This conversation will be recorded. Good morning, ladies and gentlemen. Welcome to the Swisscom Q1 2020 results presented by Urs Schaeppi, and Louis Schmid. Louis, the floor is yours.
Good morning, ladies and gentlemen, also from my side. As always, our quarterly presentation has three chapters, Q1 highlights, business review, financial results. Slightly different to the past, we will not run you through each slide. Our management, Urs Schaeppi, our CEO, and Mario Rossi, our Chief Financial Officer, just focuses on some key messages per chapter by referring to the corresponding slides. 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 page four, with the Q1 highlights. Overall, we are performing well in this COVID-19 crisis. Our performance is good. We have 85% of our employees in the home office. Operationally, we have no problem and good KPIs. On mobile, we were able to win the four mobile network tests in this year. We are also awarded as the leading provider of cloud and security in the B2B market in Switzerland, and also on ESG, we were awarded as one of the most sustainable company. In Italy, we are growing. EBITDA growth of 5%, and overall, an EBITDA margin, which slightly increased. On page five, you see our market performance. Like always, Q1 is a bit weaker.
Also compared to last year on mobile, we had last year the special effects on an MVNO contract on Coop Mobile. That's why the mobile net adds are a bit weaker. Overall, it's in the region of our estimation. A bit lighter, but no specific remarks to it. In Italy, we have a good momentum on broadband net adds. Mobile is overall in Italy a bit weaker because this home office, nobody is going out, and therefore mobile net adds are a bit weaker. On slide six, you see our financial performance. Solid figures underlying EBITDA stable. It's minus CHF 3 million stable EBITDA. We were able to compensate the service revenue decline in Switzerland through cost term actions, cost reductions. In Italy, we have a growth. Overall, a stable EBITDA.
You see the free cash flow on the bottom of the chart, which is at CHF 520 million. CapEx are in the round of last year, CHF 516 million. Overall, a solid figure of financials. If you go on slide eight. You see some information to the COVID-19 situation. In Switzerland, we had the lockdown middle of March. In Italy, it was earlier. They are, let's say, two or three weeks before the rest of Europe. On an operational level, as I already mentioned, no special impact. Maybe interesting to mention is that we were able to digest the volume increase, and we have no performance problems. We don't need additional CapEx to digest the increase of the volume. The shops, they were partly closed. In the beginning of the lockdown, they were closed.
We are reopening the shops, and today we have more than 90% of the shops open. This will certainly also help us to get a better performance on mobile in the future. We also established a kind of health package for our customers. For customer which were blocked outside Switzerland, we get a roaming benefit. We have special offers for SMEs, for home solutions, the home office solutions. Also on the speed side, we made some special promotions. Overall, the net promoter score of our customer base increased through the crisis. We get very good feedback from the B2B side but also retail side. On page nine, you see the dynamic on our business of COVID-19. We will certainly have enough time during the Q&A to talk about it.
It's hard to quantify it today because it depends on the different factors like duration of the epidemic and also the behavior of our customers. It's too early to judge it on a quantified level. In Q2 or during the Q2 results, we have certainly much more visibility on the impact on it. We will have a small impact on roaming because I'm convinced that traveling will be not the big topic in 2020. We will have a small low 2-digit impact on roaming. The major question is what is happening with the payment rates, but that's too early to judge it. Today, we don't see any signs that the payment conditions are deteriorating. We have a stable cash inflow in Switzerland and in Italy. To page 10.
Here you see what was happening on our network or is still happening on our network. 70% more calls on mobile, 65% more calls on fixed voice. The calls are normally longer, 50% longer. A high stimulation of the voice volume and also the data volume increased, and this without a performance problem in our network. On page 11, I would like to skip it, but here you see how we made the restatement in Swisscom Switzerland because of a reorganization. The major change is actually the change of the SME department from retail to B2B, and this leads to the restatement which you can see on page 12. Let's jump to 13. Page 13. Here you see the figures of B2C. A solid operation. Good performance with our entertainment products, with our new TV platform.
inOne is continuing to be attractive. We have an increased penetration on inOne mobile converged offers. These are a bit the main message. On page 14, some KPIs. Low churn figures. You see it on the bottom left, low churn figures. In March, they are even a bit improving. 8.9 postpaid churn, 9.7 broadband churn, and converged offer has 7.6%. In the middle of the chart, you see our ARPU. The blended wireline ARPU is stable. The postpaid ARPU is at CHF 54, minus CHF 4. What are the reasons behind this ARPU decline? CHF 2 are coming from inOne mobile converged discounts. CHF 1 out of the revenue-generating mix or brand shift, CHF 1 is because of the de-bundling. Which is compensated also by lower SRC.
