Good morning, ladies and gentlemen. Welcome to the Swisscom first quarter results 2017. With us today, as usual, Urs Schaeppi, Mario Rossi and Louis Schmid. Louis, the floor is yours.
Good morning, ladies and gentlemen, welcome to Swisscom's first quarter results presentation 2017. My name is Louis Schmid, Head of Investor Relations, and with me are our CEO, Urs Schaeppi, 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 Fastweb. 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 Urs to start his part of the presentation on slide number four. Urs?
Good morning, ladies and gentlemen. If you go to slide four, you can see that we have a solid start into the year. On the branding side, we are really the trust brand in Switzerland. On innovation, we made a lot of innovation. Just as an example, we increased our coverage for 4G+, and we also launched some new products, which I will come later to it. We were able 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, a strong result in the Q1. 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. Overall, a good first quarter. Solid financial situation. We also confirmed our A ratings, and we have unchanged guidance for 2017. If you go on slide five, you see the market performance of Swisscom. Easy said, it's good 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 million connections. The net adds are, let's say, stable or -4,000. The main reasons behind it is that corporates or SMEs who are under cost pressure optimize their broadband connections. That's one dynamic. The market is saturated. On the other side, we have the CPS migration or IP migration.
Even in such an environment, we were able to have a stable broadband business and also good KPIs in the broadband business. I'm optimistic for the performance of broadband in the next quarters because with inOne, our new quadruple play offer, we will gain more momentum. We have a further rollout of our ultra-broadband footprint. We see that in areas where we have an ultra-broadband footprint, we have better sales figures. Also our Swisscom TV product is strong and has a clear USP. I'm optimistic for the future on the development of the broadband business. TV, you see that we were able to grow. On mobile postpaid, solid KPIs, a good market performance, and a small growth in a saturated market.
On the fixed voice business, 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. This is substitution. That's actually not lost to competition. Fastweb has a good evolution. You see it on the right side of the slide, a good net adds 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 CHF 54 million. If you go deeper in it, you can see that more than 40% of this decline is driven by one-offs. This is mainly exchange rate effect. Second, it's hardware business. Hardware business always a bit seasonality in it. The real decline in the service revenue is much lower.
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 see the EBITDA. Actually, a stable or flat situation in the EBITDA compared to the previous year. If you go deeper into Swisscom Switzerland, you see that we lost on the EBITDA level CHF 16 million. CHF 11 million is coming from roaming. CHF 19 million is coming from the loss of fixed lines. Then through cost savings, we could compensate this decline on the service revenue so that as a result, we have this minus CHF 16 million EBITDA in Swisscom Switzerland. If you go on slide eight, you see that we have a solid market share, and we will continue to defend this market share. In mobile, we have 60%.
Broadband, if you take or if you include also the wholesale market shares, we have 67% market share. On TV, a growing market share of 32%. Slide nine shows you that we continue to invest in our networks. In Q1, we had 3.6 million households which are connected with ultra broadband, which have a speed above 50 megabits. We have 2.1 million households which have a speed above 100 megabits per second. A fast increasing footprint in our ultra broadband network. In wireless, we are also building out our networks. We have 99% 4G coverage. We have a 4G+ coverage above 40%, and this leads to speeds up to 300 megabits per second. This shows our leading position also in the mobile market. On the right side of the chart, just some remarks to the tests. Tests is the marketing instrument of Switzerland.
A lot of competitors do the marketing over tests. We don't see our company over tests. There are some tests which shows you that there are a lot of tests where Swisscom is the winner, and it shows that Swisscom has a leading infrastructure. We will do the necessary thing 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, Wingo Mobile Fair Flat. A very competitive offer on the price level for the more price-sensitive markets 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. Also a Multi Device proposition.
