Good morning, ladies and gentlemen, and welcome to Swisscom's Q2 Results Presentation. My name is Louis Schmidt, Head of Investor Relations. And with me are our CEO, Urs Sheppi and Mario Rossi, 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 of the highlights, operational performance and financial results of Q2 and the 1st 6 months 2nd, an update on our activities and performance in Switzerland and some explanations on Fastweb's network initiatives and first half year results. In the second part of the presentation, Mario runs you through Chapter 3, the financials and full year guidance.
With that, I would like to hand over to Urs to start his part.
Urs? Yes. Good morning, ladies and gentlemen. I would like to start with Slide 4, A short update on the main highlights. So we are proud that we were able to win all the mobile network tests in the first half year.
We had also a very resilient operation during the COVID-nineteen pandemic. So our networks resilient and were able to digest additional load. On the Swiss business, we are satisfying with the overall development. We have some impacts from lower roaming revenues. And on the other side, we have an increased Net Promoter Score Customer Satisfaction index and also the solution business has a slightly positive development.
So overall, a satisfying business in Switzerland and good results in Italy, where we were able to have a quarter of additional growth in all the segments. And also important strategic projects, which I will show you later. On the sustainability level, we were able to close a green bond. So this was the first green bond in Switzerland for a listed company. And on cost savings, we were able to deliver our forecast.
And in this case, we are also committed to our outlook on EBITDA level and CapEx level and slightly lower on the net revenue level because of COVID impacts. But we are commencing our EBITDA outlook. If you go on Slide 5, you see our performance. So on broadband and TV, slightly negative net adds. The main reason behind it is the lockdown in Switzerland, where our shops had a much lower performance.
On the other side, you will see that the business is resilient. If you look also to our churn figures, we are in a very comfortable situation. On a postpaid, slightly increased postpaid net adds and also on wholesale. And in Italy, you see on mobile and on broadband good growth. So Italian market is not such saturated as the Swiss market and COVID had a good dynamic for Fastweb in the broadband Internet segment.
If I look to the month now, I think we will have a better performance on NetApp in the next month. If you go on Slide 6, you see our key financials. So net revenue of SEK 5,400,000,000, dollars slightly lower than previous year. Main impact is COVID-nineteen and some price erosion in Switzerland, increasing revenues in Italy. The underlying EBITDA development in Q2, you see that it's approximately stable, minus €17,000,000 EBITDA, increasing EBITDA in Italy, slightly lower EBITDA with $17,000,000 in Switzerland.
And also on the bottom line of this chart, you see the development of the operating free cash flow, which is on the level of our expectation. If you go on Slide 8, so there you see some, let's say, some impact on COVID-nineteen. I don't want to go through now through the details. But overall, the main topic is business in Switzerland solid, good customer satisfaction, big impact from lower revenues from lower roaming revenues and Fastweb is on track and also on debt level payments rates, we don't see a disruption up to now. On Page 9, some thoughts about the impact of COVID on our industry.
So what's clear and what's not new is that COVID will push the digitalization. And for a company like Swisscom, this brings also some opportunities. On let's say, on the cost side, on the efficiency side in our operation, but also on the customer experience side in the different segments. So we will continue to exploit these opportunities through digitalization. It will be certainly an important project.
If you go on Slide 10, you see that we are performing on our network side. You see all the tests on the wireline, the wireless side, all the tests we won in the first half year and also the improvement of our KPIs. On the right side of the chart, you see our plans for ramping up the 5 to the home footprint in Switzerland. Today, we have 30% footprint 5 to the home. In 2025, we will have a footprint of 50% to 60% and we will have a coverage of 90% with speeds above 200 megabits per second.
So good performing broadband network. On Slide 11, you see our B2C performance. So we are well positioned. We are able to defend our market position in a market which is very promotion driven. So we have a lot of activity on the promotion side in the first half year.
The market is, I would say, without promotion, nothing is happening. So the promotion activities continued even through the lockout period. On the left side of the chart, what I already mentioned, you see that the frequency in our shops and this is also the main reason why we had some lower net adds in Q2. But overall, we are well positioned. We have the right things in place to also perform in the next quarters.
If you go on Slide 12, there you see some KPIs in the B2C market. And on the upper left side, you see that our penetration in our core offering, InOne that's our core offering, InOne mobile or InOne broadband, you see that we were able to increase the penetration. On the bottom left, you see our churn figures, low churn figures. In the middle, you see the development of the ARPU. So a stable planted ARPU in the wireline business, a slightly decreasing ARPU in postpaid, wireless postpaid and the ARPU is CHF 52 minuteus CHF 4 compared to previous year.
