Good morning, ladies and gentlemen. Welcome to the Swisscom First Quarter Results twenty seventeen. With us today, as usual, Urszhakti, Mariadoci and Louis Schmid. Rui, the floor is yours.
Good morning, ladies and gentlemen, and welcome to
Systrom's first quarter results presentation 2017. My name is Rui Schmead, Head of Investor Relations. And with me are our CEO, Will Sheppey and Mario Rossi, our Chief Financial Officer. The first part of today's analyst and investor presentation hosted by our CEO consists of three chapters, a quick overview of the Q1 highlights, our market and financial performance, then some explanations on Swisscom Switzerland, and finally, an update on PharmHouse. In the second part of the presentation, Mario runs you through the financials and the unchanged guidance for the full year 2017.
With that, I would like
to hand over to Urd to start his part of the
presentation on Slide number four.
Urs? Yes. Good morning, ladies and gentlemen. If you go to Slide four, you can see that we have a solid start into the year. So on the on the branding side, we are really the trust brand in Switzerland.
On innovation, we we made a lot of innovation. Just as an example, we increased our our coverage for four g plus and we also launched some new products which I will come later to it. We were able to to keep our strong and leading position in the retail market. Overall, we have the same dynamics as in the last quarters in the retail market. Enterprise market, we have a very solid and strong positioning, a bit light solution business in Q1, but overall a good performance also in the enterprise business.
Fastweb has strong result in the Q1. And if you look to the revenue evolution, you see that overall we have a flat revenue evolution. I will come later to some details to it. So overall, a good first quarter, solid financial situation. We also confirmed our A ratings, and we have an unchanged guidance for 2017.
If you go on slide five, you see the market performance of Swisscom. Easy said it's and solid. We were able to defend our strong market position even in a market which is becoming more and more competitive. If you take as an example our evolution in the broadband business, you see that we have a stable broadband business, 2,000,000 connections. And the net adds are, let's say, stable or minus 4,000.
And the main reasons behind it is that corporate or SMEs who are under under cost pressure optimize their their broadband connections, that's one dynamic, then the market is saturated. And on the other side, we have the CPS migration or or IP migration. So even in in such an environment, we were able to have a a stable broadband business and also a good KPIs in the broadband business. I'm I'm optimistic for the performance of broadband in the next quarters because with with InOne, our new quadruple playoffers, we will gain more momentum. Then we have a further rollout of our ultra broadband footprint, and and we see that in areas where we have an ultra broadband footprint, we have a a better sales figures.
And also our Swisscom TV product is strong and and has a clear USP. So I'm optimistic for the future on on the the development of the broadband. TV, see that they were able to grow also on mobile postpaid, solid KPIs, a good market performance, and a small growth a saturated market. Of the fixed voice mail, and you see that the substitution of the fixed lines, which we already saw in the last year, is continuing, and we have a loss of 70,000 fixed line connections. And this is substitution that's actually not lost to to competition.
Fast track has a good evolution, and you see it on on the right side of the slide, a good netback in the first quarter. The financial performance on slide six, if I can begin with the net revenue, you see the net revenue is declining by 54,000,000. But if you go deeper in it, you can see that more than 40% of this decline is is driven by one offs. This is mainly exchange rate exchange rate effect. And second, it's hardware hardware business.
And hardware business is all always a bit seasonality in it. So the real the real decline in
the
service revenue is is much slower much lower. And and the the reason that the service revenue is slightly going back is the voice line loss and the impact of roaming. On the right side, you you see the EBITDA, actually a stable or flat situation in the EBITDA compared to to to the previous year. And if you go deeper in Swisscom Switzerland, you see that we lost on the EBITDA level $16,000,000 and $11,000,000 is coming from rolling, dollars 19,000,000 is coming from the loss of fixed lines. And then through cost savings, we could compensate this decline on the service revenue so that as a result, have this minus 16,000,000 EBITDA in Swisscom, Switzerland.
If you go on on slide eight, you see that we have solid market shares, and we will continue to defend this market shares. In mobile, we have 60% broadband if you take or if you include also the wholesale wholesale market shares, we have 67% market share on and on TV, a growing market share of 32%. Slide nine shows you that we continue to invest in our networks. In Q1, we had 3,600,000 households which are connected with ultra broadband, which have a speed above 50 megabits, and we have 2,100,000 households which has a speed above 100 megabits per second. So an an increasing fast, increasing footprint in our ultra broadband network.
In wireless, we're also building out our network. We have ninety nine percent four g coverage. We have a four g plus coverage above 40%, and this leads to speeds up to 300 megabits per second. And this shows our our leading position in the also in the mobile market. On the right side of the chart, just some remarks to the test.
