Good morning, ladies and gentlemen. Welcome to the First Quarter Results 2021 presented by Urs Schappi, Eugen Schemert and Laurence Schmidt. Louis, the floor is yours.
Good morning, ladies and gentlemen, and welcome to Swisscom's Q1 presentation. My name is Louis Schmidt, Head of Investor Relations. And with me are our CEO, Olsson and Olsson Scharmetz, our Chief Financial Officer. The first part of today's analyst and investor presentation hosted by our CEO consists of 2 chapters. A quick overview with some highlights on our Q1 achievements, operational performance and financials and an update on our network activities, B2C and B2B operations and financial results in Switzerland on Falstaff's strategic initiatives and Q1 results operationally and financially.
In the second part of the presentation, Olgen runs you through Chapter 3, The Q1 financials implications from the new fiber partnership and the new guidance for the full year 2021. With that, I would like to hand over to Urs
Urs, good morning, ladies and gentlemen, and I welcome you to this Q1 Results presentation, and I would like to start directly with our Slide 4, The key achievements in 2021. So financially, we have a strong good first quarter, Operationally, a solid one. And once more, we were able to win Mobile tests, all the mobile tests in Q1 on chip for Okla. So this shows our network leadership. We are also or we have also a very solid and good performance in our B2B segment.
Our solution business develops well mainly cloud and security products. Also in the retail market, a good momentum on our brand experience And to the subscriber, this week, with some exceptions, will come late to it. And then we announced today this fiber partnership with Zalt, which I will give you later some more details. And on Fastweb, strong performance in Q1. Also on the March performance side, Where all segments performed well, mainly also in the B2B market, and brand Experience of Fastweb is increasing, and we have a strong brand in Italy.
If you go on Slide 5, you see our market performance. So Switzerland, some extraordinary effects. And in Italy, we have revenue generating growth. In Switzerland, you see that broadband It's impacted by a phase out of a product. It's the Casa product where we made a phase out, and therefore, we lose Or lost 5,000 connections.
And then also, we have some spillover from the aggressive promotions of Q4. And the Valentines Day, it's always a bit the case in Q1 that the performance is weaker. And then there is certainly also a third effect, which leads to a bit weak net add performance In Q1, because we had the shutdown and shops are important for the market performance Of Swisscom. But overall, as expected, the broadband business And also to the fixed voice business, on mobile postpaid mobile, you see that underlying Net adds are plus 17. There we have extraordinary effect of the phase out of Tucci, Which we have done in Q1, at the end of Q1.
This has a bit a slight negative impact on the net adds. And then you see a slightly increasing net adds on wholesale. Fastweb With a good momentum on mobile, 100,000 new subscription mobile and a growth of 18,000 Broadband. So overall, the quarter like expected With some extraordinary effects as I explained to him. If you go on Slide 6, Some key remarks to our financial performance.
So we were able to have a revenue growth of 2.5 Percent, mainly driven by a bit better service revenue in Switzerland, but also But also solution business in Switzerland, the IT business And some more smartphone sales. And then on the EBITDA on the right side of this chart, You see that the underlying performance of the EBITDA is plus €9,000,000 so stable. That's a good performance if you look to the price erosion which we
have in
Switzerland. So Even then, we were able to compensate this service revenue decline through efficiency Measures, so we had a +7 percent on Swisscom Switzerland and Plus CHF 10,000,000 on Fastrip EBITDA growth. So overall, solid EBITDA And also a solid operating free cash flow, you see it stands at €509,000,000 in the first quarter. If we go on Slide 8, very short, our priorities, they are as Explained during the year result presentation of 2020, So investing in our infrastructure remains important to be leading on network quality, Defending our market position in Switzerland is and stay important. Then this commitment to operational excellence where we have announced this target of plus more than EUR 100,000,000 savings in this year and then pushing Fastweb and increasing the free cash flow in Italy.
On Slide 9, some remarks to our network initiatives. So on mobile, you see that we are able to continue to roll out the network In a challenging environment, we have today a coverage on 5 gs wide, this 5 gs base version Of 96%, so 96% population coverage end of Q1. And 26% of our sites Our 5 gs plus enabled, that means this 3.5 gigahertz frequency side. So you see that we were also able to increase The footprint and we get some better, I would say, some better environment for rolling out networks, Still very challenging, still a lot of sites are blocked, but a bit more positive outlook on 5 gs rollout. On the fiber rollout, on the right side of the chart, you see the waves how we ramp up our fiber Network, so the first phase was a point to point approach to get 30% coverage in Switzerland approximately.
The second wave was 5 to the street to come fast in all the areas of Switzerland to get a bandwidth, a base bandwidth in the region of 200 to 500 megabits. And now we are in the 3rd phase where we are rolling out our network to 60 So some words to the Comcore investigation. So The new investigation is still continuing, so we don't have really a visibility how Or when the end state will be, Swisscom appealed against the precautionary measures. And we are also seeing we are also are in a dialogue with the authority to Convinced them that we have a very effective competition in Switzerland. So it's too early to judge the impact.
Important to say is that on the rollout, we continue to do our rollout. So we haven't stopped the rollout On this fiber to the home initiative. If you go on Slide 10, Some words to our fiber approach. So we are an infrastructure player. That means we want to own network.
We are not a whole buyer, but we are open to cooperate. And in this slide is also the partnership with Solt, which we announced this morning. Yes. Always an open network approach. That means we give access to our competition on an nondiscriminatory base to our fiber networks.
Important to say is that we are also open for other cooperation, if they make sense for us. And This approach was successful in the past where we have done some regional cooperation With utilities, mainly with utilities and now the one with salt. How is the partnership with gold structured? You can see it on Page 11. So It's a long term agreement with 2 investment components, the one on the feeder and the second one on the drop.