And this CHF4 is approximately CHF1 is coming from rowing, CHF 1 is from a converged rebate and then 2, through revenue mix trends to lower tariff plans or second and third brands, which have a slightly increasing market share in our portfolio. Penetration of fixed mobile conversion products is also increasing. You see we are in the region of 40% to 45 percent fixed mobile penetration, which is important also because churn figures are in the region of 2 percent points lower than in single products. On Slide 13, some information about our B2B business. So you see that the revenue generating unit in the wireless business is slightly going up or slightly growth.
On the other side, you see an ARPU of CHF33.3 and you see also the price pressure, which we have in this market segment. You see also that we are able to reduce our costs. So our costs went down by 2 point 6%, which is a good performance. So overall, the EBITDA margin in this B2B segment is at 43.6%, so slightly higher than in Q1. Solution revenues in the last 4th quarter, we were able to have a slightly growth on our solution revenue, which is a good performance in the actual market condition and also in the period where we had a lockdown.
On Page 14, the financial performance of Swisscom Switzerland. Here, I would like to mention the service revenue erosion, which we have through prices and also some impacts from rolling because of COVID. So we had that decline of the service revenue of €157,000,000 The EBITDA is approximately stable, so €1.8 $1,000,000,000 EBITDA in the first half year, which is $22,000,000 below previous year, previous year period. And operating free cash flow, which you see on the bottom of the right side, there we have if you make the comparison to last year, there you should take in account that last year we had spectrum auction of 196,000,000 dollars But overall, as expected, a good robust operating free cash flow. On Page 15, some information about Fastweb.
So the strategy of Fastweb is to become an infrastructure based OTT. There are a lot of different initiatives And you see on the right side of the chart what we executed in the first half year. So we bought Cutaway, that's a smaller IT company in the cloud and IT business, which will strengthening our position in the B2B market. And on the infrastructure side, we were in talks with this fiber COP in Italy. The agreement is still pending.
We certainly saw what were the last announcements on it. On Page 16, some more information about this fiber cop, so this network company in Italy. So the main idea is that Fastweb is bringing in this new company the joint venture part of Flash Fiber with Telecom Italia and for this we get a stake of 4.5% of this fiber cost. For us, this will improve our positioning in the fiber to the home market. And so we will be able to have a better market performance.
On Page 17, you see our initiatives on fixed wireless access with 5 gs. So the idea is to get an ultra broadband footprint also in digital divided areas. So we want to deliver with fixed wireless access, 50% of footprint in the divided areas. And with this, we will be able to increase also our market shares and our margin structure in this area, in this digital divided area. On Page 18, some information about this IT company.
Cutaway, I don't want to go deeper in it, but it's certainly a good move to change our positioning in the B2B market. Page 19, some KPIs about the performance. So you see that we were able to have a growth on broadband, on mobile, on a subscription level. And also during the COVID phase, Farfetch had a good momentum on broadband. The market is still under penetrated in Italy and with the lockdown and home office, a lot of customers thought that the broadband Internet could be a good thing.
And then therefore, we have a good momentum in the broadband market. And on the right side of the chart, you see our increasing fixed mobile converged penetration. Today, we are at 33%. And you see also that we have a good net promoter store and on mobile, but also on wireline. So high net promoter score is an important target for Fastweb than we are performing on this KPIs.
The B2B performance on Page 20 of Fastweb, you see also in Enterprise segment, we have revenue growth of 5%, a good momentum and no impact up to now in the cash in of the B2B business. And on wholesale, you see also that we are able to grow. We had a revenue growth of 19% in this segment. On Page 21, the key financial figures of Farfetch, they are in line with our guidance. On the revenue side, a growth of 5% on EBITDA side, also a growth of 5% and an operating free cash flow proxy, which is 36,000,000 dollars above previous year or at $63,000,000 So overall, a good and strong performance in Italy and a resilient business in Switzerland.
With this work, I would like to hand over to Mario.
Thank you, Urs, and also good morning from my side. I will start on Slide 23 with some remarks on revenues. First on the Swiss business. The Swiss business was impacted by the roaming revenue decline because of COVID-nineteen. Outbound impact is on outbound roaming, euros 27,000,000 in the first half.
This is shown in the service revenue. And less incoming roaming revenue of SEK 14,000,000. This is shown in the segment wholesale and other. On the other side, we had less out payments of SEK 27,000,000. So the net effect of this roaming decline is SEK 14,000,000 on the margin level.
On the service revenue development in residential, we saw a slight acceleration of the service revenue decline in Q2 due to the change of the YaltiO mix. We will see some details on Slide 25. In the B2B segment, we have an ongoing price pressure. Service revenue in Q2 went down by €35,000,000 but that is €5,000,000 less than in Q1. On the other side, we see growth on the IT business also in Q2.