Test is the marketing instrument of of Switzerland. A lot of competitors do the marketing over test. We don't see our company over test, but there are some tests which shows you that there are a lot of tests where where Swisscom is the winner, and and they chose that Swisscom has a a leading infrastructure, and we will do the necessary things to keep ahead on this infrastructure competition. If you go on slide 10, you see what we have done to manage our market performance to differentiate our product portfolio, in 2017, in March, we launched a new offer, Winco Mobile Fare Plan, a very competitive offer on the price level for the more price sensitive market where we have a good starting and also good sales figures. In April we launched our quadruple play offer or fixed mobile converged offer.
I will come later to it and also a multi device proposition. Page 11 shows you the performance, wireless performance in the retail market. So a solid postpaid momentum, our Q goes up, stable churn, stable low churn figures in the postpaid markets, and and a good momentum on bundling. On the left side of the chart, you see that we have 3,300,000 postpaid customers. Out of them, 70% are Infinity customers.
And 23% are in bundles of this postpaid customers. The ARPU is overall stable, the blended ARPU, more or less stable. Infinity ARPU is slightly going back, some remarks to it. That is due to the mix, due to a mix because Infinity is still bit growing. And then lower Infinity customers are coming in the cluster.
That's main effect. If I look deep to the infinity customer base, we see a stable ARPU in the infinity customer base. So it's acquisition driven mixed driven. The overall revenue in the mobile market is stable, and we were able to compensate the impact of roaming. If you go on Slide 12, you see the wireline performance in the retail market.
And there we have a mixed picture. TV, which is growing on a year on year level of 115,000. Growth band, we have a growth of 20,000 year on year. And then the dynamic for the trends which we had already last year is in the voice line business where we have a decline on a yearly level year on year of 256,000. And this is a substitution, mainly substitution and consolidation.
The good news is that the ARPU is stable, and we have also introduced the figure average revenue per household, which you see on the bottom line of this figure. I think that's the KPI which is becoming more and more important in a more converged market. Overall, the service revenue is 680,000 so minus the overall minus 32,000,000, and the main effect is the voice line decline. Bundling is growing. Good momentum in the Bundling business.
On page 13, you see the performance in the converged market. So bundles went up by volume by 18% on a year on year level. The top line is growing by 72,000,000, so we have a good and strong momentum in the converged business. On the left side of the chart, you see the the fixed subscription and and the bundles. In q one, we had 1,700,000 bundles, triple play or fixed mobile converged bundle.
And from the mobile revenue generating units, 15% are in in this bundle. So that shows that we have still a lot of potential to increase the penetration, the mobile penetration of the bundle. The r two in the in the middle of the page, you see that the r two of of our of our bundle. This is slightly going down because also of of a a mix mix effect of the new subscription because the penetration is growing, then we get lower lower tariffs in it. That's a mix.
Effects and some impacts on rolling and then some impacts of the of the voice lines. These are the main reasons of the ARPU evolution. But overall, growing revenue with bundles. On page 14, you see some explanation to our new offers, our new price plan in one. So the market is becoming more and more converged.
We are in a mature market in Switzerland, and we have a market, let's call it, everybody offers every everything. So we see this clear trend to to a converged market. And also the customer is asking for it. So customer is asking for for more converged offer. He is asking for flexibility and value for money.
The strategy of Swiftcom in this market is is a a value oriented approach. We don't want to to decrease our our prices. Our ambition is to maintain the price level. And the philosophy behind in one is more for more. And what we are doing with our new offering, we are combining our flagship offers, we want the triple play offer, with our Infinity offer.
And then it's bundle discount on the top. On slide 15, you see the structure of this new tariff plan. It's a modular concept, and then you can can take out different bundles, let's say a large bundle on mobile, a medium bundle on on the Internet, and then also a large bundle on TV, according your demand or your desires. And if you are bundling in more mobile, you you see it on the on the right side of the chart on the bottom, you see as more mobile you you put in in the bundle as higher is the monthly benefit you get. With this approach, we will be able to increase our penetration in the mobile penetration of the household.
On slide 16, you see why we are doing this. We want to defend our our leading position in the Swiss market. We want to get an instrument where we can do upselling and cross selling, and at the end we will be able to increase our share of wallet. With the flexibility of the bundles, we will be able to increase the Net Promoter Score and also reduce the churn on the lower end of the market, which is actually already low. Interesting is the last remark on this slide.
If you take the households which have a Swisscom broadband connection, you can see that more than 1,000,000 in these households has the mobile with other operators, and this shows actually the potential to increase the penetration of mobile to our in one offering. Slide 17 gives you a short overview of our enterprise business. On the right side, you see that we have a value proposition which is very strong. So we are really the only fully integrated operator. We have strong ICT capabilities, and we can really offer converged ICT offers in a market which is becoming more cloud based, and this is shows our strong positioning in the B2B market.
The revenue in the B2B market is more than $20.16, approximately 2,400,000,000.0 And from this 2,400,000,000.0, approximately 45% of the revenues is coming out of the telecommunication business, wireless and wireline. 45 the other 45% is coming out of the solution business. And there we have different business units. We have vertical solutions as an example for the banking. We have cloud solutions.