On the figure, Zolt will coinvest in the figure, and they will have a few long This is the right to use the fibers. That's the main idea on a dark fiber base. So it's a layer 1 product. And on the drop, they have also They are also investing in the job where we have 4 fiber models and they own their own fiber tree. So it's a layer 1 product on a point to multipoint architecture.
Important to say is that Swisscom built and owns the 5 networks that our rollout ambition is Unchanged, so the 60% in 2025. And then on the guidance, there will be a slight adjustment. Eugen will explain it deeper In the next minutes, but what we can say is that overall this deal has a positive effect On EBITDA in the next year and then on the free cash flow. It's a financial leasing case, charged as a Financial leasing case under IFRS 16, so quite complex recognition of all the revenues and the Figures. But Eugen will explain it.
On Page 12, Some remarks to our market dynamic in Switzerland. So unchanged situation, I would say, As in Q4, important for us is differentiation As we have done it in the past and defend our market shares, for this we are well positioned. We have a multi brand strategy With an attack and defense approach, and our second and third brands are Products in the more for the more price sensitive customer segment. Operationally, The figures are as expected and that I already explained with some extraordinary effects, phase out of products in broad And phase out of 2 gs. But the outlook on the market Looks good.
So the momentum in the second quarter is certainly better than in the Q1. On B2C, the operational results on Page 13, Some remarks to the KPIs, 1st, starting with wireline KPIs. You see that the ARPU, the blended ARPU On broadband, it's stable. So we have a stable ARPU. I think that's a good performance at CHF 37.
The bundled ARPU on wireline is even increased by CHF 2 at the CHF 86 Swiss francs. And the churn is slightly higher because of this special effects, which I explained before. On wireless, postpaid ARPU is at CHF 54. Swiss francs, so this is minus CHF 3, where CHF 2 is coming out of the revenue generating mix. Eugenie will explain it later.
And CHF 1 is coming from fixed mobile converged rebates and roaming effects Because we had also these lockdowns in Q1 in Switzerland. So, overall, I think solid KPIs. On Page 14 on the B2B market, You see a good performance, solid performance in the B2B market. Service revenue trends are quietly are a bit better, so less erosion on service revenue in Q1, the customer base is solid, stable, so a stable customer base On a revenue generating unit level, ARPU pressure is a bit lower and there is a bit more traffic Also because of the home office situation in Switzerland. The solution revenues, that means the IT Business revenues, you see that we have a good development, slightly increasing Solution revenues with different dynamics, good momentum on cloud security and also SAP, the SAP business unit, A bit pressure on workplace and UCC, but that's more a seasonal effect.
On Page 15, our cost achievements. So we are on track for this EUR 100,000,000 plus Savings, you see in the Q1, we had net savings of minus CHF 27,000,000. So we are on track to achieve our cost target in 2021. On the financial performance of Swisscom Switzerland on Page 16, so we have Solid EBITDA. We have a revenue which is slightly increased by €15,000,000 but with different effects, the service revenue, which went down by €50 €1,000,000 And the main effect here is the erosion in the mobile business.
The Wireline business is quite stable. The price erosion has explained it, the revenue generating mix and Some price effects in D2B and growing. This leads to this minus EUR 51,000,000 service revenue. And on the other side, you see the areas where we were able to grow. EBITDA was up by EUR 7,000,000 And operating free cash flow is approximately stable at EUR 487 1,000,000.
On Page 17, some remarks to Fast Track, so and to the network strategy and the commercial update. So on fiber, we have a good momentum and the Farzug showed once more that they are leading. We are the only player which offers more than 1 gigabit per second speed in the consumer market. And also on the 5 gs fixed wireless access project, we are In a pioneering role, we are the 1st provider which will bring fixed wireless access or UBB services to rural areas. And there we have a very good performance figures of our fixed wireless access products.
And we are now progressively rolling out this fixed wireless access network. On 5 gs, we are on track On the rollout. On Page 18, some remarks to the consumer performance of Fastweb. So in the fixed business, a solid momentum. Important to mention is the penetration of our UBB subscriber base.
That's important because if we have A high percentage which are on UBB, on Ultra Broadband Business, we have benefits. They are coming out of a higher ARPU and a lower churn. And you see that we were able to increase our penetration UPP by 18%. On mobile, we have a good momentum, good subscriber growth and also a lower churn, so good momentum in mobile. On the ARPU side, important to mention that the performance of our fixed mobile converged offers, You see that we are able to have an uplift on the ARPU by 27% and the churn Is decreasing on a fixed mobile converged offer by 47%.
Net Promoter Score and for this, we are proud. So we have leading Net Promoter Score in the Italian markets. On Page 19, some figures to the enterprise and wholesale market. Both segments developed well, so we have revenue growth in the region of 12%. Financially, and this on Page 20, Fastweb has A good result.
So we were able to have a growth on revenue by 7% and on EBITDA by 5%. And then also a positive operating free cash flow in the first quarter. So overall, we are on track with Fastweb. And now I would like to hand over to Eugen to explain the financial results.
Thank you, Urs. Good morning, everybody. Urs from my side will move on to Page 22, starting with group revenue. As was already mentioned, group revenue is up By €66,000,000 on an underlying basis, net of currency effects at plus €53,000,000 Very nice growth once more from Fastweb with plus €41,000,000 that's a plus 7% Growth also out of Fastweb, as Ulf mentioned, driven by all three segments: Consumer, Enterprise and Wholesale, but certainly, we have focused on the Enterprise segment, which performed very well in this quarter. Swisscom Switzerland also up or slightly up €15,000,000 plus compared to last year.
