Good morning, ladies and gentlemen. Thank you for joining the Swisscom Q3 2026 results, hosted by Christoph Aeschlimann, Eugen Stermetz, and Louis Schmid. I am now handing over to Louis Schmid. The floor is yours.
Good morning, ladies and gentlemen, and welcome to Swisscom's Q3 2026 results presentation. My name is Louis Schmid, Head of Investor Relations, and with me are our CEO, Christoph Aeschlimann, and Eugen Stermetz, our Chief Financial Officer. Let us now move to page two with the agenda of today. As you can see, our CEO starts the presentation with chapter one and a quick overview on Q3 highlights and the financial performances of Q3. Then in chapter two, Christoph presents the business update for Switzerland and Italy. In the second part of today's results presentation, Eugen runs you through chapter three with our financials, including the confirmation of our full-year guidance. With that, I would like to hand over to Christoph to start his part. Christoph?
Thank you, Louis, and welcome from my side to this Q3 2026 call, where I am delighted to report another positive quarter in which we are advancing our strategic priorities. I move on directly to page number four, group overview. We are making good progress and are successfully executing our value strategy both in Switzerland and in Italy, and we have been able to reduce the service revenue decline in both countries, which allow us also to confirm the 2026 guidance with a growing EBITDA and a growing operating free cash flow as expected and announced in February this year. We also were able to win all connect tests in Switzerland, showing that we are number 1 in service excellence, winning the hotline connect test, the shop test, network test, and the best app test with a record and unique 1,000 out of 1,000 points.
We have also made big steps in shaping the future of B2B. We are carving out and creating a digital transformation champion for Switzerland as focusing the Swisscom B2B unit on trusted connectivity and trusted IT infrastructure in cloud, cyber, and AI, and strengthening at the same time the leadership team, which will allow us to accelerate growth and profitability in both topics going forward. Also in Italy, we continue innovating, and the integration is fully on track, and we have a strong synergy delivery in 2026, as already previously announced. Moving to slide number five, you can see that we are delivering good financial results.
I will not go into the details on the Q3 numbers, as Eugen will do this in his section, but on the right-hand side, you can see that we have higher operating free cash flow year-to-date coming out of Switzerland and out of Italy, on the back of the synergies in Italy, bringing us to CHF 1.79 billion of operating free cash flow, up CHF 184 million for the first nine months. Eugen will go into the details of all the numbers, both for the quarter and the year-to-date for Italy and Switzerland. With this, I will move on directly to the business update for Switzerland, and we will go to page number seven. Before we go into the details of Switzerland, maybe just one recap of our priorities to grow free cash flow this year, but also valid for next year.
We want to achieve stable free cash flows from Switzerland and growing free cash flows from Italy. In order to achieve this, we are focusing in Switzerland on managing the telco top line, managing the telco service revenue decline, working very hard on efficiencies, delivering cost savings, and delivering profitable IT growth in Switzerland. In Italy, it is similar but a bit different. We are driving the integration to capture the synergy potential. We are about halfway through end of this year, delivering at least 300 out of the 600 million that we plan. We are also working on the telco service revenue turnaround, as you know, and as in Switzerland, we are scaling in IT and also in energy in Italy.
Now, moving forward to the update of Switzerland on page number eight, we dive into the B2C business, where we continue our quality leadership and portfolio initiatives to drive our growth and value generation. You can see that after the price increase we have executed on the main brand in April, the churn has now further normalized both on mobile and broadband, and we have positive net adds again on the mobile side with +18,000, which is very much in line what we have seen last year in Q3. Also the broadband side, we were able to stabilize at -7,000, and we are still working on further improving the broadband trends, but at the moment, at least the RGU development is stable.
On the ARPU front, we were able to stabilize largely both the mobile and the broadband ARPUs, sort of the second brand shift offsetting the price increase on the main brand that we have executed. Overall, both together lead to stable ARPUs, both on mobile and on the broadband side. We have been able to win all the connect tests. We already talked about this. This is a demonstration of our quality leadership in Switzerland across all customer touchpoints. We also launched a new product proposition for the younger segment, so people under the age of 28, which we called the Young Benefit. This has actually delivered very encouraging inflow. We have more than doubled our ARPU inflow in this segment post-launching this proposition, and we will continue to push it going forward in the coming months.
We also see very strong interest on the security portfolio side, with net adds also up more than 50% quarter-over-quarter. This also shows that consumers are more and more aware of security problems and that they need protection on the security side. We will continue to reinforce our portfolio and the security proposition, as well as complementing it with our myAI proposition, which now has over 100,000 users. Also, an encouraging sign that we might be able to monetize the AI side going forward in the coming years. We are executing also the price increase on the second brands, +CHF 1 on Wingo and Migros Mobile, which is roughly going as expected in our case. Also important, I think, for the B2B is the expansion of our retail presence.