We had €10,000,000 growth in Q1 and €4,000,000 growth in Q2. And as seen before, at Fastweb, we have a very solid revenue performance in all three segments. On the next slide, a few explanations on the costs on the OpEx. So overall, we are well on track to reach our cost targets. On SAC SRC, in Q2, they are €5,000,000 below prior year, mainly due to the closed jobs during the lockdown.
And to remind you, in Q1, we had SEK 40,000,000 lower SAX because in 2019, in January, February, we still had the old mobile offering in the market where we were still subsidizing the handsets. That was the reason for the big saving of CHF 40,000,000 in Q1. The outpayments I mentioned, CHF 27,000,000 less because of the lower roaming business. On indirect costs, we saved €64,000,000 in the first half. Workforce savings in Q2 were only CHF 5,000,000 because of increase of promotion for holidays because nobody took holidays during the lockdown except this effect, we would have seen the sales the same saving as in Q1.
So we are well on track there. And we had some lower costs in Q2 in the area of upper indirect costs because of COVID, less travel, less marketing communication. Part of those costs you will see in Q3, mainly communication and marketing. But overall, we can confirm our cost saving target of at least SEK 100,000,000 for the full year 2020. On Slide 25, you see the different elements of the EBITDA development of the Swiss business.
As expected, you see on the left hand side, in the B2C segment, the impact of fixed voice line losses and the conversion discount is coming down So the impact of fixed line losses is negligible and also the penetration of the converged customers is going the increase of penetration is coming down, so the impact is less. As I mentioned before, we have an acceleration of the impact of the change of the Artiomix, €29,000,000 in Q2 versus €18,000,000 in Q1. €4,000,000 of debt is coming from less revenue of pay per view sports events in Q2 because of the lockdown. But overall, we have this pressure because of promotions A and B, We have more new customers on 2nd and third brand. Meanwhile, we have 17% of our postpaid customer base on 2nd and third brand.
As I mentioned before, P2PBS less impact of price pressure in Q2. And then you see also the details in the roaming, euros 10,000,000 in Q2 in the B2C segment and SEK 12,000,000 in the B2B segment. On Slide 20 6, so the underlying performance of the group is almost flat despite COVID, despite the revenue pressure in Switzerland, thanks, a, to disciplined execution of the cost saving program in Switzerland and speed, the growing EBITDA of Fastweb. The overall EBITDA margin stands at 40.6 percent. It's an increase of 0.7%.
I think the dynamics we already discussed in the other segment, we had slight decline in the business of Swisscom Broadcar Costs and of Swisscom Direct, which is in white and yellow pages. Net income on Slide 27 is at SEK 738,000,000, 5.6 percent below prior year. The main reasons are the lower EBITDA, of course. Then we had higher other financial expenses. This includes a €30,000,000 noncash adjustment of the present value of provisions for regulatory cases.
Then on the tax side, we have a $20,000,000 positive impact. We still have some reductions of the tax rate in some cantons, but long term, you can calculate this tax rate of 19.5%. We have no remarks on the CapEx. We confirm our CapEx guidance. And then as Urs mentioned before, we are well on track with our cyber all out.
On cash flows, so first of all, cash in Switzerland and Italy is in line with prior year with our expectations. So despite COVID, we have a very resilient cash generation in both markets. One remark on the income taxes paid. So we have less income taxes paid of SEK 130 7,000,000. The reason is that the government allowed to defer tax payments because of COVID-nineteen, and of course, we took benefit of this possibility.
But the rest, I would say, is without any surprises. On Page 3031, on the financing side, we had a very successful placement of a €500,000,000 green bond in Q2, several times oversubscribed, attractive conditions, and all 2020 maturities are fully refinanced by mid of this year. And that brings me already to the guidance. So we confirm the guidance of $4,300,000,000 EBITDA and $2,300,000,000 CapEx, We lowered our revenue guidance by SEK 100,000,000 to SEK 11,000,000,000, and the main reason is the expected full year impact on the roaming business of SEK 70,000,000 to SEK 80,000,000. And with that, I hand over to the operator.
Thank you very much. The lines are now open for questions. The first question comes from Marshall Bishop.
Thank you and good morning. I guess, seeing as I'm first up, it would be really good to get your updated thoughts on the potential impact from Sunrise UPC combination. I know we went over a lot of the details on various calls when the transaction was proposed before, but things like your latest wholesale exposure and how you think the competitive dynamics in the market might change will be really useful. And then secondly, on the cost cutting, I was just wondering if you could give us a little bit more color on how you think the cost cutting is tracking for the year. It felt like in your presentation, Mario, you were talking about the fact that cost cutting had actually been hindered by no one taking holiday.