We have workplace solutions. So, it shows a strong solution portfolio with 45% and with a mid term potential to grow. And then the last 10% of the revenue is more hardware driven or other businesses. The enterprise development on Slide 18, you see that we were we have stable revenue generating units in the B2B market, shows our strong performance in the B2B market. We were able to increase the revenue generating unit in the mobile market despite some aggressive price moves of competitors.
And this leads to an overall stable r two development. The the decline in in the voice business is mainly driven through through consolidation and and IP migration. The service revenue is overall flat. On a year on a year basis, lost $8,000,000 so it's more or less flat in development of the service revenue. And the solution revenue is slightly lighter in Q1, and there are actually two effects.
One is that we have always some seasonality in the project business in the B2B market. And on the other side, we had a price pressure last year with some projects in the workplace and collaboration area. That's why the the the revenue in q one is a bit lower. But mid term, we have potential to grow in the solution business. If you go on Slide 19, actually the message of this slide is we are on track with our cost savings, so we will deliver this $75,000,000 cost reduction.
And there we have a broad program to increase the efficiency to reduce costs or improve quality. On slide 21, some remarks to Fastweb. So we continue to increase our ultra broadband footprint in Italy, and our target is to have in 2020 a footprint of of 5,000,000 households with more than one gigabit per second speed. We will have a footprint of of 8,000,000 households with approximately 200 megabits and 5,500,000 with with the speed, let's say, between 2,200 megabits. So we will have a good ultra broadband footprint, and we are on track with our plan.
Slide 22 shows you our market performance of Fastweb in the broadband business. If you take the market share of the broadband connections, you can see that we are able to increase our market share slightly. And also on the revenue side, we are able to increase our revenue market share in the broadband business. The performance of the NetBanet in Q1 is good, so we were able to grow also compared to the Q1 in 2016. So overall, a good margin momentum of BaaSeq.
Slide '23 shows you the wireless performance. We launched successfully our new four gs offer. 9% of the new customers are buying bundled offer, mobile and wireline. And we see this converged offer, lower charge by three three points per percent points. So lower churn to a converged offer.
On the corporate performance on slide 24, so also here, we have an increasing revenue market share in the corporate market, and we have also very very strong proposition in the corporate market. And, therefore, we we are optimistic to have a good development in the corporate market also in next quarter. Slide 25 shows you the financial performance, solid performance, three percent more revenue, 11% higher EBITDA, and a positive free cash flow. And so we we confirm our expectation on the financial development of FARCUS. So, would like now to hand over to Mario Rossi for the financials.
Mario? Thank you, Ulf. From my side, a few additional remarks on the financials. First, as you have seen, we report in new segment reporting. Swisscon Switzerland now consists of three segments that retail customers, enterprise customers and wholesale and network and other.
You received the restated numbers one week ago in order to see your Excel sheets and your new models. I start on Page 27 with some remarks on revenue. In the Swiss business, the retail revenue declined by 3.1%, and we stand there at 1,500,000,000.0 for the first quarter. The decline comes mainly from service revenue. There we saw 29,000,000 there we saw a flat development in wireless, even a slight increase of €3,000,000 compared to prior year.
We lost €32,000,000 on wireline, 15,000,000 comes from the fixed line loss. Then we have two additional effects. We don't charge anymore for the TV activation fees. And the third effect is the bundle discount. The total effect is booked on wireline.
The enterprise business saw reduced revenues by 4.7%. We land at €612,000,000 revenues for the third quarter. A fairly stable evolution on service revenue is minus €7,000,000 50% comes from fixed, 50% from mobile, and mobile is the impact of the roaming. As I was mentioned, we had kind of a weak start in the solution business, where we lose €16,000,000 compared to the prior year. There especially, we had some weak start in the UCC workplace business.
VDC, slow evolution of the PBX business, I think that can be attributed to the all IP migration that many customers wait with projects until they get full visibility, but that will mean for their operation. On the wholesale business, there we have two effects, Less revenues from an NTR, an NTR reduction among the mobile operators, 50,000,000. That's compensated by additional incoming roaming revenues of about 12,000,000. I think Fastweb, Ulf explained it, quite a strong increase in the consumer segment, a bit like Q1 in the B2B segment, but that has something to do with seasonality and doesn't bother us. On the OpEx on Page 21, on the direct costs, SOC SRC, there we have three different effects.
We have higher SOCs of 11,000,000 First of all, we changed the model in 2016 related to the TV boxes. They are now booked at OpEx that says in the first quarter, an impact of €16,000,000 €16,000,000 Then we have higher route of subsidies of €6,000,000 And then we have less wireless SOX SRCs of €11,000,000 because we have less retention cases. You'll remember last year we had extremely high retention number in the space business. And on both goods and purchase goods, purchase, and other, first, we have lower NPLs and lower international waste type termination fees, and then because of the lower other revenues, of course, we had also lower costs related to the hardware business. On the indirect costs, as was mentioned, we are on track to deliver the 75,000,000 You see also in Q1, we were able to reduce the headcount in Switzerland by approximately 150 FTEs.