We did an agreement with MediaMarkt to enter 10 MediaMarkt stores with a dedicated Swisscom and Wingo presence, which allows us to further increase our assisted channel footprint. Now moving on to B2B on page nine. The operational trends are broadly consistent compared to the last quarters, with continued ARPU pressure both on mobile and on broadband, slightly or partly offset by a higher ARPU, especially driven by SME actions that we did on price adjustments and better pricing discipline in this segment. You can see that the ARPU is slightly up to CHF 36 compared to the last quarter of CHF 35. We also have quite good traction on the beem side.
beem delivering a couple of millions of revenues this year, also helping us offset some of the ARPU pressure and also showing that the integrated connectivity and security offering is attractive to our customers, and we will continue to invest and push this offer going forward, in particular next year. Next to telco, we continue to focus on the IT side. We were able to deliver 8 million revenue growth quarter-on-quarter. We have quite good momentum in cloud, workplace, and security services on the IT side. We are further expanding our AI offering. We were able to win quite a number of new customers. Profitability at the same time is also up 5 million, which is 14%, which I am very happy about, that we are able to grow and at the same time further improve profitability.
We do expect profitability to continue to increase in the next quarter. To help doing this, we have taken some measures on the B2B side of structural nature. As we already announced, we are carving out and bundling together all digital transformation software and data capabilities in one unit called Swisscom Digital Technology, which allows us to position Swisscom as a national champion in this area and accelerate the growth coming out of this segment. At the same time, we can simplify our existing B2B offering and focus on our core offering, delivering trusted connectivity and IT infrastructure, in particular security cloud and AI infrastructure for industries in Switzerland. I am convinced that these changes will help us drive further growth and profitability going forward, in particular when we look into 2027 and 2028. Now moving on to network and wholesale on page 10.
We were able to further increase 5G+ coverage to 90%, up 2% year-on-year, building out more FTTH connections. We now stand at 59% FTTH coverage, which is up 4.6% year-on-year. We had the excellent news in the FTTH rollout decision, where the Federal Administrative Court overturned the COMCO's decision supporting our approach to build the network in a point-to-multipoint approach. Unfortunately, this ruling is not yet in force. The appeal period is still going on. We will know probably end of next week if COMCO appeals the decision to the Supreme Court, depending on the outcome, we will then decide how to proceed on the rollout side. We will update you with the Q4 results or the full year results 2026 in February on our revised rollout strategy, depending on the final or not final point in this saga.
We will unfortunately not be able to give you much more details today in the call, as the outcome is not yet clear. We are still in the analyzing mode how to proceed on this topic. As you know, the Swiss spectrum auction process has also been launched. The auction is now expected in Q2 2027, and we need to apply to the auction in early December, which we are currently preparing. Not much news on that front either. We have good momentum on the wholesale side, managed to realize 12,000 net adds in the third quarter, roughly in line with the similar net add speed we had in the previous quarters, adding CHF 4 million or +8% to our wholesale access service revenues.
With now more than 56% of this revenue coming from FTTH connections, also showing that the shift from copper to fiber is ongoing and in full swing. We are executing well on this strategy to capture or upsell connections with our ongoing FTTH rollout. On the cost-saving side, page number 11, I am very happy to report that we have achieved our cost-saving target for the full year after nine months. We have delivered CHF 61 million of cost savings, which largely exceeds our full-year target of CHF 50 million. We do not expect much more to come in Q4, but happy to report that we have delivered on our full-year target. You can see some examples of where these savings come from on the top right side. Contact center workload hours down by 7% due to quality initiatives, IT automation, offloading to chatbots.
We have quite strong productivity gains in software development with introduction of AI tools, and we continue to invest in this topic. We have some example on the left-hand side. We continue to advance AI in the shops with an LLM-based AI host using AI-based retail analytics. We continue to drive self-service automation and IT, which is in particular important to continue to deliver cost savings also as we look or start looking into 2027. That was it for Switzerland. I will now move on to Italy. As a first slide, number 12, you can see a quick update on the integration process, which is proceeding as anticipated, especially on the people and culture integration. We are progressing as planned, and also the synergy ramp-up is ahead of plan.
We have delivered CHF 99 million of synergies, bringing us to a total of CHF 265 million of synergies, which makes it clear that we will exceed the CHF 300 million target by year-end. Another important decision that we took in the last quarter is the brand consolidation. We decided to consolidate the Vodafone brand and Fastweb brand onto the Fastweb brand over the next years. This will be executed with great care in order to make sure that we realize all the brand equity, and we maintain net adds over the brand while we are transitioning the brand onto the Fastweb brand. To strengthen or further strengthen the Fastweb brand, we will also execute a brand relaunch early, or not early, in the first half of 2027 to revitalize the brand and make sure that everything goes as expected.
On the cost-saving side, we were able to optimize some of the cost phasing and deliver the synergies we have reported with less cost, as we were able to push back some of the planned IT spend into the outer years. We now expect about 10% of the integration cost to be backloaded into 2028. However, the total target of CHF 700 million integration cost remains unchanged. What we changed is the phasing, so slightly less cost in 2026 than 2027, and about the remaining 10% coming in 2028. Now moving on to B2C in Italy. On page number 13, we are keeping our focus on realizing or executing our telco value strategy and enhance convergence with energy. You can see that on the wireless side, we have achieved ARPU stabilization year-on-year.
