Good morning, ladies and gentlemen. Welcome to the Swisscom third quarter results 2020, presented by Urs Schaeppi, Mario Rossi, and Louis Schmid. Louis, the floor is yours.
Good morning, ladies and gentlemen, and welcome to Swisscom's Q3 result presentation. My name is Louis Schmid, Head of Investor Relations, and with me are our CEO, Urs Schaeppi, and Mario Rossi, our Chief Financial Officer. First part of today's presentation, hosted by our CEO, consists of two chapters. First, a quick overview with some highlights, the operational performance, and financial results of Q3 and the first nine months. Second, an update on our activities, operational results in Switzerland, and some explanations on Fastweb initiatives to become an infra-based OTT player in the nine-month financials. In the second part of the presentation, Mario runs you through chapter three, the financials, and unchanged full-year guidance. With that, I would like to hand over to Urs to start his part. Urs?
Good morning, ladies and gentlemen. I would like to start with slide four. Our Q3 results in a nutshell. We have financially positive results and are slightly ahead expectation. Also, on the indirect cost-saving side, we have a solid result. On the operational level, we have a good quarter. Also if I look to all our award which we get on the mobile networks, we won all the tests. We won also the test for the fastest mobile network. On the commercial side, we launched a new entertainment proposition. blue will come later to it. In Italy, we made some M&A, a smaller M&A transaction to strengthen our positioning in the B2B market with a security company and a cloud company. You can also see that we ranked on ESG in front. Number 1 under the 197 telcos.
It was always a part of the strategy of Swisscom to be sustainable. That leads to a confirmed guidance as it was before. Overall, a good Q3 result. If we go on slide five, some information about the market performance and market share performance. Positive overall, stable broadband net adds, which are, I would say, flat. On postpaid, +83,000 postpaid subscriptions, and also some growth on the revenue-generating unit of wholesale. A growth in Italy on the RGU units on mobile is +59,000, and on broadband, +12,000. Overall, a solid performance on net adds in Q3. Could you go on slide six? We see our financial performance. The revenue, Mario will explain you later, goes a bit decrease in the revenue by 3%. This is mainly driven by price and some COVID effects like roaming.
On the EBITDA level, you see that we have a strong result, an increased EBITDA by CHF 27 million. This is driven by an increased EBITDA of CHF 8 million in Switzerland and CHF 10 million of Fastweb. Also a solid operating free cash flow of CHF 515 million free cash flow proxy. Overall, solid financial performance. Some remarks to our business and strategy on slide eight. You see our key success factor for 2020. I would say we are on the way, en route, to deliver another successful business year. In Switzerland, the main priority is to maximize our core business. In Switzerland, that means leading a network, investing in the network, in the improvement of our network. Drive innovation and use the advantages which we have on the converged value propositions. The fourth important topic is to transform our B2B business.
If you look to the figures, you can also see that we had a solid performance in our B2B business, also on the margin side. In Italy, it's important to bring Fastweb to the next growth level through this, I come later to it, infrastructure-based OTT. If you go on slide nine, you see what we are doing on the network side. Important to mention here is that we have the target to improve or to double our footprint on fiber to the home by 2025. That means that in 2025, we will have approximately 60% of Switzerland, which is covered with fiber to the home. We made also field trials, field tests, and we were able to get 50 Gb/ s speed, download speed on NG-PON technology.
This is, I would say, a kind of world record in the field, and shows the potential of this new technology. On the right side of the chart, you see that we are the network leader. You see the different figures and awards. If you go on slide 10, here some information about the B2C market dynamics. The competitive environment overall is unchanged. We have still this strong promotion-oriented market dynamic in Switzerland, and our strategy is to defend the market share through a superior value proposition and converged offers. You see also that we accelerated a bit our B2C activities. We made a bit more pre to postpaid migration. We have a strong competition in the fiber to the home turf, there is more local campaigns are becoming important. Wingo is performing well. That's our second brand. It's performing well.