So if that's a tailwind for 2H and you've already done €64,000,000 then it feels like that's tracking well ahead of the €100,000,000 So any comments there? And then perhaps if I could, just a very quick third question on your comments around COVID being very positive for Fastweb. And Telecom Italia were quite cautious on Italian B2B. So I'd love to just get a sense of what's driving the better traction for Fastweb given the macro pressure in Italy? Thanks.
I will take the question on the merge, possible merge and Mario then on cost. And I will say some words to Praveen. Maybe first on the on this merch UPC Sunrise, I think the dynamic will stay as we already discussed when Sunrise would have take over UPC. So the main competitive dynamic will be the same. I think we have competition today.
We will also have competition tomorrow. Swisscom is in a is well positioned on the network side, but also on the whole product and product portfolio side and distribution. So to your question, what will be the impact on our wholesale business? Maybe a bit early to say because we don't know how this is a this merger come, but certainly we will not have an impact in 2020. We will have, if this merger will come, a very low impact on 'twenty one, then maybe a bit increasing.
But overall, at the end, the full impact I think will be on wholesale business in the region of let's say $50,000,000 or $60,000,000 overall, that's the total risk. So it's the limited exposure at the end, which we have, let's say, CHF 60,000,000. And then on our positive dynamic of Fastweb because of COVID. So Fastweb is very well positioned in the B2B market. Bairstep is an agile quality provider in the B2B market segment.
We are increasing our market share since a lot of years and that was also the reason because we are agile quality providers that we were able to make infrastructure projects for B2B company. And I'm optimistic that we also have a good momentum in the B2B market in Italy in the next quarters. While on cost and on
the cost side, yes, you're right. We will see some tailwinds on the workforce costs. On the other side, we will yes, practically no marketing and communication costs in Q2 that we will see in Q3 and Q4. But overall, we expect that we will see savings north of SEK 100,000,000 that we can confirm today.
Thank you very much.
Great. The next question comes from Arpizo Roman from JPMorgan.
Thank you very much for taking my questions. Maybe just starting with a a quantified what was the impact from people taking that holiday? If you could give us a sense of those numbers, that would be helpful. And then a question on Italy as well. So there is a lot of discussions about single network coming into being and the potential merger with OpenFiber and I guess, CyberCorp in which you're now involved.
So if we go down the road, do you have a strong preference for TI having control or not having control? And do you think it is possible to have equal treatment of all operators by a single network in a scenario where TI has control or these things are just incompatible? And one more, just wanted to follow-up on the salt Sunrise fiber partnership. Do you think at this stage it makes sense for you to take part given now you've had a bit of time to think about it? Are you planning to participate in this venture in any shape or form?
Thank you very much.
So Mario will take the question about on this cost and holiday topic. And first on this Swiss Open Fiber. So our strategy is to execute our rollout plans as we announced them. And that means we continue to grow, we continue to build our fiber to the home networks. And I think it's too early to judge what this Swiss Open Fiber Company will do.
And as in the past, on a tactical level, we were open to do some partnering, but as we have done it in the past with utilities. But we don't see that we go now in a closed cooperation with the Swiss OpenType. We will build our network and continue to build it.
And on the cost side, I mentioned when I explained at Slide 24 that without this holiday issue, the saving would have been more or less the same as in Q1. That means the impact is around CHF 10,000,000 for Q2 because in Q1, we had savings of CHF 14,000,000 and in Q2 of CHF 5,000,000.
And then on this question of the single network fiber cop in Italy, the role of Telecom Italia, the whole control and this, For us, it's important that we have that we can have a fair competition in Italy. For us, this deal is value accretive, value accretive transaction. We have access to the financials, also to the dividend streams of this fiber cup and the commercial conditions reflecting Fastweb's participation in this cooperation. So overall, we will be able to ramp up for, let's say, for good investments, our footprint fiber to the streets to fiber to the home
in this
combination with fiber crop crop and different shapes ourselves in the market. But important for us is at the end that we have here an organization where competition can be executed on a fair level.
The next question comes from London. Could you please state your name?
Hi, guys. It's Simon from Barclays. Sorry, one more on Sunrise and Wholesale. Could you just give a bit more color about, say, how the wholesale contracts are structured, the volume discounts, how easy it is for them to get out of the contracts? And if they do migrate a lot of customers, how do the discounts, say, reduce?
Any color around how that all works would be very useful. And then you said that the impact in B2B was a little bit smaller on price competition this quarter. Do you think that was just COVID related and companies focused elsewhere, so not looking at switching, say, their mobile or their telco operator? Or are you seeing maybe actually a change in the B2B market and competition has just been improving? Thank you.
