook.
The outlook is unchanged, revenue around CHF 11,600,000,000.0, the EBITDA around CHF 4,200,000,000.0. There are the dynamics in the Swiss businesses. Fixed voice cancellation will have an impact of around minus €80,000,000 roaming around minus 50,000,000 to €60,000,000 Other effects like convergence impact, promotions, bundle discounts around minus €50,000,000 and as mentioned, a positive impact from the cost savings of €75,000,000 CapEx unchanged around CHF2.4 billion, I would say, I expect slightly lower CapEx in Switzerland because of some savings related to CapEx efficiency. With that, I will hand over back to the operator.
Thank you, ladies and gentlemen, and thank you for your attention. You have now the opportunity to ask questions. I already have one first question coming up from Louis from the company Morgan Stanley. Please go ahead.
Yes. Hello. It's Louis Porta from Morgan Stanley. Have two questions, if I may, please. The first one is on the guidance that you just reiterated for the full year.
And looking into the solid third quarter, your full year guidance is basically implying a big decline in the EBITDA in the fourth quarter, if my numbers are about right, like 4% on a reported basis, probably around 8% or 9% on a clean basis, stripping out the one offs from the fourth quarter last year. So what I would like
to understand is the
dynamics behind such a big deterioration in the fourth quarter or whether your outlook for the year remains being a conservative one? And the second question is on Fastweb and the impact from the twenty eight days billing, which Telecom Italia was providing some indication in terms of the absolute positive implications for 2017 and 2018. I wonder whether you could give us something similar and your views on the regulatory concerns on the implementation of this new frame for billing.
Mario, do you take these two questions or Okay.
On Fastweb, you have indicated the number on Page 23. So it's a four weeks billing impact in Q3 is about EUR 15,000,000. And yes, there is some noise around this implementation of this four week billing. But I think that's a result of the ongoing price pressure in Italy and all operators did that. And I think that's all what we have
to
comment on this noise. And on the full year guidance, first of all, Q4 is always relatively weak and your numbers are right. Of course, I mentioned that in the Residential segment, we expect a higher impact, a negative impact on the revenue side on retail. And there, we have higher, let's say, discounts for bundles in 2018 I think 2017 compared to 2016 was already the case in the first nine months. This impact will slightly increase.
And then you know, they need to guide these around, it's not exactly around.
And then, normally, you have higher also stocks in Q4.
Yes. Okay. Thank you.
Then I have a next question coming up from Julio. Please go ahead.
Yes. Hello for taking my question. My question is regarding inbound revenue in the Wholesale division. I see that basically it has increased almost 50% Q on Q. Also, if I see, for example, 2016, we haven't seen a change on this line from Q2 to Q3.
But basically, in this quarter, the impact the positive impact has been relevant. Can you give me some color of what has basically made this increase in wholesale? And my second question is regarding broadband. I see that the performance on broadband has increased versus previous quarters. Can you give me some color on what the company has done this quarter in order to have better KPIs in this business?
I will take the broadband and Mario the inbound roaming question. On broadband, so there are different effects, but certainly one of it is also in one within one, we are able to increase our performance on broadband and then some more marketing activities on broadband. And these are the main reasons. But if you look closer to the current picture, we have a good and stable business in broadband.
Mario? And on the roaming, the roaming business, you have to look at it inbound roaming and out paying. And these two numbers, you have to analyze together. And as I mentioned on Page 26, in Q3, we had also higher out payments because of the seasonality. And the higher inbound roaming has also something to do with the seasonality, more tourists coming to Switzerland in July, August and September.
And the net effect is practically zero in Q3, if you add these two effects of the higher inbound roaming and higher out payments for our customers traveling abroad.
Okay. Thank you.
Then I have a next question coming up from Frederic Boulan from the Bank of America Merrill Lynch.
Hi, good morning. Just a quick question on Fastweb. If you could quantify for us the impact of The U. Pricing and the scope of the agreement with CI on the ultrafast broadband. So just for us to try to understand where you see the underlying revenue and EBITDA trends for the business year to date?
Thank you.
Fred, can you again repeat the question?
It's hard to understand.
Right. So my question is, if you could help us quantify, if you look at the performance of Fastweb from a financial perspective, you grew EBITDA underlying by 10% ex one offs and revenue 7%. Can you strip out within that what has been so you quantified the impact of four weeks billing, but you also mentioned the retroactive pricing and the agreement with TI the ultrafast broadband. So can you help us quantify the impact of those two items so we can have a better grasp of the underlying revenue and EBITDA performance of the business?