Page 11 shows you the wireless performance in the retail market. A solid postpaid momentum. ARPU goes up. A stable churn. Stable low churn figures in the postpaid markets and a good momentum on bundling. On the left side of the chart, you see that we have 3.3 million postpaid customers. Out of them, 70% are Infinity customers. 23% are in bundles of these postpaid customers. The ARPU is overall stable. The blended ARPU is more or less stable. Infinity ARPU is slightly going back. Some remarks to it. That bit is due to a mix because Infinity is still a bit growing. Lower Infinity customers are coming in the cluster. That's the main effect. If I look deeper to the Infinity customer base, we see a stable ARPU in the Infinity customer base. It's mainly acquisition-driven, mix-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. There we have a mixed picture. TV, which is growing on a year-on-year level of 115,000. Broadband, we have a growth of 20,000 year-on-year. 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. This is substitution, mainly substitution and consolidation. The good news is that the ARPU is stable. We have also introduced the figures 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 CHF 680,000. Overall, minus CHF 32 million, 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. Bundles went up by volume by 18% on a year-on-year level. The top line is growing by CHF 72 million. We have a good and strong momentum in the converged business. On the left side of the chart, you see the figures, the subscription, and the bundles. In Q1, we had 1.7 million bundles, triple-play or fixed mobile converged bundles. From the mobile revenue-generating units, 15% are in this bundle. That shows that we have still a lot of potential to increase the mobile penetration in the bundles. In the middle of the page, you see the ARPU of our bundles.
This is slightly going down because also of a mixed effect of the new subscription. Because the penetration is growing, then we get lower tariffs in it. That's a mixed effect. Some impacts on roaming, and then some impacts of opt-outs of the voice line. These are the main reasons of the ARPU evolution. Overall, growing revenue with bundles. On page 14, you see some explanation to our new offer, our new price plan inOne. 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 everything. We see this clear trend to a converged market. The customer is asking for it. He's asking for flexibility and value for money.
The strategy of Swisscom in this market is a value-oriented approach. We don't want to decrease our prices. Our ambition is to maintain the price level. The philosophy behind inOne is more for more. What we are doing with our new offer inOne, we are combining our flagship offers, Vivo, that's the triple-play offer, with our Infinity offer. Then it's a bundle discount on the top. On slide 15, you see the structure of this new tariff plan. It's a modular concept. Then you can pick out different bundles. Let's say a large bundle on mobile, a medium bundle on the internet, and then also a large bundle on TV according to your demands or your desires. If you are bundling in more mobile, you see it on the right side of the chart on the bottom.
You see as more mobile 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 in the household. On slide 16, you see why we are doing this. We want to defend 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 million in these households have the mobile with other operators, and this shows actually the potential to increase the penetration of mobile to our inOne offer. 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. 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 shows our strong positioning in the B2B market. The revenue in the B2B market was in 2016, approximately CHF 2.4 billion. From the CHF 2.4 billion, approximately 45% of the revenue is coming out of the telecommunication business, wireless and wireline.
The other 45% is coming out of the solution business. There we have different business units. We have vertical solutions, as an example, for the banking. We have cloud solutions. We have workplace solutions. It shows a strong solution portfolio with 45% and with a mid-term potential to grow. The last 10% of the revenue is more hardware driven or other capabilities. The enterprise development on slide 18. You see that 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. This leads to an overall stable ARPU development. The decline in the voice business is mainly driven through consolidation and IP migration. The service revenue is overall flat.
On a year-on-year base, we lost 8 million CHF, so it is more or less flat in development of the service revenue. The solution revenue is slightly lighter in Q1, and there are actually two effects. One is we have always some seasonality in the project business in the B2B market. On the other side, we had a price pressure last year with some projects in the workspace and collaboration area. That is why the revenue in Q1 is a bit lower. 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 million CHF 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.
We continue to increase our ultra-broadband footprint in Italy, and our target is to have, in 2020, a footprint of 5 million households with more than one gigabit per second speed. We will have a footprint of 8 million households with approximately 200 megabits and 5.5 million with a speed, let us say between 20 and 200 megabits. 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 were able to increase our market share slightly. Also on the revenue side, we are able to increase our revenue market share in the broadband business. The performance of the net balance in Q1 is good.
We were able to grow also compared to the Q1 in 2016. Overall, a good market momentum of Fastweb. Slide 23 shows you the wireless performance. We launched successfully our new 4G offer. 9% of the new customers are buying a bundled offer, mobile and wireline. We see in this converged offer a lower churn by three percentage points. Lower churn through a converged offer. Fastweb corporate performance on slide 24. Also here, we have an increasing revenue market share in the corporate market, and we have also very strong proposition in the corporate market. Therefore, we are optimistic to have a good development in the corporate market also in the next quarter. Slide 25 shows you the financial performance. Solid performance, 3% more revenue, 11% higher EBITDA, and a positive free cash flow.