On a net basis, you could say it would be minus CHF 3. On page 15, our B2B business. We are fully on track with the transformation B2B. On page 16, some KPIs to our B2B business. We are the clear number 1 ICT provider in Switzerland. On the bottom right of the chart, you see our positioning in cloud and security from a research company. Swisscom is the leading provider for cloud and managed security, which are both growth areas. You see that our margin in B2B is stable or let's say it's a more or less stable or slightly increasing ARPU, EBITDA in B2B. On page 17, you see the financial figures of Swisscom Switzerland. The one on the revenue chart, you see the pressure on our service revenue, and then minus CHF 72 million.
40 is coming out of B2B, 32 from B2C. EBITDA, stable. These are the main messages to the financials. On page 18, Fastweb performance in the consumer market is resilient. You see that we have an increased broadband customer base by 3%. Mobile subscription went up by 24%. Fixed mobile penetration increased by 3 percentage points. This is important because then we have a better ARPU and lower churn. On page 19, B2B performance, Fastweb, a good B2B performance. In enterprise, but also wholesale, you see there the growth rates. A good performance. On the financial on page 20 of Fastweb, you see this growth of 5% of the EBITDA. These were a bit my main messages, and now I would like to hand over to Mario.
Thank you. Good morning also from my side. Only a few additional information remarks for the financials. Jump directly to page 24, where we show you the main elements of the EBITDA evolution of the last five quarters of the Swiss business. In Q1, the service revenue declined by CHF 72 million, close to 5%. CHF 32 million coming from B2C and CHF 40 million from B2B, and still CHF 20 million from the wire less business and CHF 19 million from wireline business. We were able to compensate the main part of this decline of the service revenue. I think we did, again, a good job on the cost side. We reduced indirect costs by CHF 33 million, CHF 14 million coming from workforce costs, and CHF 19 million from IT, customer care, field services, communication, et cetera.
We have a positive net effect of CHF 29 million from the device decoupling and the SRC savings. Maybe one remark to the wholesale business. You see in 2019, we had quite a material increase of the wholesale revenue. There we had the impact of the transfer of the UPC client from the network of Salt to our network. That had an impact of close to CHF 30 million for the whole year. Overall, I would say a flat evolution of the EBITDA in Switzerland. Some remarks to page 21, to the cash flow development in Q1. There are two elements. The change in net working capital of liabilities due to relatively high payments, and we had in February, January, some prepayments for maintenance contracts and licenses contracts. Overall, over the full year, I expect a flat development.
We see in Q1, we have relatively low income taxes paid. The Swiss government reacted very quickly in March and allowed to postpone payments of federal and cantonal taxes until Q4 due to the COVID-19 crisis. Of course, we took benefit of that decision. I think during these days, it's important to have a look at the debt maturity profile on slide 29. In 2020, we have to refinance a eurobond of EUR 500 million, which is due end of September, and some smaller bank loans. Just to remind you, we have CHF 2 billion committed credit lines still unused. When you have a look at your balance sheet end of March, you see that we have CHF 1.5 billion cash at hand.
The reason was that we draw uncommitted credit lines to secure the short-term liquidity, mainly to secure the payment of the dividend in April, as we did right after, let's say, the whole evolution of the COVID-19 crisis. Of course, we are committed to our strong credit ratings. We had the credit reviews with the agencies. Moody's already confirmed A2 stable this week. That brings me to the guidance. Beginning of February, we communicated our guidance for 2020. The guidance is still in place. In Q1, we don't see any negative. Urs explained to you a possible COVID-19 impact cannot be quantified at this stage. It's just too early. You saw at slide nine, possible areas of our business where we could see in the next months or quarters impacts of the COVID crisis.
With that, I hand over to Louis to manage or to the operator to manage the Q&A. Okay, operator?