If you go to Page 39, there you have the details of the segment sales. You see the consumer growth revenue was 12%. And as we mentioned before, in Q3, you can take out CHF 15,000,000 for the four weeks billing. And the business with TI, that's included in the wholesale revenue. And you see there, we have in the first nine months, we have a growth of close to 40% in the wholesale business.
And in Q3, the impact of the overall wholesale business, and that is not only related to TI, is 40%, and we don't disclose the margin of a contract with a customer.
So is it fair to assume all the growth in that segment comes from this agreement with TI? Sorry? So my question is what is the underlying trend here? Ex this agreement, is it going is it still growing or it's declining?
The wholesale business is still growing. So we are delivering a lot of details to the mobile operators. But the TI business is also including in that. But the overall business is the underlying TI is also underlying because you always in the wholesale business, you always have some fluctuations. And this year, we knew that we will have a strong wholesale business.
All right. Thank you.
Then I have the next question from Jakob Bluestein from Credit Suisse.
Hi, good morning. It's staying on the Fastweb question as well, please. Can you just maybe give a little I mean, I appreciate the terms of the TI contract are not public, but can you maybe just give us a little bit of a sense of how sustainable will that wholesale revenue growth actually be? So I mean, this year, it's grown by sort of 90,000,000 year to date. Should we be plugging in a similar number for next year?
And also, I had a little bit trouble hearing in the previous questions. Did you say there was a very high margin on that TI contract? Was that correct?
No, I did not say it's a high margin on the TI contract. I said the wholesale business at Fastweb is a high margin business. And for next year, we don't disclose now numbers for the next year. And in the wholesale business, you always have some seasonal effect, because if you're able to conclude the contract, then usually you have a high impact in Mt. Quan.
But below that, we have a sustainable ongoing wholesale business, mainly coming from BTS with these mobile operators. Since year has been since year the strong and profitable business for Fastenal.
But just in terms of understanding the sort of sustainability, I mean, TI keeps migrating customers to fiber, will your wholesale revenues essentially keep growing at a similar pace? Is that basically the mechanics?
No, that is. The main effect on the wholesale business is the
BTS business
and some wholesale business for corporate customers.
Got it. Thanks.
My next question is coming from Joshua Mayles from Goldman Sachs.
Thanks for taking the question. Just a couple from me. So firstly, just if you could give a bit more color about your B2B business. So you were seeing slightly better overall trends being driven by the IT growth, but that's lower margin. So my question is what kind of dynamic are you seeing in the traditional telco businesses where service revenues are still down about 3%?
Is that pricing pressure? Or is there any incremental competition? And then the second question would just be on cost cutting. So clearly, the presentation, you're doing a good job on this with the benefits of headcount reduction. Are there any limits or any kind of difficult conversations you're having with the unions about that at the moment?
Or do we think that this level of FTE reduction is sustainable longer term? So
I will take the B2B question, Mario, then the cost question. On the B2B business, you are right. The IT business or we call it the solution business will have potential to grow, but that's right, that's on a lower marginality. It depends very strong on which side, cloud has higher marginality than system integration business. But there we will have some growth.
And on the connectivity side, let's say that the telecommunication business in mobile, we will be able to keep our market share. We have in some accounts competition, price competition mainly from Sunrise. And on the other side, the customer base or the ARPU base is still growing. And so this is at the end, let's say stable mobile business, the broadband business, let's say that the MPLS business in the corporate market is also approximately stable. So overall, we don't see too many changes on the service on the connectivity basis in the corporate market, slight price decrease, but also slightly increased volume.
So can I just ask one question on that? So you're basically saying that you're not losing share, it's just basically that having to reprice customers downwards in order to maintain the share you have in B2B?
Yes. And it's very selective. It's not you maybe have in one customer a very competitive RFP process, then you have some margin decline. But on the other side, we are able to increase our share of wallet. Some customers, we can also win back.
So overall, at the end, it stay approximately stable.
And on our cost plans and our cost programs, so we are confident that we are on the way to deliver our announced CHF300 million savings. And we said the FTE reduction this year, there was of course, we have to do consultation with the unions, but that we had no noise around that. That has two reasons. We are doing a good job in the FTE management, natural turnover, etcetera.
And then we have, let's say, a very
fair social plan in place. Yes, this plan has been in place since years, and that's well accepted with the unions. And it is also in the future be able because part of this that's by nature, part of these cost reductions come from lower number of FTEs and we will be able to manage that in a good and orderly way as we did in the past.
Thank you.
Then I have a next question from Abhi Shak from the company Deschamps.