And we move on to Page 23 To dive into the EUR 15,000,000 revenue dynamics, as usual, I'll start on the left hand side. We've mentioned it Already, service revenue we had a service revenue decline of €51,000,000 overall. That's split into B2C and B2B. B2C minus €34,000,000 B2B minus €17,000,000 So in absolute terms, the Larger contribution comes from the B2C segment. But in percentage terms, you can see that Both segments had a decline in service revenue in the order of magnitude of 3.5%.
Some compensating factors during the quarter. First, the well known device decoupling effect, IFRS 15 reconciliation line, plus EUR 24,000,000. This line will stay with us for another quarter and then towards the end of the year We'll be gone. More operatingly, the Solutions revenue plus EUR 6,000,000, which is very positive. Moving on, hardware revenues, plus €37,000,000 that was due mainly as was explained to Smartphone sales during the quarter obviously associated with the respective cost of goods sold, which we're going to talk about in a second.
So no margin impact or very little margin impact out of this EUR 37,000,000 We had Growth in Switzerland also from the wholesale division. We had growth in our access business and some mobile Holding the major drivers behind that growth. So all in all, taking together plus €15,000,000 on revenue. Moving on to the right side, service revenue dynamics in Switzerland, the EUR 51,000,000 If you compare them to the service revenue declines of the last 4 or 5 quarters, you can see that this is On the lower end of the range over the last year, in our view, you should not read a trend into this. So we expect those €51,000,000 to remain also going forward on the lower end of what would be a typically run rate of service revenue Decline and we'll talk about our guidance towards the end of the presentation.
The €51,000,000 certainly came in A little bit less a little bit softer than expected. You remember our service revenue guidance for the full year, which was between Minus €250,000,000 minus €300,000,000 So this was certainly on the lower end of our expectations. And one driver behind that is that we had higher Then expected metered revenues, and that was due to home offices, people stay home. There is more Traffic and they are still in the B2B segment, but also in the B2C segment on the wireline end, some metered revenues that Got a little bit of a boost out of that effect. On the bottom right side, we break it down into BioLine and VLS, and you can see What I just explained here in a little bit of more detail, wireline only very slightly down with minus €4,000,000 service revenue Decline, we would have expected this to be a little bit bigger if it wasn't for the traffic effect that I mentioned.
Wireline sorry, wireless with minus €47,000,000 having the lion's share of the service revenue decline. In wireline, there is one usual suspect that you know, the fixed voice line loss. That was the same in this quarter, more or less the Same as we had in the past. On price pressure in B2B and B2C in the wireline segment, a mixed Big churn, no clear downward trend as we had in the past, and this is exactly due to this traffic effect Major effects from wireless. As I mentioned, within wireless, you can see the biggest driver of service revenue decline Comes out of the B2C Wireless segment with minus €23,000,000 what we call change in our geo mix.
It's basically a price erosion Market containing effects out of the intense promotions that are out there on the market And what we call the brand shift, so customers moving from the high end brand to the no frilled brands within our portfolio. Fixed mobile convergence going on, you know that effect. We had another quarter of roaming effect. The reason being that last year, the Q1 was not yet a COVID quarter or just the last 2 or 3 weeks or so of the Q1 of last year COVID. So there was still travel going on in the Q1 of last year.
There was not much travel out of Switzerland in the Q1 of this year. So in this quarter compared to last year, we still have a roaming effect. And on the B2B side, Same here, roaming effect and the price pressure that we already mentioned. Moving on to EBITDA on Page 24, underlying plus €9,000,000 plus But then from Fastweb, that's a 5% growth year over year and consistent With past growth and certainly a very good result. Swisscom Switzerland slightly up With €7,000,000 and I'll talk you through the major components of the EBITDA evolution on Page EUR 25,000,000.
Starting to the left, we talked about the EUR 15,000,000 plus in revenue. I'm not going to dive into that Any more? And moving on to direct costs, minus EUR 35,000,000 increased direct costs by EUR 35,000,000, Half of it coming out of cost of goods. That's the hardware sales effect that we talked about in the revenue. So that's basically neutralizing The margin out of our increased hardware sales.
We had higher or Somewhat higher customer acquisition costs. We mentioned this market is still very competitive. There are lots of promotions out there. We are not driving that game, but to some extent, we participate in that game and we react and higher promotional Activities drive SAC SoC. And also in Q1 2020, we had lower additions than this year.
So Those are the main drivers behind the SAC SOT. And there were slightly higher out payments, driven by interconnection revenues and the technical effect on the roaming side, Nothing too noteworthy. More importantly, indirect costs, Ulf mentioned it, we are on track to our Target of reducing indirect costs by €100,000,000 per year with indirect cost savings of €27 million in the Q1. You might have noted that there is only a very small effect out of workforce personnel Expands, there is 2 or 3 reasons for that in the Q1. One is we had extra workloads in the customer care center Due to the 2 gs phase out that was mentioned and the legacy product Based out on the Bayer hindsight, it was also mentioned that, that impacts, obviously, personnel expense.
And we quite simply had a seasonal effect of people not liking to go on vacations during a COVID Q1. So we had higher Vacation accruals, purely seasonal effect, which will level out over the rest of the year. And you will have noticed that as in the past, our indirect cost savings Net of capitalized costs, because obviously, some of our personnel is used for CapEx purposes, development purposes, which needs to be capitalized. Takeaway message, we are confident that we are on track to Meet the EUR 100,000,000 plus target towards the end of the year. Moving on to Page 26.