Thank you, Mario. Ladies and gentlemen, to ask a question, please dial star one four, star one four on your keypad. To withdraw your request, dial star one five. I already do have some requests. I will open the lines one by one. At your turn, you will hear a short announcement saying, "Unmuted." Please announce yourself before asking your question. I will open the first line now.
It's Roman Arbuzov from JP Morgan. Thank y ou very much for taking the question. My first one is just on the guidance. You're saying that you're keeping guidance, but there is some uncertainty related to COVID. If you look at what some of the other telecoms have done, they have withdrawn guidance due to uncertainty, and you're citing the same uncertainty, but you're keeping the guidance. I'm wondering, does that mean that in the base case and given everything that we know up until this in terms of impact on the business and also more generally in terms of the developments of the situation, is the base case that you're more likely than not to keep the guidance? Is that the right way to interpret it? Just in light of everybody else or many others withdrawing the guidance.
Maybe a little bit more color there, that'd be helpful. Second one, just a roaming clarification. The two-digit impact from roaming, related to COVID. Is this EBITDA revenues? Could you please help us understand what is the EBITDA impact on revenues? That would be very helpful. Thank you.
I will take the question of roaming. Mario then on the guidance. In Switzerland, Swisscom has a tariff scheme where roaming is included. In the majority of our postpaid tariffs, we have roaming included. The impact from there is actually zero. The second point is, what is happening with inbound roaming. That's clear. The borders are closed. There is no inbound roaming traffic. The third effect is outbound roaming, additional data package. At the sum, if you take all of this net, I think we will have a low two-digit impact on EBITDA level, but low.
On the guidance. Our guidance 2020 is still our base case. We as a management team, we will call to meet this guidance also during this crisis. There are elements which are out of our control. For example, bad debt losses. Today, we have no visibility, what might be in Q3 and Q4, how many SMEs have to go bankrupt? We just don't know. That's the reason why we say we have huge uncertainties. Also, on the shop frequencies. We opened, as it was explained, our shop, we don't know yet how people behave in the next few weeks and months. Are they afraid to go to the cities, to the shops, or are they coming back? We just don't know it.
I think we need to observe now the situation the next few months, we have much clearer statements at the earnings call of Q2. The base case for us is guidance 2020, it's our target to meet this guidance also during this crisis.
Thank you. Can I just ask a follow-up? In relation to the guidance, what do you plan in terms of mitigation measures, and have you already started enacting any of those mitigation measures? Do you think it's fair to assume that you will exceed your CHF 100 million cost-cutting target this year?
On the cost-cutting side, we always said that if we see that we can do more than CHF 100 million, then we do more. On the cost side, we have not implemented an acceleration program. I think on the CapEx side, we will see some natural lower CapEx because some sites were closed in some cantons during a few weeks. Also there, we will see in the next months, whether this CapEx will fully materialize or not. I think they may be slightly lower just because of the closing of the sites in some cantons I mentioned.
Thank you very much. Appreciate it.
Thank you. I'll open the next question.
Hi, guys. It's Simon from Barclays. Just to follow up on cost-cutting. Does COVID-19 make that any more difficult? I'm just thinking from, say, a redundancy point of view. I'm just wondering if there's any issues there. Secondly, on competition, we know that online competition has typically been very intense with big promotional discounts. I'm just wondering, have you seen any material changes in competition from that point of view in the last few weeks? Thank you.
Good. Mario, you take the cost, I will take the online competition.
On the cost side, I think we are confident that we will meet our cost target 2020. Looking for 2021, that depends on the overall social climate in Switzerland, how will be the unemployment rate at the end of the year. That might become a bit more difficult to reduce headcounts in the future. Also there, I think it's too early. We stick to our targets also for cost reductions at 2021, that we want to reduce indirect costs by at least CHF 100 million. There we started now working on different projects, like we did in the past, to fill the pipeline for the next year. You're right, might have some impact, the COVID-19 situation, on 2021, but not on 2020.
On the competitive dynamic during this COVID-19 crisis, what we don't see is actually above-the-line promotions. It is much more calm. You are right, on the below-the-line level, there are sometimes very specific aggressive promotions. That's also the point that you see that the percentage share of net adds over online channel, customer care, direct sales is increasing. From a high-level perspective, the promotion activities is not totally changing. If you also look to the aggressivity of the promotions before the crisis and during the crisis, there is no big difference. With the same flavor as in January and February. I'm convinced also if shops are reopening, shops will remain an important part, certainly on mobile.