EBITDA, in Switzerland, we lost 1.7% EBITDA. We stayed there at €928,000,000 but we were able to keep the EBITDA margin at a solid 41.3%. Would say approximately 50% of the pressure on top line service revenue were compensated by cost reductions in the Swiss business. First, that clearly benefits from the revenue increase and has stable costs. In the cost, we have two effects.
One is higher subscriber acquisition costs because we have a number high number of acquired customers. And second one is we have a change in the regulated prices on the big stream booked in Q1. Below EBITDA and EBIT, I think there are no there are two points to mention, lower interest expenses, the standard 36,000,000. We will see further savings in the future In July, there's a 600,000,000 bond yield, which a coupon of 3.75%. So we are more than confident that we will create some savings on this side.
Then on the tax rate, you see here in Q1 the high tax rate of 25% compared to the expected one of 21. Now we have two effects in Q1. There's adjustment of the prior year tax loss in Swiss business of €7,000,000 and then we have €8,000,000 corrections of prior year assessment for the year twenty twelve to twenty fifteen allocation of profits to different scantals. But again, tax rate long term will remain at 21%. On page 31 on on CapEx, only one remark, we had, let's say, low CapEx activity in the FTTH environment in Switzerland.
It's just seasonal reasons. We had a very cold January, which has which created limitation to the construction activities in Switzerland. So we will invest in the fiber area as expected around €600,000,000 in 2017. Page 33 on the operating free cash flow. There's nothing special in Q1 in Switzerland.
You remember last year we had this payment of the €186,000,000 for the ADSL case. This case is still pending at the Federal Court. We don't know when we will see a final decision. Net debt at Q1 stands at $7,700,000,000 which is 5% below prior year. And finally, coming to the outlook, as mentioned, outlook is unchanged.
So, the four main drivers for the decreased EBITDA level in Swiss business was line loss €50,000,000 Roaming €70,000,000 Price pressure and other about €50,000,000 compensate partially by savings of about €75,000,000 After Q1, I would expect a bit higher impact from a fixed line loss and a bit lower impact from the Roaming business. At Fastweb in Italy, we are confident that we will meet our growth targets on revenue and EBITDA. And with that, I would like to hand over to Louis for the Q and A. Well, to the operator for Q and A. Okay.
Thank you, you.
Simon Coles, Barclays. Your question please.
Hi, Simon Coles from Barclays. Thank you for taking the question. So the first one I guess is on the recent pricing changes. I guess it's a bit early, but I was just wondering if could give us any information about how traction is going for your new InOne product and whether you've seen any change in competition since some pricing changes from your competitors? And secondly, in the Enterprise segment, you said we saw RGUs improve this quarter, but service revenues declined.
I guess that's a function of the mix change, but is there also ARPU pressure from competition going on there? We've seen a competitor announce that they clearly want to do better in that part of the market. Thank you very much.
Well, on on on our new offer in one, it's a bit early to to really have a a good understanding. But, what we see is actually a a good take up. And, yeah, we we see we see a good momentum on mobile. We we see that it works on fixed, but it's too early really to to say how how the dynamic will be, because in the beginning, you have always been a bit another dynamic, but then in in mid term. It's too early.
But then we don't see really big big deviations to what we planned. Then, on the enterprise market development of the service revenue, overall, the development in the service revenue in our enterprise business overall it's it's quite stable. So we we were able to to grow on the subscription side on on mobile, and we have the the the impact on on roaming on the mobile and stable development in the fixed business. But what we see is in some in some in some customers, we've seen very aggressive moves from our competitors to try to enter the market. But up to now, if you you see the development of of our market shares, are in a a good and stable position.
But the price aggressiveness is there.
That's very clear. Thank you very much.
Yes. Thanks. I have a couple of questions here. Staying with Inman proposition, when you launched, you talked about initial pressure on bundled ARPU due to right grading. However, since then, Sunrise have also launched their core paper position at discount, and Salt could also enter the fixed end market.
So what makes you confident that the ARPU pressure will not be as severe and you will be able to still see upselling at a later stage. Secondly, at Faster, you are having clearly good success in mobile with four gs launch and bundling services. But at some point, you will also have increasing competition with Elliott coming in mobile. What makes you confident that the convergence strategy can still drive growth? And also, can I clarify what was the EBITDA growth this quarter excluding the regulatory changes at Parcel?
And there shouldn't be any further regulated benefit rest of the year? Thank you.
I will I will take the the the question of in one, and Mario will will come then to to fast track. You know, if if you you you go on our office on on page 15, you you see that the the the idea of our in one off. And with the flexible approach, we are also flexible in matching different price points because not every every customer needs one giga. A lot of customers are are more than happy with with, let's say, with 30 to 40 megabits per second. So I think with with our offering in one, our sales people have the ability to really react on on different customers and to offer them an attractive attractive price point.