ARPU now stands at EUR 8.4, which is pretty much flat throughout the full last year, thanks to the completed back-to-front book price alignment and much better pricing discipline. This affects some of the inflow, but at the same time, it improves inflow quality, which I think is important going forward. You can see that we had - 165,000 net adds last quarter. I would highlight that about 60,000 or 65,000 of these net adds were losses, were linked to a technical cleanup. So, the market-driven RGU loss is - 100,000, which is largely in line with the previous quarter, Q2. The underlying churn is stable quarter-on-quarter. On the broadband side, we are still in the back-to-front book price alignment. This is impacting our net adds in Q3.
You can see with - 49,000, slightly more than in Q2, but this will help us obviously on the ARPU and service revenue side going forward in the next quarters, also going into 2027, and churn going down slightly to 15.9%. On the energy side, we were able to win 38,000 new net adds in Q3, bringing us to 179,000 net adds, confirming the demand for bundled services in the market. On the B2B side, slide number 14, we have largely stabilized the telco service revenue over the past month, and we were able to also stabilize the net add development. You can see that on the mobile side, we were able to report plus 13,000 net adds. We were also able to win the higher value Consip mobile framework TM2900, which replaces the TM9 framework that we previously had.
This will help us drive mobile revenue on the B2B side in the coming quarters. On the broadband side, RGU development was roughly stable with - 2,000, but much better than in the previous four quarters. Here, we are focusing very much on the SME/SOHO side to further improve churn and ARPU inflow. We also have good momentum on the IT and energy side and the B2B space. We are strengthening our positioning with new higher value-added services, for example, in the AWS space, and we continue to drive the energy offering, and we were able to win 7,000 new RGUs in Q3. On the network side, page number 15, we successfully expanded also the mobile network in Italy to 91% 5G+ coverage, which is up 4% year-on-year. FTTH coverage is up 9% to 63%, equally split between our own and wholesale fiber access.
Also in Italy, spectrum renewal is ongoing. We replied to the first AGCOM proposal, and are in discussion with the authorities. Unfortunately, there is not much we can say on this, as the final decision is only expected early next year, and discussions are still ongoing. It is a bit uncertain how this ends, but we are in good discussions with the authorities on this topic. On the wholesale side, the Lyca migration was completed in Q3 with the RGU and revenue impact as expected. Next to this off-boarding of Lyca, the other customers are further ramping up. We have especially Sky and Enel as MVNOs ramping up and contributing to net adds in the following quarters. And we are further growing also on the broadband side.
You see we added 40,000 new lines in Q3, which is roughly in line with the run rate we have seen in the previous quarters. On page number 16, you can see an update on our infrastructure initiatives, which are progressing as expected. On the one side, we are still in regulatory approval with the RAN sharing with TIM, which is going as expected. We are expecting the conclusion of this regulatory process in Q2 next year. At the same time, we have been working hard on the MSA situation and the tower situation in Italy. On the one side, we have won the second stage of the appeal of INWIT as well on the preliminary measures. The Court of Milan rejected INWIT's request for interim measures.
This confirms the first ruling that we have seen on this topic, and we are now focusing on the merit investigation that has started. On the other side, we have been working on the migration Consip, where we have a clear plan in place now how to migrate the full network of the INWIT grid onto another grid. We will buy existing sites from alternative tower cos, we will buy new sites from alternative tower cos, and we have the make option with the JV that we announced with Telecom Italia, where we are proceeding also on the final contract so that we can soon announce this joint venture to the market. Now we have a multi-source migration plan in place for 2028 going forward. We are also open to selectively buy towers from INWIT, of course, subject to attractive commercial conditions.
This brings me to the end of the Italian overview. I now hand over to Eugen for the financial results.
Good. Thank you, Christoph. Good morning, everybody. I will start as usual with the group overview on page 18 with revenue. Revenue is down CHF 240 million year-to-date, mostly driven by Q1 and Q2. In Q3, revenue was down just CHF 14 million, with CHF 9 million from Switzerland and Italy essentially stable in both countries, as Christoph already mentioned. Only moderate telco service revenue decline in this quarter contributing to this more stable situation. On the EBITDA side, EBITDA was up CHF 56 million in the first nine months, down in the third quarter by CHF 26 million because of adjustments. I will cover this when I talk about Switzerland.
On an adjusted basis, EBITDA was up CHF 21 million in the group in the third quarter, with Switzerland contributing CHF 21 million on the back of strong cost savings, wholesale year-on-year benefit and also contribution from the IT business.