Okay. That's very clear. Thank you. Just a quick follow-up, because we've seen service revenues improve quite materially this quarter versus the run rate last year. Does the fact competition is not changing give you confidence that we're now maybe at a new run rate, if we maybe park COVID-19 for a second?
We had a better run rate in the B2B area, minus CHF 40 million in Q1 versus minus CHF 48 million in Q4 2019. I don't see a trend. No. Also there's three elements in the B2C area. I think these three trends, fixed lifeline losses, conversions, and ARPU mix, will continue to be in place also in the next three quarters.
Okay. Thanks so much, guys.
Thank you, Simon. Next question.
Good morning. It's Georgios from Citi. I have two questions. The first one is around EBITDA and the second one around KPIs. On EBITDA, I was just curious on the couple of things you mentioned earlier. If you could be a bit more specific about when do you think the timing of any bad debt recognition will be visible? If you can talk us through how the accounting works in terms of if there are delays in payments and then you start to make provisions. Also on the cost side, there was a significant benefit in SAC and SRC versus device revenues. I think it was around CHF 50 million benefit.
Mario, correct me if I'm wrong, but at the full year results, you suggested there should be a CHF 5 million, perhaps, improvement versus last year from the new device plans. Is it something you may get a slightly bigger benefit than what you are budgeting initially? My second question is on KPIs, and I think it was partly answered also when you said that with the reopening of the shops, you expect to see a bit better postpaid performance. What I was a bit curious about is, obviously you have a very significant broadband base, which some of your competitors don't benefit from that.
I was curious if you think the lower postpaid net add is specific to you or is a broader market issue around this crisis, and whether it can be explained perhaps by the use of online channels or not. Thank you.
Good. Mario.
May I start also? Thanks for your questions. In 2019, we had a full year impact, the net full-year impact of device decoupling of CHF 75 million. We expect for this year, as you mentioned, five more, around CHF 80 million. On the bad debt recognition, from an accounting point of view, whenever you prepare a balance sheet, you have to make a judgment of potential future bad debt losses. I don't think that we will see an impact already in June, because we monitor now these payments on a weekly basis. I can tell you until end of April, both in Italy and in Switzerland, we didn't see any negative impact. I would say, if we face problems on the bad debt side the first time, most probably we'll see that in the Q3 closing. Q2 would be too early. Good.
On the second question, the postpaid performance. I think in a saturated market, we should look much more to revenue market shares on mobile than only subscription market share. That's point one, because the value of the SIM card is very different. That's the first remark. The second remark is, if I look to the B2C performance, a very good indicator for me is always, on the topic of market share, net porting balance. If I look to the net porting balance, I don't see really changes. The third remark to it is B2B. On B2B, if you look to the KPIs on B2B on slide 16, you see our revenue-generating units in B2B. They are stable or slightly increasing or stable. On the other side, we have sometimes you are winning customers, sometimes you are losing customers.
This will have an effect on the value side or on the amount of SIM cards which are changing. Overall, I think we are in a quite stable market relation in postpaid. The market is saturated. If you want to get a customer, you have to do it through aggressive promotions, and then you have a dilution on your ARPU.
Okay. Thank you.
Thank you, George. Next question.
Thanks very much. This is Ulrich Rathe, Jefferies. Again, on the mobile postpaid customer losses in the first quarter. In the prepared remarks, you suggested to sort of look at seasonality. It's always a bit lower in Q1, and that is true. I'm just wondering, why has the shop closure not helped more? Is it that most of this sort of seasonal loss happens usually in January, February, and therefore March doesn't really matter that much? Or is it that you didn't see a churn benefit during the lockdown? Or am I misunderstanding the situation overall a bit on the mobile postpaid? Maybe you have pulled back marketing expenses and sort of just looked at that from this value perspective and then decided that Q1, this is entirely okay.
I'm just wondering how to interpret this, in particular vis-a-vis the churn impact from the lockdown onwards. Thank you.