CapEx for the group at €440,000,000 up by €24,000,000 mostly by €20,000,000 more €20,000,000 more on the Fastweb side, which was driven by customer driven CapEx and the 5 gs Rollout on the CapEx side, on the Swisscom Switzerland side to the right hand, You see our CapEx mix within Swisscom Switzerland. You can see a shift from our Copper, backbone, etcetera, market of CapEx to the fiber rollout. It's not as pronounced as it looks like here in the first Quarter, that's more seasonal effect. But there is certainly, as we pointed out in the full year presentation, there will be a shift from FTTS To FTTH during the year with the FTTH rollout gaining speed. Takeaway message, CapEx envelope, Apart from the effect that we are going to talk about out of the Solt partnership paper, CapEx envelope is As expected and as communicated
for the full year.
I move on to Page 27, free cash flow bridge. Just two brief words. Basically no working capital impact in Q1 2021, however, we had a big net working capital impact in 2020. So there is a year over year effect Out of that, we just had some big prepayments in the Q1 of 2020. But the important message here is no big impact out of net working capital in the Q3 of this year.
Secondly, you might have noted that we paid €198,000,000 in income taxes In the Q1, that's a mere timing issue. We don't pay every year at exactly the same point in time Our income taxes, so please don't multiply this €198,000,000 by 4 to get to our full year tax payments that's a phasing issue. I'll move on to Page 28, the net income bridge. Just two words here. First, you see that we had a pretty significant Change in the financial results with EUR 252,000,000 other financial result.
We've mentioned it at the beginning of the presentation. I believe That is due to the swap of our flash fiber stake in Italy into a 4.5% stake In fiber copper, at which point we had to mark to market the valuation of our stake in the company in our books and that gave a CHF 100 and CHF 69,000,000 positive impact, and we had a one off gain out of the Sales of Telkern International Carrier Services of €38,000,000 So that's the lion's share of this Exceptionally high financial result. 2nd comment On tax, you see the tax rate the calculated tax rate for this quarter is quite low. That is also due to the 2 transactions that I just mentioned that brought us gains in the books, but very little additional Very little additional tax. So that results in a net income of €638,000,000 compared to €394,000,000 Last year, this is the plus 62% that was mentioned at the beginning of the presentation.
Now moving on to Page 29, financial implications from the partnership with Sword. Now obviously, you will understand that the exact terms of the deal are confidential, and we can't go into too much detail on the one hand. On the other hand, we obviously need to give you some reasonable guidance on the financial impact of The deal. And I will try to do my best not to confuse you too much and walk you through the mechanics of this transaction before we go To the guidance for the specific guidance for 2021. I'll start with the most important piece, and that's on the bottom right Of the table with free cash flow.
Urs mentioned it, the deal will be free cash flow accretive. It's a long term partnership, and it will have a long term positive impact on free cash flow In the order of magnitude of a mid double digit number. So if you don't know anything else about this deal, this is what you should know If you build it into your models, technically speaking, there is a long term positive effect on free cash flow In the mid double digit order of magnitude, first thing to know. 2nd thing to know, we will have to account for this under IFRS 16 as a finance lease. And that leads to 2 distinct periods in the life of that agreement.
The first period being the rollout period from 2021 to 2025 and the second period from 2026 onward. During the rollout period, we will have a P and L effect out of that deal. Afterwards, from 20 26 onwards, there No P and L effect. There is just a net working capital effect, and the free cash flow effect continues that I mentioned. Now already now, and I'll try to repeat it later, We say here 2021 to 2025, but bear in mind, 2021 is half a year.
So what I'm going to explain now is the Typically effect on a typically full year during the rollout. And we'll talk about the specific half year effect of that deal When I talk about the guidance on the next page. So let me walk you through step by step on the typically full year effects in the rollout Period. First of all, we will book revenue in the wholesale segment When and if we hand over the right of use on the feeders and on the drops to sold over time. So we will book revenue as we hand over the feeders, and the revenues represent according to IFRS In the present value of the future lease payments.
And in a typical rollout year, this is a low three digit number. This is what we indicated with these pluses. I'll try to give you some flavor. It's a low three digit number in a typically full rollout here. 2nd step, we will have to recognize direct costs in OpEx Out of the transaction as we hand over these used assets and these direct costs primarily come out of Our CapEx, so we have CapEx savings, which I'll talk about in a second, there's CapEx savings.
And this relates to the Assets that we build as we go through the whole lot, but there is also a second piece in direct costs, which relates to the assets that are already there. And the feeders we talked about at the beginning of the presentation, the feeders are already there. And so the feeders will Come out of will be reclassified out of fixed assets and booked into direct costs. So that's the second step. Taking the first step and the second step together, hotel revenue and direct costs, yields and EBITDA impact.
And in the typically Full year rollout here, this EBITDA impact is similar to the free cash flow impact in mid double digit number. So that's important to know. Next step, CapEx. I explained where the CapEx comes from. It comes from building out The drops that we will hand over to Zolg and this CapEx will be in a typically full rollout year, will be A low three digit number again.
So we'll have a positive impact on CapEx and the combination of EBITDA and CapEx taken together We'll give a positive operating free cash flow, a proxy impact, also a low three digit number. Now comes the trick. As we hand over The used assets, Sword will not pay immediately, but there are payment terms. There is a payment schedule attached to that agreement. And that means that the operating free cash flow doesn't go directly into the free cash flow, but there is a net working capital effect in between.
And after deducting that net working capital effect, you end up at where I started, the most important part of the whole equation, The positive long term free cash flow impact in the mid double digit numbers. Now as I said, 2021 is not a full year. 2021 is not a full year. It's most probably half a year of this transaction as we start to roll out together with Sol this summer. And we will give you now Our update to the guidance for 2021, reflecting among others this agreement.
And obviously, as we head next year into 2022, the full year effect of the deal That are now explained in complicated and somewhat opaque terms will be included in the guidance that we will present in February next year. So let's talk about the guidance on Page 13. We update the guidance and we update the guidance for 3 Reasons. Number 1, as you have seen, we had some tailwinds in Q1 performance. I tried to explain that we do not necessarily expect them to continue, but they are there.