We also improved a bit our value proposition for younger customers. As already mentioned, we launched blue very successfully. We launched the new entertainment proposition, blue, which you can find on slide 11. The main idea of this proposition is to be a unique entertainment brand where our customer can use their beloved content anytime and anywhere. There is a more converged proposition between the TV platform, the content, and then also our news portal, Bluewin, and then the cinemas. This is also a converging business. There we made a good approach, and this is the first chapter, so we will continue to develop this entertainment brand. We also implemented an OTT proposition for smart TVs, blue TV Air, that's the name. Also on other screens, you can now use the TV propositions of Swisscom.
If you go on slide 12, you see the operational KPIs of B2C. Unchanged ARPU dynamic, that would be a bit summary. Stable ARPU in wireline, eroding ARPU in wireless, and mainly on postpaid. In the middle of the chart, you see the postpaid ARPU. It's CHF 52- CHF 5. The mix of this decline of CHF 5 is CHF 1 is coming from roaming. Less roaming because of this COVID effect. Fixed-mobile converged is CHF 1. The decoupling of our offer is CHF 1, and then CHF 2 is driven by the ARPU mix in the postpaid customer base. The blended ARPU for mobile is CHF 37, so minus CHF 1. You see, as already mentioned, a stable blended wireline ARPU of CHF 37.
Important to mention is that we have a sticky customer base. Our churn figures are low in the region of 8% for single play and converged offers at 6.7%. The fixed mobile penetration, also interesting to mention, is in the region of 40%-46% on postpaid and broadband. Overall, good churn figures and increasing penetration on fixed mobile convergence. On page 13, some information about our SME business. We have this leading and strong market position in the SME market. Our strategy is to extend our ICT offer in the SME market. Cloud-based product portfolio is an opportunity. You see on the chart what kind of functionality is in it, and then the strategy is to be a one-stop provider for our SME customers in this digitalized world. That means a converged offer between connectivity products and then ICT horizontal ICT offers.
On page 14, some information to our B2B business. The solution business is slightly growing. Interesting or good is to see that we have stable margins in a very competitive market. We have stable margins, EBITDA margins in the B2B business. It's driven also by cost reduction. The organization made a good job on efficiency. On the bottom of the slide on the right side, we see the evolution of our solution business. We have a good momentum on cloud and security products. That's also important to mention. On slide 15, our financial performance of Switzerland, Swisscom Switzerland. Easily said, we were able to compensate the top line decline on the service revenue to cost savings, and our operational free cash flow, free cash flow proxy is in line with the expectations.
In the first nine months, we created an operating free cash flow of CHF 1.36 billion. On the service revenue, maybe some information. The service revenue, you see that we have a decline of the service revenue of CHF 226 million in the first nine months. Out of this, CHF 47 million is coming from outbound roaming, and this is mainly driven by COVID. Overall, good financial figures in Switzerland. To Fastweb on page 16. The strategy of Fastweb is to become an infrastructure OTT. What is an infrastructure OTT? You see on the bottom of the chart, that means it's a combination of a very strong network and then with an OTT platform to deliver ultra broadband services to our customers.
Besides all packed in a secure environment, so security solutions which are embedded in the network, but which are also embedded in the products. To strengthen our positioning in this market and to enhance the strategy to become an infrastructure-based OTT, you see what kind of initiatives we made in the last months. One example is we acquired Cutaway. That's a cloud-based company in Italy. We have more activities on 5G fixed wireless access for white areas. Also we made an M&A transaction with 7Layers, which is a security company, a smaller security company in Italy. On FiberCop, that's the network company in Italy where Fastweb has a stake in it. You see some information about it.
Important is that the JV is on the way, and there are now other discussions or discussions ongoing if CDP will also come to this joint venture and some discussion about FiberCop and Open Fiber. On page 18, some information to our acquisition for 7Layers. That's the security company. I don't want to go deeper in it, but this will certainly enhance our proposition and our attractiveness in the B2B market, which is a very important market for Fastweb. It's also important to mention. On the consumer performance on slide 19. We have solid figures. We have an increase of our ultra broadband penetration by 9% year-on-year. That's important because the customers which are on ultra broadband have lower churn and a better ARPU. On mobile, you see also our momentum. We get this 59,000 net adds in Q3.