The Q1 performance has actually not really a big impact from the lockdown, because this was only two weeks. My message is Q1 is always a bit weak because there you have the spillover of these very aggressive promotions through Christmas time, then also January and February normally is also a typical strong promotion month. Then you have a spillover in March. If I look to the trend, I mentioned it on the churn figure, March has a bit of a trend on churn. We see a small effect on this lockdown. I would say that the major dynamic in our market is not this lockdown. It's the overall promotion and competition activities.
That's helpful. Can I ask a follow-up question, a separate one, please? Could you highlight who in Switzerland still installs broadband when it's not just a question of sending somebody a modem or router to plug into an existing connection, but when it all involves a truck roll? Do you do that? And do any of your competitors do that still?
The broadband market in Switzerland is totally saturated. Everybody in Switzerland has a broadband connection. If there are changes in net adds from one side to the other side, this is churn. We still see that the cable operators are suffering a bit on the net adds. Overall, the broadband market is, I would say, is becoming more calm. If you see to the movements in the customer base
They are, I would say, 100% driven by promotions from the one or the other side. The dynamic, the overall dynamic at Swisscom is approximately stable. Cable operators are slightly losing. There is a small increase on the two other telco players.
Okay. Still, there is migration between technologies, right? There's still some migration to fiber. There's sometimes churn between cable and other technologies.
Yeah, I would say the main dynamic is not technology-driven. It's promotion-driven. Yeah. The bandwidth in Switzerland, for the majority of the current, there is enough bandwidth on the hybrid copper networks or fiber networks and cable operators have enough speed. The main dynamic is not fiber to the home. The main dynamic are the promotions.
Understood. Thank you very much. Thank you.
Thank you, Ulrich. Next question.
Yeah. Hi there. Can you hear me, guys?
Yep.
Yeah, it's Steve from Redburn here. I just wanted to come back to roaming. I was kind of surprised by your relatively muted exposure. Can you just help us understand exactly what your roaming exposure is? Are you a net payer or a net receiver? Maybe just tell us what proportion of revenues and EBITDA made up from roaming. That would be great. Just on cash taxes, I heard your comment on the Swiss government support. Do you still expect to pay the same absolute level of cash taxes this year, but just all loaded into Q4? Will they be lower than your original expectations? Thanks.
Okay. Mario, do you take this one?
No, I'm taking that question. The cash taxes, we expect to have this normal payment in Q4. It will not be lower. The government just helped the companies, let's say, in a kind of a short-term financing. I think most companies took benefit on it.
Yeah, the government. What's the plan of the government? First is ensure the liquidity for this company, which had a lockdown. That's the major point. They were very fast. The second topic is you get some payments if your employees are having the work, so that you don't have to do a layoff. Stabilizing of the market. These are the two major impacts. That's why you don't see actually a real increase of the unemployment rate in Switzerland. This stabilize overall the market. Now the whole question is how fast we will have a recover of the business in Switzerland and how is the attitude of the consumer to spend money. At the end, Swiss people, they have money, and they can't travel now, so they could spend the money in Switzerland.
We don't know how the take-up will be. The whole roaming revenue is around CHF 300 million, of which CHF 200 million is inbound. Overall, we are a net payer. As Ulrich explained, we also have some revenues mainly from data roaming packages outside of Europe. On that, we make, of course, a margin. There, we might suffer a bit. That brings us to the expectation that the negative impact could be in the low double-digit numbers. The overall margin of roaming is not public.
Okay. When you say you're a net payer, if no one traveled at all in and out of Switzerland, would your EBITDA go up or down?
Yeah. We don't have outpayments too.
Yeah.
Of course, you would look at the outpayments. I'm trying to understand. You're saying there's an EBITDA hit, but if you're a net payer and no one traveled, your EBITDA would go up.
Steve, the normal situation would be that the outpayments are there, but as always, also inbound is not anymore around. The outpayments will compensate the inbound revenue losses. As Mario explained, and Ulrich also explained, we still have the exposure in outbound metered revenue, which is a certain margin. Therefore, it has, let's say, overall, not a positive but a slightly negative impact.
Okay. Thank you. Thanks, guys.
Thank you.
Thank you, Steve. Next question.
Hello. It's Usman Ghazi from Berenberg. I just want to make sure you can hear me, please.