Yeah, hi. Thanks for the opportunity. I have two set of questions, and I'm sorry, I couldn't hear your answer to Louis' question very clearly. The question the first is on EBITDA. If I look at your full year guidance, it kind of implies that quarter four EBITDA will be about CHF $946,000,000, which is like more than 13% decline versus Q3.
Now I know that your fourth quarter tends to be a bit weaker, but typical sequential decline tends to be more like 8% and not 13%, 14%, which is implied by your guidance. So I wanted to understand what is it that is going to be hitting the EBITDA particularly this year? And the second question I had was with regard to Fastweb, where I think you have about 2,400,000 customers, out of which 22% also take mobile. So let's say, 500,000 odd customers take mobile, but your total customers in mobile are like 1,000,000, which means there are 500,000 or so customers who don't take your fixed line but who are taking your mobile in Italy, which is a bit unusual because I thought you were focusing mostly on selling mobile to your fixed customers. So just wanted to understand whether Fastweb is emerging as an independent mobile kind of business, which is not just selling to the existing customers but also attracting new customers.
I
will take the Fastweb question on mobile and Mario, guidance question on EBITDA. On mobile, our strategy is to have converged office broadband mobile. And on the new contracts we are doing, the majority of them are really converged. So it's an upselling on broadband customer base. And on the other side, we have also some history in the mobile business.
In mobile, we have already for a long time some mobile business. And that's why we have some stand alone mobile customers, but we don't it's not our strategy to build up a huge standalone mobile business. And
on the guidance, so I mentioned that we will see some more pressure in Q4 in the residential segment, higher negative impact that we had in Q3, mainly because of bundle discounts. And then the guidance is around so it's not exactly €4,300,000,000
Got it. Thank you.
Then I have the next question from Georgios from Citi.
Hi, good morning. I've got a couple of questions also. The first one is if we have to go to the all in one tariffs and the progress you had so far, it looks like the KPIs are getting better, But a sense from the tone of your comments that you are worried a bit about optimization and perhaps ARPU dilution as more and more customers go in. Do you mind just explaining to us what you've seen so far, whether it's in line with what you are expecting? And also what you're expecting from now?
Because if I'm not mistaken, you expect a significant dilution initially, but perhaps later, it's less of a drag, the migration into this tariff plan? And then my second question is around the wholesale situation of FAST-eleven. Sorry to keep coming back to this. I believe you mentioned this as well in the previous quarter. And actually, the increase last quarter was much higher.
Do you mind just explaining to us I know you can't talk about necessarily the margins and stuff, but what exactly this wholesale contract with Telecom Italia entails? Good.
On On IN1, I will take the question and Mario will take the question on Fastweb.
On
IN1, it's normal if you introduce a new bundle that in the beginning, you have the strong optimizer. And what we see is actually that on mobile, we are able to have an uplift on ARPU. On the fixed proposition, we had, let's say, a kind of optimization on broadband, but this is becoming smaller and smaller now. And then you have the conversion rate. And overall, that means we have a bit better sales figures, but slightly lower ARPU on broadband and TV.
So that these are the main effects. But I think the effects on ARPU will flattening out now in the next month because you have the right grades in the beginning. And we are convinced that we will continue to have a good momentum on IN1. And
then in the wholesale business, we always had wholesale business. And you see that in the first nine months, the growth was 37% and in Q3, was 41%. And the margin with the contract with the customer of ours, we really don't disclose.
Can I ask another question? Sorry, it's not a follow-up, but I just realized I had the third question, which I didn't ask. You mentioned earlier during your comments, Mario, that CapEx may end up being slightly lower because of some efficiencies. Do you mind explaining to us whether these efficiencies are sustainable? And maybe I know it's not going to be a massive difference from 2,400,000,000.0 but whether it's something that could be recurring before beyond this year?
No.
But on CapEx, the message of Mario was the following. We have a seasonal effect on the CapEx because the ultra broadband rollout in the beginning of the year was slower than planned because we made some changes on the construction side. But now we are we will ramp up there. We will have a better momentum on the rollout in the second half of the year. That was one point.
And the other point is, yes, we are doing like normal. We try to increase our CapEx efficiency. That was his remarks. But overall, we haven't changed our rollout strategy on CapEx. There is no change.
Thank you.
Okay. Then I have the next question from David Lopez from the company New Street Research.
Hi, good morning. Thank you for taking my questions. I've got two on Italy, please. And the first one is on the broadband net adds. So you have added 10,000 new customers this quarter.