We saw them in the service revenue decline that was a little bit lower Than expected and our updated guidance reflects, number 1, the Q1 financial performance. Number 2, we updated the euro Swiss franc exchange rate to the currently prevailing rate of 1.10. We had our original planning and original guidance with EUR 1.07 billion. So that's the second effect that goes into the update of the guidance. And finally, there is the 3rd effect influencing the update of the guidance, and that's the Soil transaction or to be more precise, the first half year of the Soil transaction between summer end of this year.
So that's the 3 effects. I'll now walk you through revenue, EBITDA and CapEx and how these three effects play into these three lines. First, revenue. We update the guidance from EUR 11,100,000,000 to EUR 11,300,000,000. And A little bit less than half of the change is due to the salt transaction, so the first half year of the salt transaction.
With the other piece, the rest, the a little bit more than half of the effect being due mainly to FX update, Mainly to FX update and to a smaller amount out of the operating performance of Q1 that we took into the full year guidance. Step 1, revenue. Step 2, EBITDA. We update the guidance from €4,300,000,000 to €4 point €3,000,000,000 to €4,400,000,000 So we give a range. The update is due to the 3 factors that I mentioned, Roughly onethree each operating performance, FX and the SOAR transaction.
Why do we give a range? Because there is still some uncertainty associated among others, the rollout speed, the starting point of the Solt Deal, obviously, some uncertainty still associated with the business. We are just at the end of the Q1. This is the beginning of the year, so this is why we give a range. Finally, CapEx.
We guided EUR 2,300,000,000 CapEx at the beginning of the year. We now guide in the updated guidance EUR 2,200,000,000 to EUR 2,300,000,000. So reduced CapEx For the group, and this is mostly due to the effect from the Thor transaction to a half year effect from the Thor transaction that I mentioned. Taking everything together, no change to our guidance concerning dividend. Dividend guidance Remains the same, always subject to our financial results being what we expect right now.
And with that, I would hand over to the operator.
Thank you, Thank you. So as first we have Polo Tang, UBS.
Yes, hi. Thanks for taking the questions. I actually have 3 quick questions. The first one is really just about Sunrise UPC. I mean, what are you seeing in terms of competitive behavior?
So are you seeing signs that they are maybe focusing on maximizing profitability? Or are they kind of more focused in terms of driving subscriber growth. So that's the first question. 2nd question is really just trying to understand COVID-nineteen impacts in a bit more detail and how that may or may not evolve through the year. So for example, How do you think about the SME segment and business customers?
But I'm also curious in terms of how we should think about roaming revenues From here, but also in the presentation you mentioned the uplift in metered revenues as people work from home. So is this here to stay in terms of these metered revenues? Or do you think that will kind of fade over time? So can you talk about kind of COVID-nineteen effects My final question is just really about the sale of your stake in Biggs. Can you remind us why you decided to And specifically, what is your view of the TeleSign business within Bix?
Because I mean, obviously, the multiple That you could have got for Bix. I think it was right about 4x EBITDA. So kind of were you quite cautious In terms of the outlook for Bixup rule. So those would be my three questions. Thanks.
Good. So thank you for the question. If I start with the standardized UPT question, what will be the behavior in the market? So If I look to the behavior in the last quarters, they are very volume driven, promotion oriented. And I think this will not change in the next month.
I think it will Remain a promotional oriented business. Long term mid or long term, it's Quite hard to say. Maybe I'm the wrong one, which you put this question. From the back book side, I think to be too aggressive long term on promotion is quite a risky game Also for this new call. But the next month, I think we will have the same behavior As we have it today.
On the COVID-nineteen impact, we see Some positive impact on solution, digitalization, so is pushing through this home office. And that's why there is a bit more solution business. It is a traffic effect, which Olgenscha explained. I think they will flattening out In the next month, when home office is also going down, so there will be weaker this effect in the next quarters. And roaming also, we will have a certain relief on roaming, but You know, big travels will be not made.
That's our assumption In this year, maybe more on the retail side than on business side, we think That the revenues will stay quite low also in this year also in the 3rd Q4. Maybe next year, we will get a better situation on it. Then why we sold our stakes in VIX? That has nothing to do with the performance of this company, though this company is well performing. The main reason is we have a minority stake in this company and it's not a very liquid Actually assets.
And that's why we if we get the opportunity to sell it, it's not strategic. We sold it. So that's all behind it, but not because of performance of BiCS. We stay a customer of BiCS, And so we will have a further cooperation with them.
And can I maybe just ask a clarification question about what you said on the Q2, because I think for B2C, you said you're more optimistic in terms of Talking about improving trends in Q2 versus Q1? So can I clarify whether you're talking about subscriber trends Or revenue trends or both?
No, subscriber trends, Q1 is always strongly impacted by this Aggressive Q4 promotions. So Black Friday, Christmas promotions. And then also that the lockdown which we had in Switzerland, where Swisscom shops were closed and this leads to a lower gross adds Performance. That's why we think that the performance in the next quarters will be
A bit better. Clear. Thanks.
Next question, Steve Malcolm, Redburn.
Yes. Good morning guys and thanks. Can you hear me okay?
Yes.
Hello? Okay. Sorry. Thanks for all the detail on the SALT transaction. I've got a couple of questions on that and then one on Fastweb.