We confirm our expectation on the financial development of Fastweb. I would like now to hand over to Mario Rossi for the financials. Mario?
Thank you, Urs. From my side, a few additional remarks on the financials. First, as you have seen, we report in the new segment reporting. Swisscom Switzerland now consists of three segments: 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 the 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 CHF 1.5 billion for the first quarter. The decline comes mainly from service revenue. There we saw CHF 29 million. There we saw a flat development on wireless, even a slight increase of CHF 3 million compared to prior year. We lost CHF 32 million on wireline. CHF 15 million come from the fixed line loss. We have two additional effects.
We don't charge any more for the TV activation phase. The third effect is the bundle discount. The Tariff effect is booked on wireline. The enterprise business saw reduced revenues by 4.7%. We land at CHF 612 million revenues for the first quarter. A fairly stable evolution on service revenue with -CHF 7 million. 50% comes from fixed, 50% from mobile, and mobile is the impact of the roaming. As was mentioned, we had kind of a weak start in the solution business. There we lose CHF 16 million compared to the prior year. There especially had some weak start in the UCC workplace business. We will see a 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, what that will mean for their operation.
On the wholesale business, there we have two effects. Less revenues from MTR. An MTR reduction among the mobile operators, CHF 15 million. That's compensated by additional incoming roaming revenues of about CHF 12 million. I think Fastweb, Urs 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, there we have three different effects. We have higher SOC of CHF 11 million. First of all, we changed the model in 2016 related to the TV boxes. They are now booked as OpEx. That has, in the first quarter, an impact of CHF 16 million. We have higher router subsidies of CHF 6 million. We have less wireless SOCs of CHF 11 million because we have less retention cases.
You remember last year, we had extremely high retention number in the Swiss business. On goods purchased and other. We have lower MTRs and lower international voice-side termination fees. Because of the lower hardware revenues, of course, we had also lower goods related to the hardware business. On the indirect costs, as was mentioned, we are on track to deliver the CHF 75 million. 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 stay there at CHF 928 million, we were able to keep the EBITDA margin at a solid 41.3%. I would say approximately 50% of the pressure on top line in the service revenue were compensated by cost reductions in the Swiss business. Fastweb clearly benefits from the revenue increase and has stable costs.
In the costs, we have two effects. One is higher subscriber acquisition cost because we have a high number of acquired customers. The second one is we have a change in the regulated prices on the bitstream booked in Q1. Below EBITDA and EBIT, I think there are two points to mention. Lower interest expenses, they stand at CHF 36 million. We will see further savings in the future. In mid of July, there's a CHF 600 million bond deal with a coupon of 3.75%. We are more than confident that we will create some savings on this side. On the tax rate, you see here in Q1, the high tax rate of 25% compared to the expected one of 21%. There we have two effects. In Q1, there's adjustment of a prior year tax loss in the Swiss business of CHF 7 million.
We have CHF 8 million corrections of prior year assessment for the year 2012-2015, allocation of profits to different cantons. Again, the tax rate long-term will remain at 21%. On page 31, on CapEx, only one remark. We had, let's say, low CapEx activity in FTTX environment in Switzerland. That's just seasonal reasons. We had a very cold January, which created limitation to the construction activities in Switzerland. We will invest in the fiber area as expected, around CHF 600 million 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 CHF 186 million for the AGFA case. This case is still pending at the Federal Supreme Court. We don't know when we will see a final decision. Net debt at Q1 stands at CHF 7.7 billion, which is 5% below prior year.
Finally, coming to the outlook. As mentioned, the outlook is unchanged. The four main drivers for the decreased EBITDA level in the Swiss business was line loss, CHF 50 million, roaming, CHF 70 million. Price pressure and other, about CHF 50 million, compensated partially by savings of about CHF 75 million. After Q1, I would expect a bit higher impact from 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. With that, I would like to hand over to Louis for the Q&A. To the operator for the Q&A.
Okay.
Thank you, Louis. Ladies and gentlemen, for questions, please press star 14, star 14. To withdraw a question, dial star 15. Thank you. Simon Coles, Barclays, your question, please.
Hi, Simon Coles from Barclays. Thank you for taking the question. The first one, I guess, is on the recent pricing changes. I guess it's a bit early, but I was just wondering if you 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. Secondly, in the enterprise segment, we saw RGUs improve this quarter, but service revenues decline. 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.