And then with with the with the advantage of of mobile, we will be able to to really offer an attractive proposition for the household. And and then I as I mentioned, it's in our broadband household footprint. More than 1,000,000 mobiles are not with Swisscom, so there is is a potential to upsell. And then you have also a potential to upsell if if we increase our loads of broadband footprint. So we we can upsell customers who are are keen for for speed.
We can upsell them if it's a more sales job. So I think we have the the influence to to react flexible on the mobile market. And it's a bit too early to say how successful the the converse transfer of of Sunrise will be. I I don't I don't see on our our side huge impact up to now, and it's too early to say how how sold will will launch the fixed market. But I think we have a a solid positioning to defend our market position.
And on on the Italian business, first of all, we are happy with with the move of our customers to the network of Telecom Italia and the ability that we can deliver four g to our customers. Then we see software, I think we preempt or this is mobile offer, the kind of two kind of preemption of an expected EIAT market sentiment. And that was mentioned in his presentation, we see that now, already at the very early stage, that 10% of new customers are willing to buy mobile and wireline. And as we mentioned several times, you know, Iliad might be very fast in delivering mobile services, but delivering fixed line services. As you all know, it takes a little bit longer.
And I think during this period, with these attractive bundled offers, we are able to further grow our customer base. And that combined with the fiber rollout where we see lower churn, I think that's a sustainable strategy to defend against the market entrants of EDAS. And on the financials, we have an EBITDA increase of €14,000,000 compared to Q1 twenty sixteen. Around €7,000,000 comes from a one off of prior years. We don't see any additional positive impact in the remaining three quarters.
But as I mentioned, we have also higher subscriber acquisition costs because of a high number of acquired customers that contemplates more or the one off from regulatory points.
That's very helpful. Thank you.
Thank you. Next question, Frederic Boulan.
Hi, good morning. A couple of questions, please. First of all, to follow-up on the enterprise side, we saw EBITDA worsening quite sharply in Q1.
If you could discuss a little
bit the dynamics you're seeing here. Is this temporary? Is this driven by the Solutions trends and what we should expect for the rest of the year? And secondly, if you could talk a little bit about your segmentation. We're seeing quality of activity on your side with Wingo, in particular, in the last year or so.
Are you seeing any change in dynamics here between your core and discount brands or you still have a very solid segmentation? And then maybe if I may IN1, I know it's quite early day, but what do you expect will be the dynamics between the standalone price increases you've actually implemented versus the threat of people on bundling, for instance, fake telephony or benefiting mobile discounts and getting a discount versus what they're currently selling? Thank you.
So maybe Mario can take the question on EBITDA on the enterprise, but I will start Wingo. Wingo is is actually with with the launch of Wingo that's our our, let's say, online only mobile product, we have we have a good stock. And what we see is that we we are able to to attract price sensitive customers. And that the majority is coming from competition, But there is result of some price sensitive customers from from who are going on on Wingo. That's clear.
But the majority is coming from competition. Therefore, the approach with Wingo works works. And and our acquisition on on our own brand, Winko Mobile, is working well, there we are are are on on our plan. So I think the multi multi brand approach works at this time. To anyone, it's too early really to say, but clearly, we have we will have positive effect That's the upselling the upselling potential we have in the triple playoff, the share of wallet increase with mobile.
These are the positive effect. And the other side is that certainly have some customers who are who are going to who are they'll optimize themselves. But if we don't offer them such such a possibility, I I think it it would result in churn. Overall, we will have lower churn and and and upselling potential. That's why I I think we will have a better momentum within one in in the actual market condition.
And on on the enterprise business, in q one compared to to to prior year, the the loss is 7,000,000 on on on service revenue. I would expect that that trend will continue also during the next three quarters more or That's again price pressure on fixed and then and then mobile a little bit, and the other 50% are on. And I would expect that these trends will continue. On on the solution business, as we explained, it was a weak q one. I think we could really see a recovery in the next three years.
Edward explained that it was, let's say, a weak start on on the project business. There we will see some recovery. The cost savings we saw cost savings in Q1 compared to prior year of about €4,000,000 per quarter. That will continue. Small acceleration, I would expect that overall, think we will see some recovery.
You can do now your calculations of that would mean on EBITDA level, but it
will be a better EBITDA evolution in
the next three quarters than in Q1 of this year compared to prior year.
Okay. Thank you very much.
Thank you, Frederic. Next question, Jacob Bluestone, Credit Suisse.
Hi, Jacob Bluestone here from Credit Suisse. Just a couple of shorter questions. Firstly, just in terms of sort of customer perceptions of your mobile offering, I guess it's six months ago now that we have the Connect test. You've obviously had some other mobile tests since then, which sort of went more your way. But I was just interested, has there been a shift in customer perceptions, things like Net Promoter Scores, since the Connect test back in December?