On the right side of the chart, you see the benefit of the fixed mobile converged offers. We have an ARPU uplift of 24% and the churn benefit of 21%. Net Promoter Score on the bottom right side, you see that we have a very compelling and high Net Promoter Scores. We are a leader in the Net Promoter Score, which is important for the loyalty of our customers. Page 20, B2B performance for Fastweb. Positive momentum in the enterprise market, you see 5% revenue growth. Also on wholesale, you see that we were able to have a growth in core for wholesale offers by 23%. Financial performance on Fastweb on page 21. The performance is in line with our guidance. You see that we were able to grow by 6% on the net revenue.
EBITDA growth of 5%. We have an operating free cash flow proxy in the first nine months of EUR 119 million. This is a change of plus EUR 57 million. With this, I would like to hand over to our CFO, Mario.
Thank you, Urs. Also welcome from my side to my second last earnings call. Some remarks on the performance of Q3. On page 23, the overall dynamic of the service revenue development is unchanged. We have still price drop on service revenue in Switzerland, a bit less decline than in Q2, and the solid growth of Fastweb in Italy. For Switzerland, the drivers of the service revenue decline, we will discuss on page 25. Of course, we had also impact from roaming in the third quarter. In the service revenue, we have accumulated impact in B2C of CHF 20 million and CHF 27 million in B2B. Inbound roaming came down accumulated by CHF 27 million. That's included in the segment wholesale. Maybe one remark, again, Fastweb, very solid in Q3. Growth on revenue in all three segments. On page 24, Urs mentioned it already.
I think we did once again, a great job in cost management. On the direct costs, on acquisition retention costs, we have this positive impact of CHF 40 million in Q1 because of the lower sub SAC fee, because we had in 2019, in January, February, still the mobile offering in the market where we subsidized the mobile handsets. On outpayments, we had less outpayment for roaming, CHF 34 million in Q3. The impact is CHF 7 million. On goods purchased, we had less trading volume in B2B. We had less OPEX for sports events in Q3. The reason is because the Champions League and the Swiss Football League started later than prior years, therefore we had fewer events, we book the cost for the events when the events take place.
On indirect costs, we stand now at CHF 88 million savings for the first three quarters. In full year effect will be north of CHF 100 million, of course. The EBITDA dynamics in the Swiss business, we can say fixed line loss. You see that, the -CHF 4 million per quarter. That's a minimal effect. I think that's over. Also conversions. The conversions impact is coming down as is expected. We have still some growing numbers of converged customers, but less at the beginning of the new portfolio. The Q3 effect of the ARPU mix with CHF 21 million is better than in Q2. We had a bit less pressure on wireline, but I think it's too early to say that's a trend. It's too early in my opinion.
In B2B, we have an unchanged pressure in the mid-market, the decline in the corporate or in the larger accounts is slightly softer. On the right-hand side on the top, you have the bridge of the EBITDA development of Q3. In this block, others, I think there are non-recurring elements of approximately CHF 20 million. We have this impact of the TV rights, which I mentioned. Say that's north of CHF 10 million. We have lower assurance costs in Q3, approximately CHF 10 million. Less outpayments, I mentioned CHF 7 million. We had a better B2B profitability in the IT and solution business. Again, approximately CHF 20 million out of the CHF 38 million are non-recurring.
On the next page, the EBITDA dynamics in Switzerland, as discussed, I would say overall for the group, ongoing service revenue pressure, very strong execution of cost management and solid growth of Fastweb and that helps to show a flat EBITDA for the first nine months in 2020. On net income on page 27, we have no special effects below EBITDA. Despite flat EBITDA and EBIT, we have a small decline of CHF 14 million on net income. The reason is, last year we had benefited from adjustments of deferred taxes because of the change of tax rates in some cantons. I skipped the slide on slide 28 because we are well on track on the rollout, as you heard from Urs. Free cash flow on 29, I'd say very resilient cash flow generation. Collection of accounts receivable is unchanged in Italy and Switzerland.