Italy was essentially flat with +CHF 1 million in the third quarter after a very strong Q1 and Q2. In Q3, wholesale in Italy turned negative year-over-year as expected. Also, we had some in-year phasing of indirect costs that I already alluded to in the previous quarters. I will move on to page 19. CapEx is down CHF 128 million year-to-date. Also here, mostly related to Q1 and Q2. In Q3, CapEx was actually flat in the group. In Switzerland, down CHF 9 million, essentially in line with prior year after a strong deviation the first two quarters. In Italy, CapEx up CHF 12 million, where CapEx is doing some catch-up after very low CapEx levels in the first two quarters, all as expected.
By implication, operating free cash flow in the group is up CHF 184 million year-to-date, with a strong contribution from Switzerland and Italy. On an adjusted basis, the quarter is up CHF 21 million, mostly driven by Switzerland, as the contribution from Italy is lower due to the CapEx catch-up that I mentioned. Let us move on to page 20 on Switzerland. Switzerland revenue is down CHF 36 million year-to-date. In the quarter, just -CHF 9 million. If you look at the individual segments, B2C is actually up CHF 4 million in the quarter. Service revenue decline was quite moderate, similar to Q2, and other revenues were up. B2B was down CHF 24 million, also driven by hardware, just the other way around. Otherwise, the typically lower service revenue, and in this quarter, we also had higher IT revenues that compensated for that.
Wholesale was up CHF 7 million in the quarter on the back of the higher access revenues that Christoph already mentioned. There are some further effects from roaming and termination, which increased the effect even further. On the EBITDA side, year-to-date, in the group down CHF 34 million, in the quarter CHF 46 million. This is entirely driven by adjustments in the third quarter. On the Swiss side, we booked a restructuring charge in connection with the new B2B setup that we announced today or a couple of days ago. The more important effect is actually in the prior year, we had a strong release of provisions that now shows up as a negative effect year-over-year. Net of all of this, on an adjusted basis, EBITDA in the quarter in Switzerland was up CHF 21 million, with B2C positively contributing.
Service revenue decline was quite small and compensated by cost savings. B2B was down CHF 6 million in the quarter. Service revenue was partially compensated by positive contribution from the IT business. Wholesale was up CHF 13 million. That is both the impact of the access business that is growing and some profitability catch-up on the roaming side. Finally, infrastructure and support functions were up CHF 10 million. Very steady development over the course of the year, thanks to our delivery of the cost savings. Page 21, CapEx in Switzerland was down CHF 79 million, as mentioned, driven by Q1 and Q2, where in the prior year, we had very high fibre CapEx. Now in the third quarter, CapEx is almost fully in line with prior year, and by implication, operating free cash flow year-to-date was up in Switzerland, not only in Italy.
The -CHF 37 million reported in the third quarter are due to the restructuring charges and other adjustments that I mentioned. On an adjusted basis, very nice development in Q3 with +CHF 30 million operating free cash flow backed by higher EBITDA and stable CapEx in Switzerland. Deep dive Switzerland on page 22. I will start on top left. Most importantly, service revenue development with -CHF 18 million in Q3, very similar to Q2, and both quarters significantly better than Q1. Obviously impacted by the price increase. You can see this in the B2C line immediately below, after -CHF 16 million in Q1, -CHF 3 million in Q2, and now -CHF 6 million in Q3.
That is very much in line with Q2, slightly worse, but closer to Q2 actually than we expected. People traveled a lot, so the roaming downside that we expected did actually not fully materialize. Q3 is very close to what we already saw in Q2, and obviously a positive surprise. B2B, also service revenue decline smaller in the third quarter with - CHF 12 million, slightly better than Q2.
The result of some of the measures that Christoph mentioned that sustained ARPU on the B2B side in the SME segment are now showing their positive effect. All in all, with service revenue, we stand now, sorry, we stand now at -CHF 71 million year-to-date. So, we are clearly on track to give and take -CHF 100 million for the full year, rather than -CHF 120 million that we expected at the beginning of the year. Final remark on this page, top right. Telco P&L, you see most important, the + CHF 61 million in cost savings. As Christoph mentioned, not much more to come, but obviously very happy with the achievement so far.
With that, I move on to Italy on page 23, starting with revenue, which year-to-date is down EUR 121 million, but actually stable in Q3. B2C up EUR 11 million, with energy sales compensating the small service revenue decline, and also some hardware revenues. B2B essentially flat, with telco service revenues stabilized. Wholesale now down EUR 10 million in the quarter. That is obviously due to the loss of Poste and partly Lyca, and we also had higher EU revenues in the prior year. On the other hand, our UBB business is nicely up, so the mix gives to the - EUR 10 million in revenue year-over-year in the quarter.
On the EBITDA side, year-to-date up EUR 125 million. In the quarter, EUR 21 million, and on an adjusted basis, just EUR 2 million. I will walk you through the individual effects. B2C up EUR 31 million, moderate service revenue decline overcompensated obviously by the synergies. The synergies become a bit weaker from quarter to quarter because the MVNO migration happened in the second half of last year, so this synergy is now going to phase out over the quarters. B2B, -EUR 7 million, the impact of the revenue.