Simon, on the wholesale business, I think you get the best details, which are public, on the Sunrise presentation of last year, September 30, that they're talking about the run rate of savings of cost of goods sold of SEK 60,000,000. That's exactly the number also explained or confirmed before, which will be built up over the next 3 years. SEK 60,000,000 there you have savings from MNO. Of course, we don't disclose the details of the MNO contract with UPC. Then you have the savings of the fixed network access costs.
And there is the story is unchanged. UPC has not 100% cable coverage. It's around 70%. So part of it, there will always need to buy from us, from Swisscom. And then, let's say, the migration of the customers, again, will most probably not be 100%, and it will not be happen overnight.
So I would say today, the situation is unchanged as end of September last year where Sunrise disclosed the potential synergies of this transaction, and they are stated at EUR 60,000,000. And also, the discounts of the excess deal is actually with Sunrise, they are not public.
Then on the cost margin?
On the B2B, the better development of B2B, no, that has nothing to do with COVID. These contracts and the impact of the new contracts, these contracts were closed a few months before.
So that's slightly better improvement,
better development on the price pressure. I wouldn't say that's yet a long term trend.
Okay. Very clear. Thanks very much.
Great. The next question comes from George from London.
Yes. Good morning and thank you for taking my questions. I have 2. The first question is around the developments in Italy. Urs, I just wanted a bit more color as to the agreement you signed with Windtrail last year?
My understanding is there are certain areas where you will act as our wholesale provider. And obviously, they have some arrangements with OpenFiber. I'm just curious how these will work in areas where there are overlap, whether you take your agreement has priority or whether OpenFibre's agreement with Winters has priority? And then my second question is more broadly on B2B and thank you for the update on both the Swiss trends and the Italian trends. I think when COVID started, Mario, you are suggesting that you are worried that ICT projects may be delayed and everything else, but over time maybe virtualization and cloud will take over.
Do you mind just giving us an update of whether you think this could change the B2B business over time and whether the net effect could be positive or negative? Thank you.
On Italy, you know that the agreement which we have with WinTred, there are different elements in it. That's the partnership, the co financing partnership for 5 gs, that's one part. Another part is a wholesale agreement where they get access to our broadband portfolio. And the 3rd part of this agreement is also base station connections such things. So the wholesale business is quite wide.
And you are right, there we are in competition also on broadband with Enel Open Fiber. But we are confident that we will have a good wholesale business also with WindTray on this broadband axis, retail broadband axis. And then on B2B, Mario, on this, how's on this solution business development?
Joseph, I remember we mentioned at your conference that we might see some lower IT business in the second half. So far, we didn't see that. So the business is developing as expected. And yes, we think mid term, this crisis and the whole digitalization is certainly, let's say, a chance for our IT business, thinking about cloud, thinking also about security. It's more and more people working from home.
There will be some new aspects in terms of security. So I think mid term, that's a good opportunity for our B2B business, and I think we are well positioned with our large IT organization to create the revenues.
And if I could ask a quick follow-up on the B2B side. Around bad debt, it was something I think you mentioned at the start of the year, you'll have better clarity by the second and third quarter results. Is it still too early to assess if there will be an impact? Or should we interpret this as meaning probably the impact will be quite negligible?
Well, what we see today is the impact, it is quite negligible.
Also in Switzerland, and in Italy, today, we don't see an impact. So the whole question is what will be the development in mainly in the SME market in the next month, and that's hard to judge. Are there a lot of bankruptcy? But at the end, if I look to the Swiss economy, I don't think that the forecast on a year level, but we don't see now alarming signs.
Okay. Thank you.
The next question comes from Ulrich from
Thanks so much. It's Ulrich Reins from Jefferies. I have one question and two clarifications, please. The first one is on the commercial environment, but specifically in the consumer market. It seems that, that has been pretty rough and has stayed pretty rough in the Q2.
Could you confirm that or discuss that a bit? You can provide a bit of color how you see the competitive environment there? And then specifically, with regards to B2C, I mean, if you had to choose whether emerged Sunrise UPC is a tougher competitor because it has fixed mower capabilities or whether it would be a more rational competitor that is ultimately interested in preserving market value? Which of these two sides would be your base case expectations, tougher or more rational? And then 2 clarifications.
On the wholesale exposure, Urs, when you talked about the €60,000,000 do I understand correctly that, that would exclude the UPC MVNO, that the number you mentioned there excludes the UPC. Mario's comments sounded like that was the case. I just wanted to confirm. My second clarification is when you book wage costs, do you book them essentially as paid? So everybody somebody who's fixed employed, just have the same cost per month because you pay them fixed per month?