Good. On our new offer, inOne, it's a bit early to really have a good understanding. What we see is actually a good take-up, and we see a good momentum on mobile. We see that it works on fixed, it's too early really to say how the dynamic will be. Because in the beginning, you have always a bit another dynamic than in mid-term. It's too early. We don't see really big deviations to what we planned. On the enterprise market development of the service revenue. Overall, the development in the service revenue in our enterprise business is quite stable. We were able to grow on the subscription side on mobile. We have the impact on roaming on the mobile, and stable development in the fixed business.
What we see in some customers, we've seen very aggressive moves from our competitors who try to enter the market. Up to now, if you see the development of our market shares, we are in a good and stable position. The price aggressiveness is there.
That's very clear. Thank you very much.
Yeah, thanks. I have a couple of questions. Staying with inOne proposition. When you launched, you talked about initial pressure on bundle ARPU due to right grading. However, since then, Sunrise have also launched their Sunrise One proposition at discount, Salt could also enter the fixed line market. What makes you confident that the output pressure will not be as severe and you will be able to still see upselling at a later stage? Secondly, at Fastweb, you are having clearly good success in mobile with 4G launch and bundling services. At some point, you will also have increasing competition with Iliad coming in mobile. What makes you confident that the convergence strategy can still drive growth? Also, can I clarify, what was the EBITDA growth this quarter excluding the regulatory changes at Fastweb? There shouldn't be any further regulated benefit rest of the year.
Thank you.
I will take the question of inOne. Mario will come then to Fastweb. If you go on our offer on page 15, you see the idea of our inOne offer. With the flexible approach, we are also flexible in matching different price points, because not every customer needs one giga. A lot of customers are more than happy with, let's say, 30 to 40 megabits per second. I think with our offering inOne, our salespeople have the ability to really react on different customers and to offer them an attractive price point. Then with the advantage of mobile, we will be able to really offer an attractive proposition for the households. As I mentioned it, in our broadband household footprint, more than 1 million mobiles are not with Swisscom, so there is a potential to upsell.
You have also a potential to upsell if we increase our ultra broadband footprint, we can upsell customers who are keen for speed. We can upsell them, and it's more a sales job. I think we have the influence to react flexible on the mobile market. It's a bit too early to say how successful the converged offer of Sunrise will be. I don't see on our side a huge impact up to now, it's too early to say how Salt will launch the fixed market. I think we have a solid positioning to defend our market position.
On the Italian business, first of all, we are happy with the move of our customers to the network of Telecom Italia and the ability that we can deliver 4G to our customers.
With this offer, I think we preempt, with this mobile offer, the two kinds of preemption of an expected Iliad market entrance. As Urs mentioned in his presentation, we see now already at the very early stage that 10% of new customers are willing to buy mobile and wireline. As we mentioned several times, Iliad might be very fast in delivering mobile services, but delivering fixed line services, as you all know, it takes a little bit longer. I think during this period, with these attractive bundle offers, we are able to further grow our customer base. That combined with the fiber rollout where we see longer term, I think that's a sustainable strategy to defend against the market entrance of Iliad. On the financials, we have an EBITDA increase of CHF 14 million compared to Q1 2016.
Around CHF 7 million come from a one-off for prior years. We don't see any additional positive impact in the remaining three quarters. As I mentioned, we have also higher subscriber acquisition costs because of the high number of acquired customers. That compensates more or less the one-off from a regulatory point.
That's very helpful. Thank you.
Thank you. Next question, Frédéric Boulanger.
Hi, good morning. 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? Secondly, if you could talk a little bit about your segmentation. We're seeing quite a lot 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? Then maybe, if I may, on inOne.
I know it's quite early day, what do you expect will be the dynamics between the standalone price increases you've actually implemented versus the threat of people unbundling, for instance, fixed telephony or benefiting from mobile discount and getting a discount versus what they're currently selling? Thank you.