Wholesale -EUR 19 million, so that is obviously the impact of the revenue drivers that I mentioned, but also the mix of the revenues as mobile revenues drop out and UBB revenues come in with a different margin profile, and also the EU obviously play a role here. Finally, indirect costs in the quarter, costs were higher by EUR 7 million. There is an impact of higher energy costs on the one hand, and also some in-year phasing across the quarters that is different this year from last year. Page 24, CapEx down EUR 37 million year-to-date, but up EUR 15 million in Q3.
Essentially, we are catching up on infrastructure and IT investments that were quite low in the first two quarters. Operating free cash flow is up EUR 162 million in the year with higher EBITDA and lower CapEx, and slightly up in Q3 with +EUR 6 million, given the lower EBITDA contribution in this quarter compared to the previous ones, and the now enough mentioned CapEx catch-up that we are seeing in the third quarter. Move on to page 25. Very important here, the B2C turnaround that Christoph mentioned is materializing in the numbers. You see the telco service revenue overall, B2C and B2B, just -EUR 24 million after -EUR 55 million and -EUR 35 million in the first and second quarter.
Things are gradually stabilizing as we have been guiding for over a couple of quarters already. You also see it in B2C with -EUR 20 million in Q3. You see the development over the quarter split into RGU and ARPU, and basically the ARPU effect turns from quite negative in the first quarter now to basically neutral in the third quarter year-over-year. B2B, -EUR 3 million in the quarter, so telco service revenue almost stable.
There is lower churn in SME and successful retention of large customers in corporate, which helps us on the wireless side. That is obviously a very positive result. With -EUR 114 million year-to-date and one quarter to go, we are clearly on track to the roughly -EUR 150 million that we guided, maybe a bit better. I move on to page 26. I will be very brief because Christoph mentioned most of this already. The synergy run rate is already standing at EUR 99 million per quarter, so we are clearly on track to more than EUR 300 million for the full year.
Synergy integration costs -CHF 100 million year-to-date. We still expect a lot more to come in the year, but not as much as originally planned. Christoph already mentioned the replanning we did of our integration costs, where we move about 10% of total integration costs into 2028. So this year, we are not going to need as much as originally planned, but we are going to need it in the end. Total CHF 700 million confirmed, and also the total CHF 600 million synergies is confirmed. Page 27, free cash flow, CHF 1.445 billion in the first nine months, up significantly versus prior year. Only part of this is driven by the increase in operating free cash flow of CHF 184 million. The rest is driven by different phasing of net working capital year-to-date. This year, not much movement, as you can see, +CHF 69 million, fairly stable.
But in the prior year, net working capital was quite negative on 30th of September. This is stuff that typically evens out over time, and we also had a higher tax payment this year, which I already mentioned in Q2. I move on to page 28. Net income, +CHF 23 million compared to prior year, in line with EBITDA. With that, I move on to page 29. We confirm the guidance for 2026 with a couple of comments. Number one, revenue, we are trending towards the lower end of the range, mainly due to Italy. Number two, on EBITDA, however, we are trending towards the upper end of the range, and on CapEx, towards the lower end of the guidance. So by implication, on operating free cash flow, we now expect to come out above CHF 2.0 billion.
So far, the guidance was approximately CHF 2.0 billion, so a marginal adjustment here on the guidance. Finally, in Q3, we issued a hybrid bond, so our leverage guidance is now also below 2.3x rather than so far approximately 2.3x. With that, I hand back to the operator.
Yeah. Thank you. To ask questions, we are now starting the question- and- answer round. To ask questions, please press star one four. I repeat, star one four. If you wish to withdraw your request to speak, please press star one five. I will now open the lines one by one. As soon as your line is open, you will hear a corresponding text on your line. Please introduce yourself by name and company before asking your question. Since there are already questions there, I will open the line for the first question.
Hi, it's Polo Tang from UBS. Just have three quick questions. The first one is just on Swiss competitive dynamics. As we head into the Black Friday sales period, what are you seeing in terms of promotion activity, and where is front book pricing compared to last year? Second question is just on Swiss fiber rollout. What is the difference? Can you remind us what the difference in cost is in terms of cost per home pass between point-to-point versus point-to-multipoint? I appreciate you said you're waiting to hear whether there will be an appeal, but if there is no appeal, you have a choice of either lowering your CapEx envelope or building faster. Which approach are you more likely to take, and is there enough construction capacity if you did want to build faster? My third question is really just about Swiss B2B.
Can you talk about legacy products in the unit? Will all the legacy products have been phased out by the end of 2026, meaning that Swiss B2B revenue trends should improve in 2027? How should we think about the growth dynamics and margins from the new digital technology unit that you're carving out? Thanks.
Okay. Thank you, Polo. Christoph. On the Swiss competitive dynamics, we are expecting and seeing pretty similar dynamic than we've seen in the previous years for Black Friday. We don't expect any big change on that front in terms of pricing and aggressiveness in the market. We will see now over the next weeks how the different market participants will execute the year-end.