Or do you actually book the cost when people work and you don't expense wage costs when people are on holiday? Is that what you're saying here? Thank you.
Good. On wage costs, Mario will take All set
and wage costs are the same.
Okay. And then on Sunrise, Sunrise UPC, this is possible merge. So at the end, the main question is how rational this new player will behave, and I don't know it. But if I look to the industry dynamics and to this new company with back books in Internet, back books in TV and then also in mobile, I think it should be a rational player at the end because the market shares are much more distributed, but I don't know it. But I think it will be maybe more rational than in a current market situation.
But I don't know what we will see. On the competition in Switzerland, you are right. We in the first two quarters in Switzerland, we have very aggressive promotion. And driven by Sunrise, driven also by Salt and some of them also by UPC. So very aggressive promotions, let's say, the red line of it is half price and some hardware in it.
And if there is no promotion, there is no liquidity in the market. But at the end, market shares are not turning so much. If you look to Swisscom, so it's a kind of washing machine. And the question is how long this will last. The acquisition cost of these promotions are quite tight.
But my forecast is that we will also have aggressive promotion in the Q3 and Q4.
And on the wholesale side, so the SEK 60,000,000, those include the MVNO savings. And as mentioned before, that will not happen overnight. That will be built up over, let's say, 3 years. And on the accounting question, yes, the wages are booked and people work. So that means if they take holidays, you have less personnel expenses.
That was the reason nobody took holidays in Q2 compared to 2019.
But we are confident that they will take holiday until the end of the year.
Understood. Thank you. Can I just follow-up real quick then? The SEK 60,000,000 sounds quite low compared to how Sunrise discusses the synergies if it includes the MBNO savings.
So would you be Just
refer to the presentation of Sunrise before the merger or the potential merger last year. Its run rate synergy estimate, EUR 60,000,000 per year and fixed network access cost savings and MVNO savings. And the reason is there's not 100% coverage of the cable operator and that not all customers most probably will be migrated in the footprint. So you have both FX. And we don't disclose other numbers, but we confirm this €60,000,000 estimate, and we did already last year.
We did that already last year.
Okay. Thank you.
The next question comes from Steve Malkin from Redburn.
Yes, good morning guys. I hope you can hear me okay. I just had a couple of sort of, I guess, Q2 COVID specific questions. One is on your inbound roaming. I'm kind of surprised that it was only down $14,000,000 $28,000,000 in the sorry, dollars 28 percent in the quarter.
I guess in other markets, we're seeing it pretty much zeroing. Can you explain where the inbound roaming revenues that you booked actually came from? Are those kind of take or pay contracts? And secondly, just sort of trying to tease out your cost performance. I get that that's you on personnel, but if I look through your fact sheets, your other operating expenses declined by 17% in the quarter, which was a kind of massive drop versus what you reported in Q1, down nearly €100,000,000 Can you maybe just sort of explain what goes into that bucket of other OpEx, which fell so much?
And maybe one final one, just on Fastweb wholesale. I mean, that was clearly the big out performer in the quarter in Fastweb, very difficult to model. Can you give us an idea what you think sustainable growth in that Fastweb wholesale revenue line is over the next 2 or 3 years? Thank you.
On inbound roaming, we had this impact in Q2 of €13,000,000 That's roughly 1 third onethree below prior year. And you have delivered some traffic. We are in the middle of Europe, and you still have some traffic. But then you have also some valuation impact because it's always they're always bilateral agreement, but I cannot give you the, let's say, by heart, the distribution of the traffic by country.
Are you back to sort of normal levels now? Where are you tracking on that inbound roaming in Q3? And how are you thinking about that for the second half of the year?
No. We expect a similar impact in Q3 as in Q2. You have in Q3, it's usually you have a lot of stories also coming from Asia and the U. S. Usually in Q3, and that will be practically 0.
So we will have a similar reduction in Q3 and in Q2.
Okay. But onethree of reductions is a kind of normal level given the traffic flows with Germany and France and Italy is what you're saying?
Okay. You know that traveling will be on a low level also in Q3.
I'm surprised the impact is so relatively little because it's a lot smaller than the market, but I understand your geographic location may help. Okay. And other OpEx in Fastweb Wholesale?
In other OpEx, we had CHF 45,000,000 savings in the first half. That's from marketing advertising. I mentioned before that nearly stopped in Q2. That's CHF 12,000,000 out of the CHF 45,000,000, then we have less maintenance repair, SEK 6,000,000. And then we benefited from lower travel costs, IT costs, I would say around SEK 15,000,000.
And then yes, these are the main elements. And then we had €7,000,000 higher savings in Q2 than in Q1, and that's mainly because of marketing and travel. It's
And I think that we saved about
SEK 2,000,000 per month. So we saved about SEK 2,000,000 per month because nobody was traveling.