Maybe Mario can take the question on EBITDA on Enterprise, I will start with Wingo. With the launch of Wingo, our, let's say, online-only mobile product, we have a good start. What we see is that we are able to attract price-sensitive customers. That the majority is coming from competition. There is also some price-sensitive customers from Swisscom who are going on Wingo. That's clear. The majority is coming from competition. Therefore, the approach with Wingo works. Our acquisition on our own brand, Swisscom Mobile, is working well. There we are on our plan. I think the multi-brand approach works at this time. To inOne, it's too early really to say, clearly, we will have positive effects. That's the upselling potential we have in the triple-play offer. The share of wallet increase with mobile. These are the positive effects.
On the other side, we will certainly have some customers who will optimize themselves. If we don't offer them such a possibility, I think it would result in churn. Overall, we will have lower churn and upselling potential. That's why I think we will have a better momentum with inOne in the actual market condition. On the Enterprise business in Q1 compared to prior year, the loss is CHF 7 million on service revenue. I would expect that trend will continue also during the next three quarters, more or less. That's again, price pressure on fixed and mobile a little bit, and the other 50% are roaming. I would expect that these trends will continue. On the solution business, as explained, it was a weak Q1. I think we will see a recovery in the next three years.
As was explained, it was, let's say, a weak start on the project business. There we will see some recovery. We saw cost savings in Q1 compared to prior year of about CHF 4 million per quarter. That will continue. Small acceleration, I would expect. With that, overall, I think we will see some recovery. You can do now your calculation 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, Jakob Bluestone, Credit Suisse.
Hi. Jakob Bluestone here from Credit Suisse. Just a couple of shorter questions. Firstly, just in terms of customer perceptions of your mobile offering. I guess it's six months ago now that we had the Connect test. You obviously had some other mobile tests since then, which went more your way. I was just interested, has there been a shift in customer perceptions, things like Net Promoter Scores, since the Connect test back in December? Are perceptions of your mobile offering pretty stable or heading in the right direction? Any color you can shed on that would be useful. 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. I think I might have missed that. Thank you.
Well, on the customer perception. We are doing regularly Net Promoter Score measurements. We don't see an impact on our Net Promoter Score. The awareness, the perception of the network quality is stable, high, and clearly above our competitors. Yeah, that's what I can say. That's what our customers are telling us. We don't have a churn problem. Our churn in mobile is even lower than a year ago. We have a very stable mobile business. In Switzerland, a lot of marketing is done through these tests. I think a test is not the whole rhythm in the market. The network of Sunrise is certainly becoming better. That's clear. The Swisscom network is a good one. You are also in Switzerland, so you can talk with customers. Jakob, the impact on the MTR. On revenue, it's CHF -15 net revenue.
On the cost side, CHF -13 million. We have a small benefit because the asymmetry was a little bit reduced.
Can I maybe just ask one follow-up as well? You reported adjusted EBITDA growth slightly up, I think +0.6%.
Your guidance for the full year is down. There are obviously quite a lot of moving parts through the year, the introduction of your new plans, which you said initially is dilutive. 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 we should do a guidance per quarter, Jakob. 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 loss, bit lower impact on roaming. You have moving parts, for example, incoming roaming was strong this year in Q1 also because of the Ski World Championship in St. Moritz. On the other side, easily be differently in Q1 and Q2 that relates to outbound roaming. I think we will take quarter after quarter and then we speak to the full-year guidance.
Okay. Fair enough. Thank you.
Next question, Joshua Mills.
Hi. Thank you. Just a couple of questions from me on the enterprise side. 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. If that is the case, what kind of discounts 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 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 EBITDA, Mario can come later to it. On the development in the B2B market. We don't have actually big losses in the B2B market. If I take all the customers, let's take the mobile market, because actually, the main attack today are in the mobile market. If I took all the SIM cards, we increased our SIM cards, and the win-back ratio is above the loss. I think we have a stable comp situation in the B2B market. We are able to defend our position in the B2B market. As you mentioned it, this is always also a price-driven game. Not only price, but price discounts are important in such RFPs. On the other side, this is always a very selective approach. That's not to all customers. These are only a few customers where we have this aggressive promotion.
The main impact on our service revenue development in the enterprise market is driven by the roaming impact. That was the big impact we had in the last quarters and not by price competition.
Again, coming back on the EBITDA. On page 17, we showed you the distribution of the revenues, I think we shouldn't just look at telco business. Of course, that has a higher margin, but we have five pillars in the solution business. There, looking at the funnel, looking at the order book, we are confident that we really have three better quarters ahead than Q1, as I explained before. Midterm, I think we are well-positioned, for example, in the banking verticals. We are well-positioned to develop this business. Also 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 with less CapEx intensity. I think that is what we can say for midterm perspective.