Okay. Polo, on the difference of cost between point-to-point and point-to-multipoint, I would rather like not to say too much today because obviously the implication will be what is the potential CapEx saving, et cetera, et cetera, and we are simply not there yet. Obviously, both routes that you mentioned are in theory open, to build more with the same CapEx or to build with lower CapEx the same amount that intended to build. It's simply too early to give you an answer on that topic, and I would rather like not to throw numbers around because they will be just interpreted in a way that might be wrong. Please bear with us, a bit of patience. Beginning of February, we will give an update on the situation.
On the B2B side, I assume that with legacy products you refer to the MPLS wireline products and the migration to SD-WAN-enabled wireline products. This will be, to a large extent, finalized by the end of this year. We have some remaining migrations that will go on in Q1 next year, but latest by the end of Q1 2027, the migration of MPLS to SD-WAN will be terminated. But in terms of revenue effects, I mean, you will still see a lot of these effects in 2027 on a year-on-year comparison, as some of the effects of the migration which have been done Q2, Q3, or Q4 this year, and some of the line losses and switches to lower value connectivity, you will only see the revenue impact next year.
On the wireline B2B side, we expect, let's say, a stabilization more coming in 2028 rather than next year. In terms of revenue growth and marginality on the carved-out unit, we are looking at an entity with about 1,000 FTEs and approximately CHF 300 million of revenues. It is about 10% of our existing B2B business. In terms of revenue dynamics, we expect single-digit percentage points in growth rate. Profitability-wise, you can expect something sort of standard for professional services. On an EBIT basis, like high single-digit percentage points. In the coming years, we will try to get it obviously up in the lower double-digit spots, but it will not materially impact, let's say, the full EBIT of Swisscom, as we talk about CHF 300 million of revenues. It does not change, let's say, materially the EBITDA of Swisscom going forward.
Thanks.
I will open up the line for the next question. Go ahead, your line is open.
Hi there. It is Joshua Mills here at BNP Paribas. I would just like to dig into a bit more detail on the cost-cutting in Switzerland. Clearly, you are running ahead of schedule and you have beaten the CHF 50 million guidance this year already. What is driving that, and how sustainable do you think these cost-cutting efforts are as you head into 2027? Could they accelerate further with things like AI, or are you pulling forward some savings that you might have made next year anyway? Secondly, if I could maybe just come back to the comment on competitive environment and future price increases.
I think at the end of last year, you were saying, "We are not looking to do as many back book price increases going forwards," but the results today and the lower churn suggest that price increases have landed a bit better with customers than expected. I think the message from Sunrise around their own price increase in August has been more positive too. What do you look at, or what would it take for you to consider back book price increases as more of a structural element to ARPU growth in the Swiss market? What is holding you back from moving towards a kind of annual price increase mechanism, as we see in other countries? Thanks very much.
I can take the first question, Josh. Christoph mentioned some of the most important drivers for the cost savings this year, and it is actually not just this year, but also last and probably next. The major drivers are reducing the cost in customer care, and also nearshoring and efficiencies in software development. I think Christoph covered the main drivers. Did we pull forward anything that would otherwise come in 2027? No, we did not. What potential do we see going forward? We still think that fundamentally, you can increase the efficiency of this business for many years. We still think that about CHF 50 million in terms of gross measures is a number that is achievable. At the same time, I already highlighted in February that there is a compensating effect going forward. Some of the things that used to be CapEx in the past are becoming OpEx now.
The topic is software as a service. Some of the savings in the future years will be compensated by CapEx becoming OpEx. Obviously, at the same time, we will cut the CapEx, so net effect on operating free cash flow is the same, but you should not expect net CHF 50 million to coming out of the P&L in the coming years on a regular basis due to that effect.
On the competitive dynamics, yes, it is true that churn has normalized now after half a year after the price increase on the main brand, but we did see quite an uptick on churn, as we discussed. Customers are reacting to price increases on the main brand. We have also now executed the second price increase in a row on the second brand, and we, contrary to last year, this year we have seen some churn also on second brand now. People reacting to the, let us say, the second increase within 12 months. I would say what is holding us back is, I think we need to be two things. One, we do have a substantial ARPU differential already today compared to the other brands, and even more so to the lower end of the market with all the discount and MVNO brands.
I think that's one aspect that we need to be carefully monitoring. On the other side, many customers accept price increase, but there is also churn, and we need to be I think it would be a dangerous assumption to just assume that all the customers accept annual price increases without reacting to it, as there are many other offers in the market which are substantially lower priced. I think overall, we did it now, it was successful, but I am not fully convinced that this is something that we can do on an annual basis. I am sure there is more room to work on price going forward, especially on the second brand, but maybe not on an annual basis. I think that might be stretching it a bit too much.
But we will see in 2027 and 2028 how we will continue to work on price, as this obviously remains a very important topic to sustain service revenue.
Great. Thank you.
I am opening the line for the next question. Go ahead, please.