Far, no problems on that side. Net in Q2, we have less income taxes paid because of deferral of some payments to Q2, which was allowed by the Swiss government. That brings me already to the guidance, which after Q3, it's no surprise that we confirm the guidance on revenue, EBITDA and CapEx. With that, I give back to the operator for your questions.
Thank you. Ladies and gentlemen, you have now the opportunity to ask questions by dialing star 14 on your telephone keypad. At your turn, you will hear a short announcement saying, "Unmuted on your line." I repeat, star 14 for questions. We have the first question from Ulrich Rathe from Jefferies.
Thanks. I have two questions, if that's okay. Could you comment on the somewhat counterintuitive improvement of the wireless service revenue trend? I mean, you're highlighting the pressures. That I understand. There's a roaming pressure, an output pressure and competition. When you simply look at the year-on-year growth, that was -12% last quarter and -9% this quarter. Even though the roaming pressures are presumably up in the third quarter, the underlying trends seem to improve. Could you just shed a bit of light on that? The second question I had is, in the cost discussion that you put out, the big trend change, so to speak, versus the second quarter seem to be the direct cost in particular. You mentioned some of the factors, the insurance cost, the sports events.
It's a bit difficult for me to disaggregate what is non-recurring, Not non-recurring is the wrong word, but what is related to COVID and might just come back, and what is underlying change on the direct cost picture? Could you also comment on that? It was like a 41, I think from memory now, CHF 41 improvement in the third quarter, and how much of that is just an unusual situation, and how much of that is sustainable? Thank you.
On the cost side, I mentioned on slide 25. Out of the CHF 38 million other, about CHF 20 million are non-recurring. The TV rights I mentioned, the impact of the TV sport rights are north of CHF 10 million, because of fewer events in Q3. If all these events will take place in Q4, we will see that in Q4. Say from the assurance costs, they were very low in Q3. Close to CHF 10 million are non-recurring. The impact on the outpayment for roaming in the direct cost was in Q1 was CHF 6 million, in Q2, CHF 21 million, in Q3, CHF 7 million. That's hard to predict now for Q4 because with the COVID situation, you really don't know the behavior of our clients in terms of traveling.
Good. Then to the second question, let's say the dynamic on wireless or the trends, or if there is some improvement. I think as Mario mentioned, it's a bit too early to say what is really a sustainable trend. If you go on slide 25, you see actually a bit the dynamic of the different elements. You see also that there is an impact on COVID. If you take these two topics together, it's quite a substantial part of it. What we see is that we have a bit better evolution in the B2B business on mobile, but this can change. This is a bit also driven by different renegotiations of contracts. To summarize it, the whole dynamics on service revenue, we will have further pressure on the service revenue on mobile.
The impact of convergence will go down. That's for sure because of the penetration. The ARPU mix element will stay. Roaming will disappear when COVID disappears. That's a bit the summary.
That makes sense. Can I just ask for clarification? Thank you for the breakdown of the cost. On slide 25, the CHF 38 million there, that is more or less the CHF 41 million on the cost slide on 24. That is sort of the item that's being explained there. I mean, give and take.
It's approximately that amount exactly.
Yeah, cool. Great. Thank you so much. Thank you.
Thank you.
Next question from Matthias von Leinhorst from Kepler.
Yeah. Good morning, gentlemen. The first question is on your cost savings and related to that on the dividend. Far, you have been doing quite a good job on the cost-cutting front. Looking in the years ahead, where do you see further savings coming from? Related to that, for this year, it is likely that you will distribute the year 2020, CHF 22 in dividends. Looking ahead, given that we see ongoing pressure on service revenues, how confident are you that you will be able to keep the dividend at the same level? What kind of leverage do you believe you still have you can pull to keep the dividend safe in the years ahead?