Also digital solution, the digitalization of the industry is actually a chance or a potential for Swisscom because with our ICT capabilities, we will be able to deliver more solutions. On the other side, we have now some effects, midterm, I'm optimistic on solution business.
Thank you.
Thank you, Joshua. Next question, Carola Bardelli, Deutsche Bank.
Good morning. It's Carola Bardelli from Deutsche Bank. Thank you very much. I have a couple of questions on Fastweb, if I may. 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 gigabit per month? I was wondering if we could have any indication on the margin that you expect to generate on the EUR 90 million voice service contract won with the public administration. Lastly, if you could elaborate a little bit on your content strategy in Italy going forward and what you intend to do. Thank you very much.
We don't disclose the ARPU and the gigabytes of mobile. You know the offers, and then you can estimate approximately the ARPU. On the margin on PA, also there, we don't disclose ARPU on specific customers. You see that we are able to increase our market share in the market segment public administration. Now also with the deal we made with Tiscali, we will be able to have a good and strong position in the public administration market. Our content strategy in Italy. We have a partnership with Sky. We have also a specific offer to address the market. Our intention is not to acquire now sports rights in Italy. Maybe, Carola, the EUR 20 million coming from the incremental revenue.
We don't disclose margin per customer or contract, but we have an average margin because the advantage of Fastweb is that we have a strong infrastructure, that we don't need to rent infrastructure to deliver services to the customer. That's the average margin we have on this EUR 20 million.
Thank you very much.
Thank you. Next question, Matthijs Leijenhorst.
Yes. Good morning. I have only one question left. How should I look at the development of the retention costs, because it's positively impacting your adjusted EBITDA. What is actually happening there? What I understood is 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. Again, we have stable churn rates. That means we don't have a problem on the customer base. We had very high retention cases through all the quarters last year. That doesn't make us nervous, this 20,000 less retention. Then at the low level, you have the impact of an increasing number of SIM-only customers, also in Swisscom. We have a SIM-only offering in the market, it's at a low level. You see there an increasing impact of SIM-only customers. Overall, I would say that development as expected.
Thank you very much.
Next question, Georgios Ierodiaconou.
Hi. Thank you for taking the questions. I have a couple on Fastweb. The first one is around, there's been some news that BT may be putting up a conference 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. The second question on Fastweb is around the timing of the change of the billing date 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? Finally, very quickly, a question on Switzerland.
I just wanted to get a bit better idea of the inOne tariff plan and the logic behind it. 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 inOne. Then Mario can come to this billing cycle and regulatory environment in Italy. inOne, I think that we will be able to keep our market share in this broadband business. The market is saturated at the end. With inOne, with an increasing ultra-broadband footprint and the good TV product We have a decent value proposition for our customers. The main advantage is actually coming to us and cross-sell. The market is saturated, so the market shares will not shift dramatically from one to the other. That's why it is important to work on the share of wallet upselling. That's the idea behind the inOne.
On the four weeks billing, there's no impact in the first half. We will see the impact in the second half. It's only for residential customers, not for the B2B segment.
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 with Telecom Italia. Around BT, right now.
It's too early to say.
Too early. Let's say from the desk, I wouldn't see any regulatory obstacles. We just look at the situation in Italy, and then that's what we have to say around the BT.
Thank you.
Next question, James Ratzer, New Street Research.
Yes, good morning. Thank you. Two questions, please. The first one is regarding your inOne product. Going back to that. You've mentioned a few times on this call that you're excited by the opportunity of around 1 million people in your footprint served by other mobile operators. 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? Secondly, what's the risk on the other side? How many Swisscom Mobile customers do you have, in particular in Sunrise and Salt Home, who could try to upsell and target your mobile customers? Secondly, just with regard to the FTTH build-out from Fastweb. You've given a 2020 target, but at the run rate you are building out, it looks like you could hit that towards the end of 2018.
As a result, I was wondering if you could say, do you think you can hit that 5 million homes two years early? Do you think actually you will then maybe continue above 5 million and see a bigger opportunity there? Thank you.