First of all, just can you just clarify that The transaction is not dependent on any outcome from the ComCom investigation. And do you expect This deal to help your negotiations with ComCom or the discussions around getting regulatory clearance. Secondly, the guidance you've given, I assume that doesn't And I think for the retail consequences of salt coming in as a wholesale partner. And can you maybe give us a sense of how much market share salt Had in those new fiber areas, I assume it's very low because there is no fiber and what you're thinking is on the retail consequences of giving this wholesale deal to salt. And then just a question on Fastweb.
I mean, your B2C growth in Fastweb is only around 2% now. All the growth is coming from enterprise and wholesale. I mean, do you think that Fastweb can grow mid single digits if it's only growing B2C at 2%? And if not, how do you revive the growth in B2C Your sort of midterm growth ambitions for Fastweb. Thank you.
Good. On the first question, The salt, steel and this whole impact on the ComCo. So It's too early how they judge it. But if you ask me, this should actually help Because we have a layer 1 with salt now, we have a layer 1 steel In the point to multi point turf, and that's exactly what Concor is asking for. So we have a solution for it.
It will lead to a good competition, to a healthy competition. So in my view, it should help To this investigation of the COMCO, but I can't tell you. Today, it's too early. And then on the guidance topic or what will be the impact Of salt in the retail market, if they enter the retail market. What you have to assume is that they get a bit of footprint, that's clear.
But this footprint will not come from one day to the other. So that's incremental. We will ramp up our footprint In the next years to 60% from something above 30% to 60% In the next 4 to 5 years. So it will be an incremental impact, But it will certainly bring competition in the retail market. We have The advantage that we will get to wholesale revenues and to be sustainable in the retail market, It's not only the access which is important.
We were successful in protecting our market share through this Combination, network, customer service and excellent products. And we have really a superior entertainment proposition. But that's why we think We will not suffer too much on the retail markets, but this will certainly have an impact. The question is who will We will lose these customers at the end if Soltis is competing on price.
The guidance does not bake in any assumptions around future retail market share loss. It's purely The guidance you've given us is purely the wholesale side of the equation.
Yes, that's right. But the impact will be neglectable in in 2021.
So clearly, it will be negligible this year. But going forward, you would assume that Solv is doing this, The starting point for their market share on the new fiber plant is very, very low because they haven't been marketing fiber because there isn't any there, correct?
Yes. It will take time. It will be a process. And then we have our strategy to defend our market share, as I explained it before. So there will be not In my view, there will be not big changes in the next compared to today in the next quarters.
No, I wouldn't expect much impact in Q2 and Q3, but thanks. I have a long stab. Thank you.
Thank you.
Sorry, it was the last question on Fastweb, the growth profile. So we will have And we are optimistic to have a strong momentum on B2B and wholesale that the B2C market will become more competitive Also because of the market entry of Williad in broadband. But on the other side, We have our strategy to defend our market shares in the broadband business. And what you have to assume is that prices in Italy are on another level. It will Let's say, the freedom to undercut the actual market prices in Italy is not so big as it was in the mobile market.
And our strategy is to get a good momentum also with fixed converged offer in Italy with a Superior product portfolio with a very transparent product portfolio. So the market will be tough in B2C, but we are optimistic that we will have Refer to growth path here also in B2C.
Okay. Okay. Thanks a lot.
Next, we do have Jacob Bluestone, Credit Suisse.
Hi, good morning. Thanks for Taking the questions. I had 3 questions, please, fairly short, regarding the fiber partnership with Salt. First question is, who actually makes the decision of where to build? Is it you or is it Salt or do you do it together?
And I mean just following on from Steve's question, you presumably have less retail market share to defend in cable areas, whereas I guess for salt, They'd be a little bit more different whether it's whether you're building in a cable area or not. So any color on who makes the decision on where to build? And the second question is, can you just clarify, do you pay per home passed? Sorry, does Salt pay you per home passed Or per home connected. From what I can see, it looks like the feeder payment is homes passed.
The drop might be home connected, in In which case, presumably, there would be some further growth in revenues as salt connects customers over time. So if you can maybe just clarify that. And then just a final clarification. I think you mentioned that the wholesale revenue impact in a build year would be low triple digit 1,000,000, so called sort of €100,000,000 plus. But I think you also said that the impact in 2021 From salt, roughly half of the €200,000,000 upgrade, so €100,000,000 was coming from Salt contributing essentially for 6 months.
So can you maybe just clarify a little bit? I mean, it seems like both the EUR 100,000,000 impacted the 6 months and full year effects. Maybe it's just to do with rounding or maybe I'm just misunderstanding. But can you just clarify around the revenue impact from Salt on your wholesale revenues? Thank you.
So I will take the first one on the decision, how we do the rollout, and Eugen will take the 2 other questions. On how do we construct this network? So Swisscom has the full ownership On the strategy, on the network strategy, on the rollout and also that's why we decide where we want to build And how we build the network. Thirdly, we will also listen to Solv, What are their ambitions? But we control the network and we decide how we do it and where we do the rollout.
And we do certainly the rollout on a competitive driven approach, where we think that we get the best momentum.
I'll try to answer the second question if I got it correctly. So we deliver we will deliver the rights of use On the feeder to salt as we roll out, okay? Secondly, We will deliver the drops to salt as they need them depending on their gaining market shares. I believe that was your question. If not, please follow-up.
I think you used the terminology homes passed and homes connected. I think I got it if I didn't please.
Okay. If I can just jump in on that one. So it sounds like I mean, as For the second part for the drop, because that is something that comes over time as new drops are done, It sounds like there might still be some revenues even in 2026. It's just not immediately visible to day 1. Is that correct?
There might still be a longer term effect.
No. We just if you just give us a second, then we'll try to answer it. Otherwise, we'll do it afterwards, okay? Sure. Okay.
Sorry, we just clarified then internally. Yes, we delivered the euro For the crops also later on in the later years, 2026 plus, but we have to account for them as revenue In the 1st 5 years of rollout. Sorry for the timing, because we needed to clarify it with accounting.