Good. We are convinced that we have further potential to decrease our cost. What are the levers to decrease cost? This is digitalization. It's reducing volume. That means less calls, less interventions. On this area, we think that we have further potential. We have also some potential to increase our CapEx efficiency midterm. You should see that if you go forward, CapEx, there is a potential that CapEx is coming down in some years. Because now we are in the push to Fiber to the Home. We are in the push for fiber to the street. fiber to the street will be done in 2021. You see that we have elements to save our free cash flow. Software has a positive momentum, which brings us a positive free cash flow proxy.
Okay. Thank you.
Next question, Andreas Müller from ZKB.
Yes. Thank you for taking my question. Good morning. I have actually two questions. I was wondering, in the enterprise side, is the solution business, which is probably lower margin than the service business. I mean, is the margin gap there in any extent decreasing versus last year, and what's the trend there, solutions versus service margins? Then I was wondering, in Italy, what is the impact of this Huawei ban on 5G? Is there any impact for you anyway given the partnerships, or what do we expect there?
On the margin side, if you compare solution business with the telecommunication business or service business, that's right. The margin of solution business are lower. We have good solution business margins and overall stable at that. Otherwise, we wouldn't have a stable EBITDA in the B2B business. That shows you that we were able to manage this solution business margins. You're right, they are below the service business, but on a good level for solution and IT business.
On Fastweb Italy, this Golden Power rule of the government. For us, we have an alternative to do it. For us, it's not a big impact. There are other providers who can deliver us some infrastructure, and the overall impact for Fastweb is negligible.
Okay. Thank you.
Next question from Steve Malcolm from Redburn.
Yeah. Good morning, guys. I hope you can hear me okay. I had a couple of questions. I just want to come back to the point you made on programming costs. I understand that you've got a sort of temporary reduction given the late timing of sports events, but can you just give us the sort of net EBITDA impact? I mean, are you billing your customers. Did the Q3 numbers reflect a full quarter billing for these premium sports events, or are you light on the revenues as well there? Just an idea of the sort of match of revenues and costs in Q3 and how to think about that going forward. Just coming back to Huawei.
Can you just tell us how much Huawei you have in your Swiss fixed line network and what the implications of a more draconian position from the Swiss government would be if you were forced to swap it out on a sort of five, six, seven-year basis, the upside to that. Thanks a lot. Bye.
On the sports right on the top line. The main part of the revenues are coming from flat subscriptions, the pay-per-view income is negligible. You don't see it on our top line. This business in Switzerland is twofold. One is you generate some revenues, the more important part of this business is still securing the broadband and TV customers. Without a good sport proposition, we wouldn't have such low churn rates in TV.
Your customers have been paying for sports that they haven't been getting, and you've not had to pay for them, but you will pay fully in Q4. Is that fair?
Yeah. They pay you on a monthly basis. We gave some discounts during the lockdown because then no events have taken place. Now, today, we have events from the Champions League, from the Swiss Football League, from the Europa League. There's no reason to give a refund right now.
Okay. Great.
But on-
The cost reduction. Okay. The terminal cost reduction is effectively an EBITDA benefit this quarter that will come out in Q4 as you bill those costs more normally, as you sort of pay them more normally. Is that fair?
Yeah. Correct.
Yeah. Okay. Great. Thank you.
On Huawei in Switzerland. As you mentioned, we don't have Huawei on our mobile proposition, so we have our supplier there is Ericsson. We have some infrastructure from Huawei in the wireline business, mainly in the access business, fiber to the street. Therefore, I think that our risk profile is low because on access that's not a critical area, and the other exposure is quite limited or manageable. In Switzerland today, we don't see a dynamic to getting bans of Huawei, and I think also the whole discussion about Huawei is too narrow. If you want to attack an infrastructure, you have to look where is the weakest point in your whole system, and our process is weak. If you want to get secure networks, we have to have a multi-vendor strategy with a holistic security framework around. That's the strategy of Swisscom.