Good morning, everyone. It's Andrew from Goldman Sachs here. Just a couple of questions. Firstly, on the restructuring charges you took this quarter, could you just give us a bit more insight into exactly what they were, whether we should continue to expect restructuring charges the fourth quarter and going into FY 2027? Just be useful to know the outlook for that and the cost of your restructuring. Secondly, lots of digging into the Swiss competitive environment. Could you just give us a bit more of an update into the Italian competitive environment? The operational trends look a bit better. Are you seeing sustained improvement in the environment there? Thank you.
Hi, Andrew. I'll take the first question. The restructuring charges simply refer to reductions in personnel in the context of the new B2B setup and some of the FTE reduction that we did over the course of this year. In principle, you should, as we had in the past years always, you should expect some restructuring charges to recur, as personnel reductions happen from time to time. This can also happen in Q4 and in 2027. However, the number we charged this quarter, probably on the high end because of this reorganization on the B2B side, which is a one-off event, and on top of our usual annual restructuring that we execute.
I will take the question on the competitive environment in Italy. I would say that the competitive environment is pretty stable and similar to the previous quarters. I think that's good news that things have not worsened further. Although there are new brands entering the market, so you have Enel that entered the market, Sky entered the market, and this will, of course, to some extent impact also the Vodafone Fastweb net adds going forward. But we can compensate this on the wholesale side with corresponding gains. But overall, we expect a pretty similar competitive environment in Italy going forward and going into 2027. I think what we can say is that unfortunately, I mean, we are executing this value strategy, but some of the competitors are still very much focused on volume, which prevents, I think, the full market from recovering and actually improving.
That's why we're also expecting competitive dynamics to remain similar, as we do expect these competitors to continue to focus on the volume strategy versus focusing on realizing the value.
Thank you very much.
Next question, your line is open. Go ahead.
Hi, good morning. Thank you very much for the questions. Just two, please. Firstly, just on the Switzerland spectrum auction next year. If I understand correctly, any bidders have to register in early December. I am just wondering if that is correct. The auction clearly is potentially open to a new entrant. Just wanted to get your thoughts around what may happen in terms of the number of bidders once we see that list in December, and whether you think that SpaceX could potentially be a bidder in the auction. Then just secondly, on the Italian brand consolidation in H1 2027, is it right to think that you will just consolidate the brand under the Fastweb name? What are you planning in terms of the relaunch around that rebranding? Thank you.
Thank you for your question. It is correct. Swiss spectrum auction, all bidders have to register latest early December. Obviously, we do not know who else will register next to Swisscom. I assume, obviously, Salt and Sunrise will register, but if there will be additional bidders, we do not know. We will see. Technically, it is possible that there are fourth bidders or fifth bidders like Starlink. The requirements are quite tough. You need to build out a terrestrial network covering at least 50% of population within five years, using the spectrum that you acquire. I think that makes it quite hard for new entrants or less likely that there will be a new bidder. But we will know once the registration period is closed. Now, on the Italian brand consolidation. Yes, we will consolidate the Vodafone brand onto the Fastweb brand and, going forward, only use the Fastweb brand.
This will be done over a couple of years going forward, as we are quite careful on the B2C side to make sure that all the customers are really aware of the Fastweb brand and that we can execute this in the best possible manner. For this, I think the Fastweb brand is The last time we revamped the brand is many years ago, so we will give a facelift to the Fastweb brand. I do not want to say too much about it because we will unveil it a bit later going forward. You can expect sort of a more modernized look and feel, and overall, let us say, updated brand refresh for the Fastweb brand.
That is great. Thank you. Can I just have a quick follow-up? I mean, just taking a step back, your mobile ARPUs in Italy are EUR 8. I mean, I think we all understand that is ridiculously low. But is there any plans over the next couple of years coinciding with the rebrand to really try and get pricing up and use that as an excuse to try and increase your back book and front book prices?
Working on pricing in Italy is one of our prime priorities, because as you point out, EUR 8.4 is obviously I have been using ridiculous, so it is like a But I would not contradict the price is really low. In order to make sure that we also have more money to invest in networks in Italy and actually improve coverage capacity and deliver a better network experience to customers, we need to work on pricing going forward. Actually, the whole industry, I think, needs to think about pricing in order to improve and deliver the network experience that Italy needs for the future digitalization of the country. So I think this will be a big topic for not only next year, but the coming years.
Thank you. Really appreciate the comments.
Next question, please. Your line is open.
Hi, guys. Thanks for taking the question. I have two. The first is around your Italian telco service revenues, just referring to slide 25. I can see the ARPU trends have obviously got better this year, and the RGUs still remain a drag. Do you see that continuing into 2027, or can you turn around that RGU drag, and what will the levers be there? The second question is again based around Italy, which is, you are getting a decent amount of FTE cuts in Switzerland. I think you are down 4%. Italian FTEs were slightly higher. I think they are around 1% higher. What is driving this higher FTE base within Italy specifically? Do you feel like you need to invest in the company, having acquired Vodafone? Thank you.