Or are perceptions of your mobile offering are pretty stable or sort of heading in the right direction? So any color you can shed on that would be useful. And then just secondly, I didn't quite catch what was the decline in the MTR costs during the quarter. I think Mario ran through some of the individual cost items, but I think I might
have missed that. Thank you. Well, on the customer perception, we are doing regularly Net Promoter Score mission. We don't see an impact on our Net Promoter Score. So, the awareness, the perception of the network quality is stable, high, and clearly above our competitors.
And, yeah, that's what I can say. That's what our customers are telling us. And and we don't have a churn problem. Our churn in mobile is even lower than than a year ago. So we have a a very stable mobile business.
And then, you know, in Switzerland, a lot of marketing is done through this test. I think a test is not the whole not the whole rhythm in the market. And the the network of Cerner is certainly becoming better. That's clear. But, you know, the switch on network is a good one.
You are you are also in Switzerland, so you can talk with customers. And the check of the the billing tax on the MTR. It's on on revenue. It's minus €15,000,000 net revenue and on the cost side, €13,000,000 So we have a small benefit because the AdCemetery was a little bit reduced.
Can I maybe just ask one follow-up as well? I mean, you reported adjusted EBITDA growth slightly up, I think, 0.6%, and your guidance for the full year is down. And obviously, quite a lot of moving parts through the year, the introduction of your new plans, which you said initially is dilutive. But then I guess you also have an easier comp later in the year as a result of the roaming drag being smaller in 2017 than in 2016. Can you maybe just sort of give us a sense of through the years through 2017, which are the strong quarters, which are the weaker quarters, just given the fact that there's quite a few moving parts this year?
Thank you.
I don't think that you should do a guidance for growth, Jacob. So I think I explained the four main drivers for the full year. There I explained that we will see a little bit higher impact on fixed line loads, bit lower impact on roaming. You have moving parts. For example, roaming incoming roaming was strong this year in q one also because of the key words have been checked in in in some countries.
On the other side, East will be differently in q one and q two that relates to outbound roaming. So I think we'll take quarter after quarter and then speak to the full year guidance.
Okay. Fair enough. Thank you.
Next question, Joshua Mills.
Hi, thank you. Just a couple of questions for me on the enterprise side. So just following up on the comment that the pressure in the enterprise revenues from continued heavy price pressure. I'd be interested to know whether you're actually losing B2B contracts or whether that price pressure is just coming through as you offer discounts to existing customers. I mean and if that is the case, what kind of discount do you end up offering to customers in order to keep them on the Swisscom network?
The second one, you talked about enterprise EBITDA improving over the next few quarters.
I wonder if you have kind
of any longer term guidance on when you think revenues can stabilize. Obviously, KPN is in a similar situation facing enterprise revenue pressure at the moment, and they've targeted stabilization in the medium term. Is that something you feel you could commit to seeing the legacy declines and growth in the new services as you do today? Thank you.
Good. On the the EBITDA, Mario can come late to it. But on the development in the b two b market, so we don't have actually big losses in in the b to b market. If if I take all the the customers let's let's take the mobile market because, actually, the the the main attack today are going is are in the mobile market. We if I took all the SIM cards, we increased our SIM cards, and and then and we we have we our the win back ratio is is is is above the law.
So I I think we have a stable stable comp situation then then b two b markets, you are able to defend our position in the B2B market. But as you mentioned, it's always also a price driven game. Not only price, but price discounts are important in in such RFPs. On the other side, it this is always a very very selective approach, so that's not all to all customers. These are only a few customers where we have this this aggressive promotion.
So the main impact on on on on our our service revenue development in the enterprise market is is is driven by is driven by the roaming impact. So that was the big impact we had in in the last 4%, not by by price competition. And, again, coming back coming back on the EBITDA. So on Page 17, we showed you the distribution of the revenues. And I think you should just look at telco business, of course, that has a higher margin.
But we have five pillars in the solution business. And they are looking at the the funnel, looking at the old book, we are confident that we really have three better calls ahead than Q1, as I explained before. Mid term, I think we are well positioned, for example, in the banking vertical, we are well positioned to develop this business. Then also cloud, cloud services, I think there are midterm possibilities to grow the business at a lower margin than the telco business, but still at a decent margin and this lacks CapEx intensity. So I think that is what we can say from midterm perspective.
Yeah. But also digital solutions, the the the digitalization of the industry is actually a chance or or a potential for for Swisscom because with our capabilities ICT capabilities, we will be able to deliver more solutions. But on the other side, we have now some effect, but make sure I'm optimistic on solution base.
Thank you.
Thank you, Joshua. Next question, Karolabardelli, Deutsche Bank. Yes, good morning. It's Karolabardelli from Deutsche Bank. Thank you very much.
I have a couple of questions on SASSA, if I may. So I was wondering what is the average ARPU that you are generating on your mobile subscribers in Italy? And what kind of usage in terms of giga per month? And then I was wondering if we could have any indication on the margin that you expect to generate on the 90,000,000 voice service contract one with the public administration? And lastly, if you could elaborate a little bit on your content strategy in Italy going forward, what you intend to do?