Up today, we don't have evidence that Huawei is actually doing wrong things. Let's say short, we have some exposure in the access business. The other one is manageable and access business, I think that the risk is quite low of getting banned.
Do you have some exposure in your core as well?
Yeah, we have some exposure in some elements of the core, but that's really manageable.
Your current expectation is that nothing's going to change in Switzerland.
Yeah
Huawei will remain an acceptable supplier.
I don't know. We will certainly explain ourselves to the government that if you want to have secure networks, you have to work on a holistic approach and not just only on making a ban of one technical supplier.
Okay. That's great. Thank you.
Next question from Ulrich Rathe from Jefferies.
Hello, hope you can hear me. Thanks for letting me on again for a follow-up question. I would like to ask about the Liberty Sunrise deal that seems to be getting closer to coming through. From an operating perspective, would you see an opportunity to steal some customers there, to attack the customer base a bit? These sorts of integrations are difficult. They create a bit of an internal focus of management, usually. It is an opportunity to maybe have a go at the customers. Is this something you'd consider doing in 2021? Thank you.
I didn't know if I get your question right. If there is an opportunity for Swisscom because of a post-merger consolidation, as they are not so agile in the market.
Yes.
I would say our behavior is another one. We always have the thinking that they will be successful, and we have to do our business as good as possible. For us, it is important to execute our strategy, to differentiate ourselves, to invest in networks, to have an excellent customer service, and all the other things is speculation. I don't know how they will manage the company in the future. You should never underestimate your competitor. That's why we are executing our strategy, and we don't do speculation about our competitors.
Thank you.
Next question from Kathy Usman from Berenberg.
Hello. Thank you for taking my questions. I've got two, please. The first question, which is going back to this slide, which is showing the B2B price pressure in Switzerland. Obviously, we can see that there's been a significant improvement. I just wanted to understand your earlier answer. Are you saying that the reduction in price pressure this year is because of lower renewal activity? That this might not be a trend? I just want to make sure I understand what's going on that front. The second question was on Italy. As Fastweb continues to execute really well in what is a very tough macro environment. Just on the enterprise segment in particular, where for some of the other telecom operators, we're beginning to see some early signs of pressure on revenues in B2B.
How is it that Fastweb is actually posting an acceleration in revenue growth in the enterprise market in a challenged kind of macro environment in Italy? Thank you.
I will take the Fastweb question. Mario, or no, I will take both. Mario is already in the retirement phase.
No.
Okay. No. You take the B2B.
We had less pressure in Q2 and Q3 in B2B. Overall, as you mentioned, it depends on the renewal activity. There we have some seasonality. I would say it's too early to think that we have here really a relief. We still see, especially on the mobile side, very tough negotiations. We still see on certain accounts, Sunrise being more than aggressive, I would say. It's too early to give here. I will expect the same trend also in Q4 and then going on also into the next year.
On the Fastweb question. The dynamic or the development in the B2B market. The Fastweb has a strong positioning in the B2B market. We have also a very capable customer-oriented go-to market structure. Through also the small acquisition and the capability improvement in the B2B market, we are able to offer differentiated product portfolios. Also, let's say, improved with security proposition and some cloud propositions. Fastweb is an agile B2B provider. That's the reason why we have a good momentum in the B2B market. In the last months, we see a good development on bigger corporates in the B2B market.
A bit calmer is actually the SME market in Italy because of all this COVID, and they are really suffering. Overall, we have really good figures in B2B, and we also believe that we will have a good momentum in the next months. A question is what is happening with the bad debts. Up today, we don't see any signs that bad debts are going up, neither in Italy nor in Switzerland. Yeah, that's a bit what I can say to it. I think we'll continue to have a good momentum in B2B.
Can I just follow up? The pricing pressure on renewals on the corporate side, you're not seeing that in Italy, it seems from your commentary.