Usman, we cannot hear you. Can you speak clearly or more loudly? Very good. Clear. Thank you.
Okay, great. I just have two questions, please. Firstly, just wanted to understand.
No, Usman, it does not work.
Hi, sorry. Now?
No.
Great. Thank you. I just wanted to point out firstly, some companies have disclosed what the exposure is to sectors that are most affected, so hospitality, leisure, travel, et cetera. Are you willing to disclose how much of your revenues are coming from those specific sectors?
Good. We have a very different dynamic in this market. We have industries which are booming and other ones which have really a tough time. The industries which will have the most tough time in Switzerland, these are the traveling industry and the event business. These are not too big industries in Switzerland. That's point 1. The second point is, even if they have problems, the revenues of this industry will not just go away because they would have to make a bankruptcy, then we would lose or would have more bad debt. That's why it is, as Mario mentioned, it's too early to say what will be the impact on these bad debts, and we don't disclose the revenues by industry.
Okay. Thank you. The follow-up question was just on B2B. I guess from your experience in previous cycles, in the wake of a recession, how long does it take for your clients to start requesting contract renegotiations, et cetera? Do you think that, because of the financial support being provided by the government, this crisis might be different in that you won't see that kind of impact?
No, up to now, we don't see changes there. As Mario mentioned, we don't see changes in the payment behavior, and we don't see an additional activity on renegotiating contracts. This depends all on the development of the economy. If the economy comes under big pressure, that's clear you will have a step-by-step negotiation on some contracts. On the other side, I think everybody saw how important telecommunication and IT is. We had a lot of companies where we were able to do additional projects, IT projects, to ramp up their infrastructure. I think there are two dimensions: risk and a chance.
Okay. Thank you very much.
Thank you, Usman. Next question.
Thank you. Good morning. It's Michael Bishop from Goldman Sachs. Just two questions, please. Firstly, following up on the comments that you've seen a much higher NPS. We've also heard this from a couple of other big European telcos through the crisis so far. The big picture question is: Do you think this higher level of NPS can continue potentially post-crisis? In a sense, do you see a sort of fundamental mind shift from customers in terms of realizing what value they're truly getting from telco connections? The second question is, you're flagging that you've completed the move to All IP and residential and B2B, and the subsequent decommissioning will complete by 2022. Could you just walk us through the next practical stages on that?
To what extent can you effectively monetize any of the old infrastructure like some other European telcos have done in terms of selling buildings and things like that? Thanks very much.
Mario will take the question on IP, and I will say something to the Net Promoter Score. I think it's normal that during a crisis, if you are very close to your customers, if you are agile, fast reacting on the demand, that NPS has a good development. On the other side, I'm totally with you. Our industry should now be able to use the good momentum which we have, because everybody saw that our industry is crucial, and that we should work on the differentiation and Net Promoter Score, that we come out of the area where we only talk about prices. I think that should be a chance for our industry. Yeah. Unfortunately, our industry prefers to talk about prices than value.
I think we should really work now on the momentum to show the value of our industry, and then we will be able to increase the Net Promoter Score also in the future.
On decommissioning, I'm not so optimistic about monetizing the decommissioning of All IP. The equipment may be some parts you can sell, but that will not impact you. You won't see in the cash flow statement. It's not material. On the buildings, in the main technical buildings, those we cannot leave, because there are also data centers, et cetera. Maybe you have some free space afterwards, but you cannot rent those spaces. Most probably, we will use them for additional data center capacity. Then you have a lot of free space in small buildings, and these buildings are not very attractive. They're not nice buildings, and they are not on central locations in the landscape. Also there, of course, we try to monitor to do some monetization, but I really don't expect a material cash inflow.
Sorry about that, but I think that's a matter of fact here in Switzerland.
Yeah. From the All IP migration, there are certainly positive effects.
On the cost side.
On the cost side, volume side, on call centers as an example, shops. It's much more convenient for the customer, so we can decrease costs in call centers. That's new, and we see it already today.
The huge part of these All IP savings, we realized in the last two years. You saw the lower number of calls, the lower interventions. That we really realized, and that was part of our cost-saving programs, where we took out CHF 250 million net in the last two years. Was one important element.
Thanks. That's really helpful.
Thank you, Michael. Next question.