Thank you very much.
Because we we we don't disclose the the output and the gigabytes of mobile. But you know the opposite and then you really kinda estimate the approximate in the output. But on on the margin on PA, also there, we we we don't disclose ARPU on specific customers. But you you see that we are able to to increase our market share in the market segment public administration. And now also with the deal we made with Italy, we will be able to have a good and strong position in the public administration market.
Our content strategy in Italy, so we are we are we have a partnership with with Kai. We have also specific offers to to address the market. Our intention is not to acquire now a sports rights in Italy. And maybe all I have is the 20,000,000 coming coming from the incremental revenue.
I think there we have a
we don't disclose margin per customer or contract, but we have an average margin because the advantage of FastJet is that we have a strong infrastructure that we don't need to rent infrastructure to deliver services to the customer. So that's an average margin we have on this bank.
Thank you very much. Thank you. Next question, Matthijs from Leidenhorst.
Yes. Good morning. I have only one question left. How should I look at the development of the retention costs in because it's positively impacting your adjusted EBITDA, but what is actually happening there? Because what I understood is that last year, it was significantly higher.
Could you give some more color on this subject? We had approximately 30,000 less retention cases this year compared to the prior year. But, again, so we have stable churn rates. That means we don't have a problem on the customer base. We had very high, very high retention cases throughout the quarters last year.
So that doesn't make us nervous, this 20,000 less retention. And then you have, at the low level, you have the impact of an increasing number of SIM only customers also in Swisscom. We have the SIM only offering in the market, but it's very it's at a low level. But you see there an increasing impact of SIM only costs. But overall, I would say that's a development as expected.
Thank you very much.
Next question, Giorgios Yerodiacomo.
Hi, and thank you for taking the questions. I have a couple of fast work. The first one is around there's been some news that the team may be putting up a conflict sale. I just wanted to check with you if there will be any regulatory issues with you being involved or any other issues apart from price that may keep you from being interested in that asset. And the second question of Fastweb is around the timing of the change of the billing dates to '28.
I believe that was in late February. Is it possible to have an idea of what impact it will have in your numbers going forward and whether it's just in consumer or whether some of the business customers will also be affected by the billing change? And then finally, very quickly a question on Switzerland. I just wanted to get a bit better idea of the one private plan and the logic behind it. And I I understand you are expecting to get a bit more upselling in mobile and you may lose a bit more voice lines.
What I wanted to understand is around broadband, whether the improvement you expect to see is around net additions or the mix, whether this is a tool for you to upsell higher speeds to the base? Thank you.
Maybe, I will start with with with IN1. And then Mario can come to this billing cycle and and and the regulatory environment in Italy. In one, you know, the I think that that we will be able to to to keep our our market share in this this broadband business. But the market is saturated at the end. But with with in one with an increasing ultra broadband footprint and the good TV project, we have a decent value proposition for for our customers.
But the the main the main advantage is actually coming to us and from them, the market is saturated. So the market shares will will launch it dramatically from one to the other. And that's why it is important to to work on on the share of what we're gonna say. And that's the idea behind the in one. And on the four weeks billing, there's no impact in in in the first half.
We'll start in the second We will see the impact in the second half. It's only for residential customers, not for the b to b segment, and the impact is included in the guidance. As you remember, we see for Fastweb a similar increase of EBITDA as in 2016. In 2016, of course, except the one off coming from the litigation is Telecom Italia. And around BT, right now, too early to say.
Too early in the but but let's say from from the desk, I I wouldn't see any regulatory obstacles, but we just look at situation in Italy, and then that's what we have to say around the '18.
Thank you.
Next question, James Rautzer, New Street Research.
Yes. Good morning. Thank you. Two questions, please. The first one is regarding your IN ONE product.
Going back to that, I mean, you've mentioned a few times on this call that you're kind of excited by the opportunity of around 1,000,000 people in your footprint served by other mobile operators. So two questions on that. Specifically, can you give us any guidance on how you are doing so far on upselling to that part of the base? But secondly, what's the risk on the other side? How many Swisscom mobile customers do you have, in particular in Sunrise and Salt Homes, or sorry, Sunrise Homes you could try to up sell and target your mobile customers?
And then secondly, just with regards to the FTTH build out from Fastweb, I mean, you give the 2020 target, but at the run rate you are building out, it looks like you could hit that towards the end of twenty eighteen. So as a result, I was wondering if you could kind of say, do you think you can hit that at 5,000,000 homes two years early? Or do you think actually, you will then maybe continue above 5,000,000 and see a bigger opportunity there? Thank you.
Good. On A1, as as I mentioned before, it's too early to give more details on on our performance of of n one. But, you know, we we we made the the calculation, and and we we are optimistic that we can do upselling. And and the question the second question is now, do we have further churn potential on mobile? Because in the in the areas where we don't have ultra broadband footprint.