It's also in Italy, but it's everywhere the same. If you have to renegotiate contracts, you lose some ARPU. On the other side, in Italy, we have the potential to gain market share. We are in the region of 30% market share in B2B, we have momentum to get market shares. This overcompensates the price decline.
Thanks. Good. Thank you very much for the detail.
Next question from Georgios Ierodiaconou from Citi.
Yes. Good morning, and thank you for taking my questions. I have a few. Some of them are follow-ups. The first one is on B2C, and particularly the very good numbers you had on mobile net adds. I understand there's been a bit more promotions in the second and third brands. Is it possible to give us a bit more of a picture of what the rest of the market is doing, whether we are seeing some signs of more rational behavior from some of your competitors or not? My second question is on B2B and kind of a follow-up from what you just discussed with Urs around the long-term growth drivers of B2B. You mentioned security and cloud.
Is it possible to perhaps give us an idea around, what are the prospects you see now versus in the past in the B2B segment, where there is stronger potential? Finally, on Huawei, just a quick follow-up. You mentioned that you don't expect a ban necessarily. Do you see a problem with some of the sanctions they are facing in maintaining a competitiveness of the equipment that they provide? Is there perhaps a reason to not use them? I know for you don't have exposure, but some of your competitors do. Do you see a reason why people could diversify away from Huawei just on the equipment side? Thank you.
To the dynamic in the mobile market. We had a better net add because we had a good momentum also on pre to post-migration, on second and third brands, good dynamic. Let's say low figures in our core portfolio of Swisscom. This leads to this better net adds. On the other side, promotion activities are unchanged. We see a lot of promotion. If I would say what is the red line through these promotions, it's half price. Half-price promotion, that's a bit the red line. I don't see changes there. I don't see actual changes. On the driver of the B2B business. It's as you mentioned, it's security, it's cloud, the digitalization of the industry actually is potential to grow. This needs more connections. This needs more bandwidth in the networks. On top, you have this possibility to deliver solutions.
Therefore, we think that there is further potential. We are also in some verticals as the banking, as an example, and there, through the digitalization, we see also some potential. Then maybe a last remark to this B2B growth drivers. In the SME market, there is a midterm, not short-term, but midterm is really ICT potential. The whole SME market is from the IT part, underdeveloped, and the digitalization will need more cloud-based solution in the SME market, and there we have, as Swisscom, a potential to grow. That's not tomorrow, but midterm, that's the potential because it has quite a long adoption phase. Then the third question on Huawei. I actually didn't get it. What is that?
Whether without the ban, you think they will remain competitive given some of the sanctions they will face. If you are exposed to Huawei, would you think that over time you could continue to rely on keeping their equipment
Okay. I think Sunrise is a strong company. They have a huge home market, and they have other countries where they can deliver infrastructure so they can remain scaled. I think they will remain competitive for a while in the future. This is a capable company. They will be competitive also in the future, even if they have sometimes some challenges. No, I wouldn't say that this will be a less competitive company in the future.
Very clear. Thank you.
It's a political-driven discussion with a lot of uncertainty in it.
Excellent. Thank you.
We have the next question from Steve Malcolm from Redburn.
Yeah. Thanks. I just had a couple of quick follow-ups. One was just on Italy. You mentioned the small acquisition that you made. Can you just confirm that there was no sort of material financial contribution to the Fastweb business on the back of that acquisition? That'd be great. Secondly, just on wholesale. I mean, your wholesale revenue trends were very strong. I mean, inbound roaming was down, but not as probably as much as we thought. Are there any particular sort of movements in that? Did you have any big price rise in the quarter? Just help us understand. Clearly, that's an area we'd expect to be weak due to the Liberty Sunrise merger as the Liberty MVNO traffic moves off. Just maybe some color on the wholesale trends of the quarter, which looked particularly strong would be great. Thanks.
On Italy, on Fastweb, these two acquisitions had no material impacts on both top line and EBITDA. Nothing.
These are more acquisitions to.
Yeah
some more momentum on the capability side.
Okay, zero revenue, zero EBITDA effects.
No, not zero.