Good. On inOne. As I mentioned it before, it's too early to give more details on our performance of inOne. We made the calculation, and we are optimistic that we can do upselling. The second question is now, do we have further churn potential on mobile? Because in the areas where we don't have ultra broadband footprint. If you go overall, we have a market share of strongly above 50%. That shows that already there on broadband, we are in a good situation for a quadruple play offer. With the household advantage, I think we have a strong argument to gain market share. On the other side, the loyalty of the mobile customers is big. We are working on customer service, on the network quality. I don't think that we will have a churn risk, a big churn risk on mobile, therefore.
{crosstalk} Do you know how many mobile customers you actually have in the Sunrise fixed footprint?
Sunrise has a footprint. They can work on the footprint of Swisscom. That's clear, because they are a wholesaler of Swisscom. At the end, in a quadruple play offer, it's the whole portfolio which is important. I think there we are in a good situation. We have the advantage of the mobile, we have the advantage of the TV products. We have a good customer service. I think there are a lot of arguments which play for Swisscom.
Okay, great. Then on the FTTH point in Italy.
If you look at the FTTX, so that means ultra broadband. There we stick to our target, 13 million by 2020. I don't have the yearly rollout plans. If you look end of 2016, we had 7.5 million households in the FTTX area. If we build around 1 million per year, then we reach our target on 2020. I don't know exactly the distribution between H and S. H depends also on the rollout within the JV within Flash Fiber with Telecom Italia.
It does seem you are running ahead of the required rate on FTTH. Do you think you could see an opportunity to increase above the 5 million homes?
As Mario mentioned, really we are on the plan. We are not fast than announced.
Great. Okay. Thank you.
Thank you, James. Next question, Julio Arciniega, RBC.
Yes. Hello. Thank you for taking my question. Two questions. One regarding broadband. I see that, 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? The second question, coming back to the inOne. You mentioned that you don't expect revenue cannibalization from this offer. Can you help me to work out, for example, if I take the M size bundle in inOne, it's CHF 190. I believe that the previous M offer, the price was higher. How come we shouldn't expect any revenue cannibalization? Thank you.
On the mobile performance, as I explained, in Q1, there are different elements which led to a weaker performance on the net adds. It is structural elements like the migration of All IP where customers are doing consolidation. Also CPS migration. These are the main effects. There's a bit more promotion-oriented activities in Q1. Overall, the performance of broadband, it's fine. Also, we don't have really a churn problem in this market. With inOne now we have the possibility to even accelerate it. Don't think that the broadband business will be the big growth potential for Swisscom. We are in a saturated market. We have a stable situation there. As I have mentioned several times, it's too early to give a bit more flavor on the dynamics of inOne.
Okay. Operator, perhaps a very last question before we finish this call.
Okay, our last question in this case, Sarab Purawang, Redburn.
Hi there. I just had a question firstly, on your roaming. I noticed in your packages you include roaming, I was just wondering how important that is for the Swiss consumers 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. My second question was just regarding Salt. What are you expecting in terms of their fixed coverage when they're expected to launch later this year? Thanks.
Okay. On roaming. Our Natel Infinity tariffs, they have roaming included. Depends on the tariff plan, more or less days. What we see actually is that this really stimulates the roaming traffic. Two-third of the roaming traffic actually is done in the bundles. On the other side, with this we see also a stimulation on the roaming packages. Overall, the roaming volume in data is strongly growing. On Salt, the footprint, I can't only make a forecast. What could Salt do? They can take the footprint of the wholesaler in fiber to the home footprint in Switzerland. This will be approximately 30% of the households. That's one of the possibilities. The second possibility, they can come to Swisscom and buy wholesale offers from Swisscom. They would have a broad footprint or they would have a footprint in all Switzerland.
This can do everybody in Switzerland.
Sorry. Have they approached you so far? If they have those kind of talks, how have those talks gone?
They always have talks with us on wholesale also on other areas. We don't disclose now the detail of our talks. Salt is a customer of Swisscom Wholesale.
Sorry, what was that? Salt is a?
Salt is a customer of our wholesale products, already today. This was always the case. If Salt is coming to Swisscom and ask for wholesale products, we will offer them. We have the commercial normal products which everybody can buy. We would certainly offer them this product.
Okay, thanks very much.
Thank you. Well, also thanks to the operator. With that, I would like to conclude today's presentation and call. 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. With that, again, thank you for your participation, and a good day and goodbye.
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