Going forward on the Italian side, we expect a further improvement on the service revenue decline in 2027. We managed to decrease it quite substantially this year, and we expect a further decrease of the decline next year, but we still expect a decline, and we will guide on the specifics in February 2027. But you can expect another substantial improvement in the trend, and you will see B2B is largely already stabilized. We continue to work on the B2C side, in particular on the RGU side, but this will require some more work going forward. On the FTE side in Italy, on the one side, we are realizing synergies leading to less positions in Italy.
On the other side, some of the synergies that we are realizing are linked to the insourcing of activities that have previously been bought from the Vodafone Group through transitional service agreements, which we have in place. On the back of this insourcing of activities, we are also building up new positions in Italy, and that is why you see sort of a flat or slightly increasing FTE count in Italy overall, despite the synergy realization.
Okay, great. That makes sense. Thank you.
Before opening the line for the next question, please introduce yourself by name and company before asking your question. I will now open up the line for the next question.
Hi, Rohit Modi from Citi Research. Thank you so much for taking my questions. I have two, please. Firstly, a follow-up on Switzerland. As you mentioned, the one-off restructuring that you saw in 3Q was kind of exceptional, and you don't see this kind of magnitude. I'm just trying to understand, and if I look at your guidance of CHF 3.3 billion EBITDAaL, you have a bit of decline, slightly higher decline in 4Q in Swiss market, so segment. I'm just trying to understand what's driving that. I mean, if you look at the magnitude, it's way higher than what you did in the first nine months. I understand there's a cost-saving element in the first nine months, but still, it's way higher.
I've been more cautious on the Swiss side because you raised your operating free cash flow guidance in terms of around EUR 2 billion to more than EUR 2 billion, but not the Swiss, which is like CHF 3.3 billion. That's the first question. Second question is the brand dilution. If you can share, what was the brand dilution impact you had on your service revenue and Swiss telco service revenue? You have B2C, but sorry, you have the wireless in the presentation, but not the wireline. If you can share the total impact on brand dilution, that would be great. Thank you.
Okay, so I will take the first question. I will try to answer as good as I can. So Q4 on the Swiss side, compared to the previous quarters, what you will see is that the spread between service revenue decline on the one hand and cost savings on the other hand is expected to be bigger than in the previous quarters, given that we had quite strong cost savings in the previous quarters. In Q3, service revenue decline was almost covered by the cost savings, so this is something we do not expect for the third quarter, fourth quarter, sorry. Not to add to the confusion. Second point, Q4 is expected to be a very CapEx-heavy quarter, and that also contributes to the overall operating free cash flow evolution and builds the bridge from year-to-date to the full year as guided.
On your second question, brand dilution, I assume this refers to the shifting of main brand to second brand in Switzerland. Is that correct or? Okay. That effect, we do not disclose it separately. What we can say is now the second brand penetration on mobile stands at 39%, and we continue to expect this to slightly rise. As I have said, the brand dilution roughly offset, or brand dilution, the brand shift, the second brand roughly offset the price increases that we executed on the mobile side.
I will now take the line for the last question. Please go ahead, your line is open.
Yeah. Hi, guys. It is Maurice Patrick from Barclays. Thanks for taking the questions. Apologies if you addressed it. I was slightly late dialing into the call. If I could take you to slide 16 and the tower strategy or network strategy in Italy. You have got a slide there that shows a clear, albeit illustrative, migration plan of sites from INWIT to multi-source. Could I just ask, are you actually in active negotiations with INWIT at the moment, or is it stuck in the courts for now? First question. Second question, when you talk about multi-source, you have spoken about the 6,000 sites, of course, in the JV with TIM. Just curious as to where you see other sourcing coming from. I think Cellnex had indicated not a huge amount of sites that would be available to you.
And I guess just thirdly, and all linked together, is it your assumption that post-2028 and the termination of the MSA, that you wouldn't be subject to the all-or-nothing clause, and that you would be able to secure access until 2040, which is the end of your migration plan? Because I think INWIT suggests otherwise. Thank you.
Thank you. We are not in active negotiations with INWIT. We are discussing the migration plan with INWIT, which we have shared with them, to finalize and work on the details so that we can start migrating off their network in 2028. We expect this to last 12 years, as explicitly detailed on the slide, until roughly 2040. The contract that we have in place foresees operational continuity and tower access during the migration phase. This is one of the foreseen in the contract and part of the migration phase discussions with INWIT. As the contract is terminated per 2028, there is no more all-or-nothing clause. What is in place is the migration period that needs to be defined. At the same time, we are negotiating with other tower companies in Italy.
You see some of the logos on the slide, Cellnex or Phoenix, which have over 30,000 towers in Italy. Actually, many of those towers are available and have space on the towers, which makes it quite easy to offload a huge part of the grid into alternative sources without building out new towers.
Thank you very much indeed.
Thank you very much. With that, I would like to conclude today's conference call. If you have any additional questions, please feel free to reach out to the investor relations team. We look forward to speaking with you and wish you a pleasant day. Bye-bye.