On CHF 2 million. It's required.
Okay
in Q3 and in Q2. We just started. We will see some impact next year.
Okay. Thank you.
On wholesale. The dynamic on wholesale, if I go through the real wholesale business, not the roaming in it's driven a bit by a bit more broadband wholesale business, which we are doing with competitors of us. It's not only Sunrise, there are also other ones. If this merger is coming, Sunrise UPC, that clearly we have an exposure on that MVNO business with UPC, and the exposure there for 2021 is a low, I would say, a low two-digit million figure.
A low. Say that again, a low two-digit figure?
Yes.
Next year, and then it will build up in three years up to CHF 56 million.
My first was on mobile, on MVNO.
Thank you.
This will go Fastweb. That's clear. Then there will be some erosion on the wireline business connections, but it will take time.
Yeah. If I look at wholesale services in particular, that seemed to grow north of 10% in the quarter, which had been fairly flat. The increase in wholesale broadband lines, I guess, was fairly consistent, so it wouldn't explain a sudden jump up in revenues in Q3. I'm just curious as to why that line seemed to grow quite so strongly in the third quarter.
I mean, corporate revenues from third parties is more like flat.
Yeah.
We have a growth on the core wholesale services, as you mentioned, in line, about CHF 10 million. We have a decline in inbound roaming of about CHF 10 million, and that's more or less flat.
Yeah. I guess when I look at it, the wholesale service revenue growth appears to stand out in Q3, but I don't see it being sort of stable versus the previous couple of quarters. It seemed to grow faster in Q3.
No.
No.
No.
Maybe exactly. Go through the numbers.
We can have a look to what are the numbers there later.
Yeah. Okay, great. Thank you.
Thank you.
Thanks.
Next question from Luigi Minerva from HSBC.
Yes, good morning. Thanks for taking my questions. The first one is on the CapEx outlook. You hinted that CapEx medium-term may decline once you are done with the current fiber program. Perhaps, can you make a more general comment how you see CapEx over the next three, four years, and particularly how the mix will change with 5G, fiber, and maybe more traditional CapEx? Secondly, I was wondering if you have some early indications, early feedback on your OTT TV product. How is it going? Thanks.
On the CapEx mix. We will have a slightly higher CapEx in wireline because of the rollout of 5G, but that's not so big actually. The CapEx drivers in the next two years are driven by wireline network rollouts. My message was that the fiber to the street investments will go down after 2021. On the other side, in the next year and up to 2025, we will have some high fiber to the home investments. Because of the boost of this fiber to the street investments, there is a potential that the CapEx are slightly going down midterm. At the end, it's all related to also the competitive dynamic. It depends also on the competitive dynamic of the investments in fiber infrastructure. On the mix, I wouldn't see a dramatic change.
We show the mix on slide 28, and that will be more or less unchanged. We always said with 5G, the CapEx will not explode. The overall mix will be maybe a little bit more in fiber, as Urs mentioned, and then maybe a little bit less on projects and basic infrastructure. There are no material changes.
Okay.
The second question.
May I ask if the fiber to the home deployment will have to go beyond your current targets? And perhaps, you will want to match fully the cable footprint.
The long term, it will be fiber to the home. We will have a footprint of 60% where we have fiber to the home. In other areas, we will have, through fiber to the street, a bandwidth of 200-500 Mb/s . We will have a footprint of more than 90% with speeds above 200 Mb. We have a competitive network. That's a bit the message.
Okay, thanks.
Then on OTT, we had a good starting momentum on this OTT, also on the app side. On Smart TV, that was your question. On Smart TV, we get some new customers, but that takes time because the Smart TV penetration is still not so high in Switzerland. Therefore, that's more a topic which will have a midterm impact.
Okay, thank you.
There are no further questions at the moment.
Okay. With that, I would like to conclude today's conference call. Thank you to everyone participating. If you should have any further questions, please do not hesitate to contact us from the IR team. Speak to you soon. Have a great day, and stay healthy. Thank you.