Yes. Thank you for taking my question, Andreas Müller from Zürcher Kantonalbank. I was wondering, can you discuss this 5G antenna emission measurement discussion basically in Switzerland, where the regulator hasn't set really good measurements out? Does that change anything short-term in your investment plans? Also, when do you expect these emission regulations are out?
Good. Maybe to give a bit more flavor on this question. In Switzerland, there is a big debate on 5G, a lot fake news around 5G. The government actually, let's say, is not very supportive on this topic. We have still not an established method to measure beamforming. The 5G has new antenna types, for this you need a new mechanism to measure the radiation. The government hasn't established this specification. This leads to the challenge that a lot of regional governments, they block the building of antennas. For deblocking this, I think we need this specification from the government, from the state. I think this will take time. I don't understand why, it takes time. I don't think that we will have, before the end of this year, a clear specification.
That means in several districts in Switzerland, we will have problems to build 5G networks. This is mainly in the French part of Switzerland. We will have a slowly lighter CapEx, as Mario mentioned, but this is not too big at the end. We will have a bit of slow rollout on 5G in several areas. Now I hope that government will be much more supportive.
Okay, thanks. Last night, I think, you lost the trial against Init7 for IP interconnection prices. Is that having financial impacts going forward besides the payments? I think it's CHF 0.5 million you've got to pay for them. Is there more impact on pric ing there on interconnection?
No. It's a very, let's say, political-driven topic. We had a claim of one of the players in Switzerland ask for free access to interconnection. That's not normal in our industry. Now the court decided that they have to pay something for interconnection. The regulator has now to decide how much. At the end, we will get a bit more money, because up to now, we haven't charged him. That's neglectable. It's more a political competition-driven game.
Okay, thanks. My last question, working capital was going up. Has that to do that you couldn't sell that many devices into the lockdown, or what was the reason behind it?
No, I mentioned it on the cash flow statement. We had a negative impact of a bit more than CHF 200 million. That had to do with some prepayments on maintenance contracts and license contracts and some higher payments of accounts payable in the first two months of the year.
Okay, clear. Thank you very much.
Thank you, Andreas. Let's go to the probably last question.
Yes. Thank you. It's James Ratzer from New Street Research. I have two questions, please. The f irst one is regarding business service revenues. In Italy, you have disclosed that churn on your enterprise business was down 24% year on year. What kind of churn reduction are you seeing in the Swiss business in enterprise? If there is a sharp reduction in churn, could it be in Switzerland that even though the economy might weaken, you might actually see an improving trend in business service revenues from lower market share losses? Secondly, just on your mobile net adds in Italy, could you talk about the changes you're seeing at the moment in number porting? Are you seeing less ports in at the moment from people like TIM and Vodafone specifically?
Is that what is impacting your net adds at the moment? Thank you.
On B2B churn trends in Switzerland, we don't see changes. Our churn figures in B2B are low, and if we lose a customer, it's a very specific business. If a competitor of us wants to, let's say, buy a customer, then maybe we will lose it. Overall, we have a very good win ratio. If you really want to fight for a customer, we have a very good win ratio and also win-back ratio. The main development of the churn level in the B2B is related to the aggressiveness of our competitors. I don't see changes there. The second question on mobile dynamic in Italy, maybe very high level, the market is more calm during the lockdown. I don't see general changes in the last month, Mario may be on it.
No. First of all, we have a very low market share. I think the porting dynamics are difficult to see from our low. The porting dynamics in the overall Italian markets are difficult to see from this low market share in Italy. I think on the mobile side, we suffered from the COVID because Italy is two weeks ahead. I think there, we are really missing one full month with open shops and open retailers. I think there we suffer. On the other side, we have quite a good performance on broadband.
As Mario mentioned, the whole net porting during the lockdown went down. That's a bit out of visibility, but I don't think that there were changes in the market shares or in the net porting or the whole net porting dynamics. In my view, there were no big changes during the crisis.
That's clear. Thank you very much.
Thank you, James. This was actually the last question. Back to you, Louis.
Okay. Thank you very much. With that, I would like to conclude today's conference call. If you should have any further questions, please do not hesitate to contact us. We'll see you soon, and have a great day. Thank you.
The conference recording has been stopped.