It's a bit it's slower than last year. And I was wondering why is it lower given the whole market is picking up? And my second question, sorry, still on Fastweb EBITDA. I was just wondering, I'm not sure I've understood well the question before, but why the EBITDA of Fastweb did not pick up more given the revenue uplift? So
on the broadband acquisition side, I will take the question. Mario will the EBITDA question. The Q3 for Fastweb was a weak one because there were really a lot of very aggressive promotion, more bundled promotions of our competitors. And that's the main reason why we had a bit weaker figures in Q3 on broadband. But if you take the whole gross adds Fastweb, you see that there is not so big changes to previous year.
I think it was a very promotion oriented quarter in Italy. And I yes, that is the main reason.
And then on the EBITDA in Q3, why we are not able to translate all the revenue increase to EBITDA increase? There's two reasons. One is subscriber acquisition cost for the mobile business, still a strong growth. And secondly, what I mentioned is the higher advertising costs also related to the mobile business. These are the two main reasons.
Okay. Thank you very much.
And I have one question from Matthias von Ljergenthorst from the company Kepler Cheuvreux.
Yes, yes. Two questions from my side. First one, on the B2B, if I look at the press release, you're saying that the incoming orders were approximately down 60% year on year. Can you give some color on that? What should we expect?
Should we see a negativity from this next year? Or yes, I do not fully understand what is meant with this comment. Next to that is part of the reason of your cautious full year guidance related to the fact that you expect salts will enter in Q4 the market?
Okay. Mario will take the guidance question. Take the order intake question in the B2B business. So it's a bit normal that Q4 is a much stronger quarter than the previous quarter in the business. So there is a seasonality in it.
And we are optimistic that we will have a strong Q4 and can catch up a bit lower order intake in the first three quarters. So I think we don't have really an order intake trend dynamic there. So this will within a good dimension that in the fourth quarter. But there are some big, big, let's say, accounts where we will have a good contract.
And guidance, there's nothing to do with salt and the market expected market entrants on fixed. So it's now it's November, we don't have any signals that they will come before Christmas. So we expect them to come into the fixed line business in the first half twenty eighteen.
You.
Then I have one more question coming up from Jacob Bluestone from Credit Suisse.
Hi. Sorry for the follow-up and apologies for having one more question on Italy. It's actually an accounting question. Can you maybe just explain why the JV with TI, where you have a 20% stake, is getting booked in consolidated revenues? Wouldn't it normally go through your associate line?
Or perhaps I'm misunderstanding the accounting. So any clarification you can provide on that would be really helpful.
There's nothing included from the JV that you mentioned. That's below EBITDA or below EBIT. And then it is wholesale contract, we are talking all the time, That's a separate business that from the ordinary wholesale business, which Fastweb has been done since years. That's nothing to do with the JV. JV created for the rollout in big cities FTTH, the Flash Fiber, we have a minority stake.
And as you mentioned correctly, this one is booked as equity under equity accounting below the EBIT.
Great.
Thank you
very much for that. Welcome.
Then I have one more question from Nick Priceon from Jefferies. I
had a couple of questions on OpEx, if I may. First, it was just a follow-up on Josh's question on headcount. You mentioned the degree of natural turnover. And I think during 2016, you said around half of the headcount reductions achieved in this way. I was just wondering when we look at the five seventy FTEs reduced during 2017, could it have been roughly 50% as well?
Then also on headcount, I appreciate it's a bit sensitive, but I was wondering if you could give any color on what type of roles these staff were doing. Has the reduction primarily come from sort of admin or sales or network engineering roles? And finally, I was just wondering if you give us any more color on the seasonal or one off effects that you mentioned in direct OpEx. If you could just give some color on what that was, that would be great.
On the OpEx side, Feet. So we were able in 2017 to really use the natural fluctuation and redeployment. So that at the end, we have not so much people who have to lift hard the company. So I think we have we were very careful in reducing our headcount in Switzerland. And if we reduce the people, we don't do them in areas where we would have a big impact on the business.
So we haven't reduced sales people, network engineering people, which are, let's say, volume driven businesses. We had more we have a leaner in that or we were more in the area of supporting functions and making the organization a bit leaner. That was certainly one point. And then we have some businesses which are declining, like in the voice telephony business, so we can reduce the headcount in such area.
And on the one off in Q3, I think there are two, three effects. One, we had this year lower marketing expenses than last year. Then secondly, last year, had higher bad debt losses in Switzerland. And the third reason is we had the higher costs for real estate in Switzerland also in the last year. So they're related to higher costs in the last year.
So
this was the last question. There are no more questions in the queue.
Okay. Thank you, operator. And with that, I would like to conclude today's call,
and thank you for your participation. If you should have any further questions, please don't hesitate to contact us from the IR
team.
Thank you again, and
good