No, that's very clear.
And then the impact on net revenue?
Yes. Net revenue. So I'll start from the guidance again, which is half a year, And then it will not be too difficult to work out the full year effect. So on the revenue guidance, we updated the guidance from 11.1 percent to 11 point And I said that a little bit less than half of the effect is due to the Sol deal, and that is a half year effect. So from that, you can work backwards to the full year effect, which I called a low three digit number.
Got it. Thank you.
And what you have to assume is this is related to the network rollout.
It depends on the network rollout speed, how we can construct
the network. So it's a So it's not very easy to forecast.
Sure, sure.
Thank you. Thank you.
Next, we do have Ulrich Ratte, Jefferies.
Thanks very much. I have 3 quick questions, please. The first one is, did you have any benefit in the Q1 of Lowering marketing or advertising cost because of the lockdown and you decided that maybe campaigns While the shops are closed aren't so useful. You didn't explicitly mention that. I was just wondering whether that is part of the overall financial profile in the Q1.
The question the second question is so you mentioned that SALT pays You have sort of payment terms agreed with Solt. Could you give us sort of a general picture of how that payment profile looks? Is this Front loaded? Will there be higher payments during your rollout period? Or has it all been In the actual payment terms, all flattened out so that effectively they pay as they get the customer.
So from their economic situation, it's essentially a wholesale deal. And you sort of absorbing that in these working capital shifts? That will be my second question. And the third question, please. When you talk about these free cash flow accretion numbers of the deal, coming back to An earlier question.
That and you sort of you're talking about that into 20 25 and then beyond 2025, you sort of gave numbers for that. That excludes any retail effect. I just wanted to confirm that you haven't Subtracted the potential retail impact when you were guiding for the free cash flow accretion. Thank you very much.
Okay. So I can take the question. So number 1, Yes, we had some seasonal effects in indirect costs. As I mentioned, we believe this will level out over the whole year. Whether it's in Marcom or somewhere else, I would not dive into that.
But on the quarter, you always have some seasonal effects. On the payment terms, we can't comment on the details of the agreement. There's certainly no full front load. I explained that. If there was a full front load, there would not have been a net working capital effect.
But on the detailed payment schedule, I ask for your understanding that we can't give any details. On the third question, the free cash flow number does not account for any retail effect. So what we gave you is the impact of the deal.
That's helpful. Can I just clarify your first answer? I understand there are seasonal effects. The question was whether you have held back beyond the seasonal pattern in the Q1 because of the specific situation like the shop closures? That's the question, not the usual sort of Q4 to Q1 pattern.
Thank you.
We actually did a little bit less smart home than originally intended, It's not a huge effect that would impact in any significant way the financials of the quarter.
Thank you very much.
Not a big impact. So we made also big campaigns in March in the retail market. So There's really not a big impact from Marketing Communications and COVID.
Thank you.
Next question, Michael Bishop, Goldman Sachs.
Thanks. Good morning. Just two quick questions from me. Firstly, just picking up on Slide 11, where you've talked about clearly the CapEx impact Of the Salt deal. But the slide also refers to in combination with CapEx optimization.
So I just wanted to ask with the guidance change on the CapEx, how much of that is the salt deal? And is there actually any underlying Changed your CapEx or your assumptions around how or what price you can build out the fiber to the home expansion at? And then my second question was just around the improvements in the B2B service revenue trends. It looks like Soltan, Sunrise both over the last couple of quarters have refreshed, particularly SME Mobile offers, but you're reporting better trends. So you're just not really seeing any impact there?
And what's the competitive landscape like in B2B mobile? Thanks very much.
Good. I will take the service revenue trends, Rojik and the guidance on CapEx and costs.
Okay. Sorry, I'll start with I'll start with the first one. So no, there is no significant underlying change in our CapEx guidance. The effect that we talked about on the updated guidance is primarily due to the Thor transaction and the word primarily stands that Always on CapEx. There is a small foreign exchange effect if you update the foreign exchange rate.
But there is no change in guidance as to our Normal CapEx envelope.
And then on the service revenue trends, I The best picture for it you get on Page 23. So and in the B2B markets, You see that we have price pressure that's coming out of the corporate market and the SME market. So it's price driven and you will have also these effects in the next quarter. So there is competition in the SME mobile market. But on the let's say, on the whole performance Market shares, we are quite stable, but we have fair price, price competition and it will remain.
Great. Thanks very
much.
Next question is coming from George Yerodiacono.
Good morning, guys, and thank you for taking the questions. I just have a few quick follow ups. The first one is around Question I was asked earlier about the regulatory review. Perhaps Just to follow-up on that, was there any other party apart from Salt that was requesting, let's say, Point to point kind of option. Is there other interested parties In this kind of arrangement that you've announced today with SALT.
The second one is on the deal itself and apologies for this because I know You may have already given the numbers, but I was a bit confused between the annualized impact of this transaction When it ramps up versus what we are seeing this year. I just wanted to confirm some numbers just to make sure I get this right. So in terms of the overall EBITDA and operating free cash flow proxy impact, Is it fair to assume that when it ramps up not in 2021, but in the future years, this could potentially even be More than 3 digit on an annualized basis on EBITDA and probably More than double that when it comes to operating free cash flow. I just want to just get an idea of the magnitude. And then the final question I had It's more around other implications for your wholesale business from this, whether you are building in assumptions for doing something similar within your existing footprint of fiber, not just in the new builds with other players, whether this option could be available
Olga, and I will take this impact question from the salt deal. And maybe you can start with it, and then I will take the wholesale question and the regulatory question.