If you go overall, we have a market share of of of strongly above 50%. So that shows that that's already there on broadband. We are in in in a good situation for a quadruple playoff. With the household advantage, I think we have a strong market to to gain market share. On the other side, the the loyalty of the mobile customers is think we are working on call it customer service on the network quality.
So I I don't think that we will have churn risk a big churn risk on mobile, therefore. Do you know how many of our customers you actually have
in the Sunrise fixed footprint?
Sunrise has a has a has a footprint, which is is is they they can they can work on on the footprint of of SWITCOM. That's clear because they are all set of SWITCOM. But, at the end, in a quadruple playoff, it's a whole whole portfolio, which is important. And it's and I think they are in a good situation. We have the we have the the the advantage of the mobile.
We have the advantage of of of the peer TV products. We we have a a good customer service. So I think there are a lot of arguments with which case for Swisscom.
Okay. Great. And then on
the the FTTH point in Italy?
So so if you look at the the FTTx, so that means ultra broadband, and there we stick to our target, 13,000,000 by 2020. I don't have the the the yearly order of plans, but if you look end of twenty sixteen, we had the 7,500,000 households in the FTTx area. And if you get if we can, it's around 1,000,000 per year, then you reach our target from 2020. But I don't know exactly the the distribution between h and f. H depends also on on on the rollout with in the JV is in between Flash Fiber and Telecom Italia.
But it means that you are running ahead of the required rate on FTTH. I mean, so do you think you could see an opportunity to to increase above the 5,000,000 homes?
Yeah. But as Mario mentioned, I really we are we are on the plan. We are not fast to kinda kinda know.
Great. Okay. Thank you.
Thank you, James. Next question, Julio Garcia, RBC.
Yes. Hello. Thank you for taking my question. Two questions. One regarding broadband.
Actually, for example, this quarter, basically, the broadband net adds were negative when actually in 2016, they were all positive. Can you give us more color about the competitive dynamics in the broadband market? We know that, for example, Sunrise is becoming more active. Do you expect this trend to change? Should we expect positive net adds in broadband in the coming quarters?
And the second question, coming back to DIAIN one, you mentioned that you don't expect revenue cannibalization from this offer. But can you help me to work out, for example, if I take that M size bundle in IN1 is 190 And I believe that the previous m offer, the price was higher. So how come we shouldn't expect any any revenue cannibalization? Thank you.
Good. On the mobile performance, as I explained in in in q one, there are different elements which led to a to a a weaker performance on the netback. This is structural elements like the the migration of all IP where customers are doing consolidation, also, CPS migration. That that's they they got the main effect. And they did more promotion oriented activities in q one.
But overall, the the the performance of of of broadband, it's fine. It's fine. So, also, we we don't have a churn really a churn problem in this market. And we we didn't want now we have the possibility to to even accelerate it. But don't don't think that the the broadband business will be the the big big growth potential.
So it can be in a saturated market. We have a stable stable situation there. And I think too early, I have to mention it several times, it's too early to to get a bit more flavor on the dynamics of v one. Okay. Operator, perhaps
a very last question before we finish this call.
Okay. Last question in this case, Sato Pudhavan, Redburn.
Hi there. I just had a question on firstly, on your roaming. So I kind of noticed in your packages, you include roaming. But I was just wondering how important that is for the Swiss consumer just to have it all included and not have to worry about it versus Sunrise's approach, which is just to add on roaming packages as and when? And then my second question was just regarding Salt.
And what are you expecting in terms of their fixed coverage when they're expected to launch later this year? Thanks.
Okay. On on roaming, so our NASA Infinity tariffs, they have roaming included. Depends on the tariff plan more or less days. And then what we see actually is that this really stimulates the rolling traffic. Two third of the of the of the roaming traffic actually is done in the bundle.
On the other side, we see also with this, see also a simulation of the roaming packages. So overall, the the the roaming volume is is in in in in data, it is strongly growing. And on salt, the the the footprint, you know, I can't totally make a forecast. Or what could salt do? They can take the footprint of of the whole set in the five to the whole footprint in Switzerland.
This will be approximately 30% of the household. That's one of the possibility. And the second possibility, they can come to Swisscom and buy wholesale offers from Swisscom. And then they they would have a a broad footprint in order to have a footprint in our Swiss Switzerland. But this can do everybody in in in Switzerland.
Have they approached sorry. And have they approached you so far? And if they have, if those kind of talks, how have those talks gone?
Yeah. But they all they always have talked to us on on wholesale also on our radar because we we don't
Sorry. What was that? Phone to the
Oh, it's a customer of our wholesale process. But already today, it is not always the case. And and if someone is coming to Swisscom and ask for for wholesale products, we would we would offer them. We have the commercial normal products with which everybody can buy, and we will have we will send you off for them this product.
Okay. Thanks very much.
Thank you. Well, also thanks to to the operator. And with that, I would
like to
conclude today's presentation and call. Also, thank you to all of you for your participation. If you should have any further questions left, please do not hesitate to contact us from the IR team. We've said again, thank you for your participation and a good day and goodbye.
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