Okay. So I mean how much would you say is sort of COVID specific? Because you call out the COVID revenue impact, but it's a little harder to see the sort of COVID specific cost benefits that you got in Q2. Is it possible to put a number on that?
Yes. But at the end, it's not so
big, Alan. So I would say, in other OpEx, euros 5,000,000 to 10,000,000 and there may be another SEK 5,000,000 to SEK 10,000,000 coming from Marketing Communications. And Marketing Communications will certainly see a path in the second half.
Okay.
10% to 20%. And then on Fastweb, the wholesale development on Fastweb. So the main growth drivers for wholesale of Fastweb is our company's customers like Syskali, Windtrek, but also Sky. So there are a lot of different retail players, so that will bring a growth for faster wholesale business. And then also faster wholesale business is the whole base station connection and these mobile networks are increasing.
So there is also more base station connection. So these are the drivers behind the wholesale business in Italy.
But you think you can keep growing that business double digits over the next 2, 3 years. Is that fair?
I don't make forecast on all the percentages of growth, but it's wholesale will be a growth business, yes.
Okay. Thanks a lot.
Great. Thanks. The next question is from Jacob Bluestone from Credit Suisse.
Hi, good morning. Thanks for taking the question. I just had a question on the evolution of your service revenue drivers that you outlined on Page 25. Could we maybe just get back to the point about the sort of worsening drag from B2C RGU mix? Just to sort of understand how much of that do you think was you mentioned earlier in your presentation that you were seeing more spin down to sort of the second and third brands.
How much of that do you see as a temporary effect? And how much of that do you see as a sort of increasingly accelerating drag? I mean, it looks like over the last few quarters, there's been quite a step up in the size of this RGU mix drag. Thank you.
I would say of
this 28,000,000, about 50% are coming from the impact of 2nd and 3rd brands.
That's a
few million higher than in Q1. Then what I mentioned is $4,000,000 is coming from value added services because we had no sports event to sell. And about SEK 4,000,000 to SEK 5,000,000 are coming from the wireline business, some pressure on the wireline business and also from in that area, from lower number of customers because we lost some customers in the last quarter.
Okay. So it does sound like there was even ex COVID and sports obviously was temporary. It does sound like there is a sort of deterioration of the
The fact that it is €4,000,000 I think. Yes.
Okay.
We have a slight acceleration, and that's coming from 2nd mainly coming from 2nd and 12th brands and less subscribers on B2B.
Great. Thank you.
Next question comes from Usman Ghazi from Berenberg Bank.
Hello, thank you. Just have 2.5 questions, please. The first question was just on the second and third brand topic, I see that you've expanded the distribution of Ringo now to offline channels with Mobile Zone. Could you perhaps run us through what your logic is there and if there is a risk that this general move of spin down in the market goes up even more as a result of that move? The second question was just on the various network widely reported during Q1 and then through a bit of Q2.
Has that at all impacted your relationships with your B2B customers or resulted in a need to make some special offers to retain these customers as a result of these disruptions? And just generally, I mean, it's quite uncharacteristic of Swisscom to report such kind of disruption. So could you perhaps indicate whether the issues here have been solved
or not?
And then my third question was just on the damages claim between Sunrise and Swisscom. I see that you have a provision in the balance sheet of around 210,000,000. The annual report also indicates that you expect some kind of resolution within 0 to 5 years. Could you perhaps give any update on how you see this claim situation developing? Thanks.
Well, Mario will take the claim question. I will take the 2 or 1.5 other questions. And to the first question, the second and third brands, you are right. We also distributed through mobile phone, Wingo, the product Wingo, already with our 3rd brands we were in other channels. And if you look through the whole competitive environment in Switzerland, I think online is an important channel for 2nd and 3rd, but also some physical channels are important.
That's why we entered in Mobile Zone, in the Mobile Zone channel. And it's working well. And on the network stability side, so we had some problems in the Q1, a lot of different reasons behind it, no structural pattern. And if you look to our net promoter score, we didn't get a hit on the net promoter score. Net promoter score in Q2 is even higher than before, and it also reflects our strong performance during COVID.
So I think we didn't actually get a hit on the customer side through this stability problem. In B2B also, we haven't got some losses on it. But clearly, stability has priority 1 for us. And the stability of the Swisscom network is very good. If you take some KPIs, you see that in the last two years, we were able to decrease our meaning of failures by 40% in the retail market, just as an example.
And therefore, I think we didn't get actually a hit through this incident in the Q1.