Okay. So I will try to best simply repeat what I said, hopefully answering Your question. So the comments I made on EBITDA, CapEx and operating free cash flow proxy They're as follows. As I said, the EBITDA impact on a full year is in the mid double digit numbers Comparable to the free cash flow impact. The CapEx impact is a low three digit number in a full year.
And obviously, EBITDA and CapEx together gives the operating free cash flow proxy effect. Did that help?
It's more a 2 digit impact than a 3 digit impact.
Clear, clear, clear.
Good. And then on the regulatory Point. Do we have other companies who are interested in a deal like Salt? I certainly understand that I would or can't comment this, but Swisscom is open for partnerships If they make sense for us. So these are commercial driven partnerships.
If they make sense for us, we are open for it. And for all the competitors who don't want to invest, we have very attractive wholesale offers. So we get this 3 layer offer. And we have, let's say, 1 of The strongest competitor in Switzerland, he used this 3 layer offer and he is very successful. And in the point to point turf, the investments are done.
So if we talk about Further, co investments or partnerships, fiber partnerships, This would be in the region or in the footprint where we make the new rollout and certainly not in the existing one.
Thank you, George. As a short reminder, as we have some new ink callers, As next, we do have Luigi Minerva, HSBC.
Yes, good morning. Thanks for taking my questions. I just on the salt agreement again. I just wanted to get a sense of what's your view on How the economics for salt change following this agreement as compared to a pure wholesale option. So I mean, so essentially my question is whether the agreement will give salt more room, more scope To be more aggressive on the retail pricing.
So yes, how the economics change compared to a pure wholesale solution for them? And the second question is about the CapEx outlook. And so I mean, the savings are a positive, But I'm wondering whether you considered if there is scope to reinvest the CapEx savings from the agreement Into a larger FTTH deployment. I appreciate you are reiterating your guidance today of the 60%, but perhaps it makes sense to reinvest in a broader footprint. Thank you.
Good. On the Economics of salt, I can't comment it.
But
The strategy of salt is always A price oriented one. On the other side, they get the capabilities to be a converged player, to be competitive. So I can't give you insights to the economics, and I don't know that the pricing strategy was solved. But I think it will not become more aggressive than it is already today. Maybe that's what I can say.
So perhaps I didn't say it properly. So I mean for salt, will it be more expensive To pay the IRU as part of the agreement.
I can't comment on this. We certainly understand it. Okay. And on the CapEx out, if We can afford ourselves a bit higher CapEx and we could reinvest them. That's clear.
And our strategy is to make a fast rollout on fiber to the street. Bottlenecks are not only the CapEx, bottlenecks are also the capabilities to do the rollout of such networks. And That's a bit the story, but I'm not now here to give you a guidance for 2020 To forward, but we want to have a fast rollout of fiber to the home that's maybe Half of an ounce.
Okay. Thank you very much. Thank you very much.
Thank you, Luigi. Next, Simon Cowles, Barclays.
Hi, guys. Thanks for taking Just quickly on the service revenue trend. We always have the guidance at the full year of €250,000,000 to €300,000,000 impact And the Q1 was only €50,000,000 I'm just wondering why you don't think it stays Sort of €50,000,000 range given all lap roaming headwinds and you've obviously got a little bit of a boost from the RG mix on the fixed side.
Simon, I'll take this one. Yes, you're right. If you just multiply the minus 51, you obviously don't end up €250,000,000 to €300,000,000 And I think in updating our guidance, We also acknowledge the fact that within that range of €250,000,000 to €300,000,000 we are probably moving How at the lower end rather than the upper end. Still, we see not only as I mentioned when I discussed Page 23, we don't necessarily expect the trend to continue or the 51,000,000 to be the going run rate. There are components in the service revenue mix that could well worsen.
You mentioned the headwinds from traffic revenues that are there right now, but that will be gone very soon. And we also talked about price pressure in the B2B segment that could well get worse over time. So we made a balanced assessment and took all of this into account, not just the Q1 numbers And came to the conclusion that we stick to the range, but I think you spotted it correctly. We are trending towards the lower end of The range as things stand right now.
Okay. That's clear. Thank you.
Next, Steve Malcolm, Redburn.
Yes. Sorry, guys. I had another couple of questions, if I could quickly. Just a quick one on capitalized costs. They rose quite sharply in Q1.
I know they were up €30,000,000 year on year, which was a big component of EBITDA Increase. Is that something we should expect for the full year or through the year? Should we expect capitalized labor cost to rise every quarter to help the EBITDA? And then just coming back to salt, I just wanted to dig it slightly deeper again. The dealer structure is an IRU.
I mean, can you give us a sense How long that RU last? Are we talking 15 to 20 years? So should we expect Solstad to have to make further payments when the IRU Period ends. And just for the sake of clarity, when the 5 year period is over, does Sol effectively have Access to your network with no ongoing rental costs. How do the rental costs work beyond that?
From what the press release, I guess they're kind of 0, but
So we don't comment commercial details on this contract. And on the capital cost, on the capitalized
expense, I think it was in the Q1 Probably towards the higher end, as you saw. It's not only capitalized expense, it also includes Other revenue, and we had a not very significant, but we had an effect in there, I think, from a sale of real estate or something like that. So it starts the upper end of what we We would expect for the coming quarters. That's correct.
Okay. So Q1 was abnormally large capitalized cost increase versus what we should expect through Q2? Okay.
That's what I was saying.
Okay, timing wise operator. The last question,
Last question. Well, George was in the pipeline, but he does withdraw his questions. So no more questions. Back to you.
Okay. Thank you. And with that, we would like to thank you and conclude today's conference call. Should you have Any further questions, please do not hesitate to contact us. Speak to you soon.
Have a great day. Thank you. Bye bye.