And on provisions or regulatory cases, you will understand that we cannot disclose more that we disclosed in the half year report. And there you see the explanations, our expectations in Note 8. And I'm sure you will understand that you cannot disclose any more
details. Thank you. But perhaps can I just follow-up on the network question? I see that Swisscom will be shutting down the 2 gs network, I guess, earlier than your peers to free up capacity for 5 gs. Has that project anything to do with the disruptions that you're seeing at the moment?
Or is it completely unrelated? Thank you.
No, it's nothing to do with this. We announced it 5 years ago that we will phase out the 2 gs network at the end of this year. The main reason is the reduction of the complexity, which also leads to lower costs. But that's one part. The second part is we get actually space on the site for new technology for 4 gs and 5 gs and spectrum.
And then you know today that the usage of 2 gs is extremely limited. So the majority of all the traffic of the voice calls are on the 4th year.
Thank you very much.
Okay. We have two more questions. Next one is from Muller Andreas from Zechobee.
Yes. Thank you very much. Good morning. I have two questions. One is on Cybercop.
What kind of cash impacts you foresee going forward in terms of CapEx, for example, for Fastweb, but also in terms of increasing maybe the stake at some point or in general the cash impact? And then on the Swiss market, TV subs and broadband subs, You mentioned that the shop closing had some impact there. Do you see that for the whole market? Or are there also market share shifts going on in Q2 and also going forward? Thanks.
So on the question of the net adds market share shift during the lockdown period. I think Swisscom has a customer base, which is where online is still relatively low. So that's why during a lockdown of physical channels, we have a bit of lower performance. If I look now to July August, I think we are in a better situation to have a better performance. I don't really see big changes in market share on the Swisscom side, on the whole market.
And also a very good indicator normally is the net porting, where you see the importing and out porting. And there, I don't see really big changes on market shares. And I think you don't have to look only on net adds, you have to look on service revenue market share. But in what is the main dynamic there is that because of price pressure, service revenue is coming down as Mario explained it before, Switzerland. And on fiber costs,
it's a so first of all, it's it is new. It's a contribution in kind of our 20 percent stake in Flash Fiber and that brings approximately 4% to 5% of Neuco. Then in the future, as of today, we don't have any intention to increase that stake. So there's no negative cash impact on that. And on the CapEx, so in that area, maybe we'll improve our network from FTTS to FTTH.
There will be some CapEx, but they will come over the years, and that has room in our existing CapEx handler. It will be reshifting. So no negative, but also no positive cash in.
That's clear. Thank you.
But at the end, more performance network, meaning FTTH, it will be certainly be more competitive and will result in lower churn rate.
Okay. Thank you very much.
Great. The last question comes from Frederic Buenavent from BoA.
Hi, good morning guys. Quick question on mobile. So first of all, on 5 gs, if you can give us an update on the 5 gs debate, including the length with the opposition and the MS concerns and maybe an update on your 5 gs build out? And then secondly, on your mobile ARPU, so the CHF 4 impact you flagged for converters and mix, what's your what can we expect in terms of development going forward? And in particular, 5 gs, I mean, you seem to have removed the premium for 5 gs.
So where do you see that ARPU outlook going forward?
So on the network rollout of 5 gs in Switzerland, we have a very emotional debate in Switzerland in a lot of regions. We are blocked to roll out the network. Today, we have a coverage of 90% on the base of dynamic spectrum sharing. So we have a coverage on 5 gs, but we have problems to roll out or to densify the network now because of all this debate. In the last 2 or 3 weeks, I think there is some hope that the debate is becoming more rational.
And we have now some parties in Switzerland, which really are supporting 5 gs. Well, I think midterm, we will be in a better situation. But the debate on building mobile networks will stay an emotional moment in Switzerland. On 5 gs, additional ARPU, we will it's our ambition to charge for additional speed, additional money. But at the end, it's a question how does the whole market will behave on this topic.
And overall, I don't think that 5 gs will be really be an ARPU increase. It will lead to more SIM cards, higher penetration of mobile, which will bring us additional business. And on the general ARPU development, I think we will have some pressure also in the future driven from the B2B segment and driven by more second and third brands.
Now if you look at the CHF 4, CHF 6 decline, so about 50% comes from the Artiomix and the other 50% comes from roaming and conversions. And say over time, roaming and convergence, that will reduce. But as you have mentioned, on the Arduomix, on the 2nd and third brands, this decline, we expect that will continue also in the field.
Okay. Thank you very much.
This concludes the last question from the Q and A session. I'll just back to Josep.
Sorry, do you have another question?
No, this was the last question from the Q and A session.
Okay. Well then, thank you. And with that, we would like to conclude today's conference call. Should you have any further questions, please do not hesitate to contact us from the IR team. Thank you,
and have a great day.