Good morning, ladies and gentlemen. Welcome to the 3rd Quarter Results of 2019, hosted and presented by Ous Cappi, Mario Rossi and Louis Schmid. Louis, hello, you.
Good morning, ladies and gentlemen, and also welcome to Swiss francs Q3 2019 results presentation from my side. My name is Louis Schweitzer with Investor Relations and with me are our CEO, Urs Chepe and Mario Rossi, our CFO. The first part of today's presentation posted by our CEO consists of 2 chapters. First, a quick overview of the highlights, operational performance and financial results of the 3rd 9 months. And second, an update on our activities, performances in Switzerland and some explanations on BASF's doing and 9 months results.
In the second part of the presentation, Mario runs you through to Chapter 3, the financials and unchanged full year guidance. With that, I would like to hand over to Urs to start his part of the presentation. Urs? Good morning, ladies and gentlemen. So if I look to our Q3 in a nutshell, I would say we have a solid commercial execution and we are financially on track to achieve our full year guidance.
We have a good momentum with our mobile product, the InOne mobile. After several months, we have already 890,000 subscriptions on this new product. We were successful in winning some network tests, as example, Opera. On 5 gs, we were the 1st provider which is offering 5 gs roaming. And in going faster in Italy, certainly, we made progress on executing our mobile strategy.
We have the authorization to be an MNO in Italy and we also get the approval from the regulator on the contract with wind trade. So overall, we are progressing as planned and financially as on our cost savings, we are on track. If you go to Slide 4, you can see that we have a solid market performance in Swiss and a small growth on TV and broadband and also on postpaid mobile and less decrease on fixed voice. So overall, solid performance and then we'll come later to also the joint figures and you can see that we have a good and strong market performance in Switzerland. Fastweb was growing on broadband and mobile on mobile with 130,000 in Q3.
So overall growth in all segments in Italy. If you go on Slide 5 to our financial performance, You can see that the EBITDA on an underlying level is stable and we are on track, as already mentioned, with our full year guidance. On the right side of the chart, you can see on a comparable base in the red square that Switzerland, it is losing in the 3rd quarters, in the 1st 3 quarters minus EUR 42,000,000. On Fastweb, we are able to grow by EUR 38,000,000. So overall, we have a stable EBITDA on an underlying level.
And you see also that the operating free cash flow with SEK1.32 billion is solid. So overall, a stable financial performance. If you go on Slide 6, only 1 or 2 remarks to our market activities. So our strategy is to focus ourselves on our customer base to have the customer base stable to have a stable ARPU. And on a temporary base, we are doing some promotions with in one home with our triple payoff.
So the activities in the whole Swiss market is happening in Q2. It's very promotional driven. And there is also a kind of, let's say, a washing machine on the in the price sensitive part of the market. If you go on Slide 7, you see some figures to our postpaid subscription in the B2C market. So net adds fine, are good.
And also on InOne, you can see that we are able to increase the penetration on our new products in 1. I think importantly to look to the right side of the chart, There you see the fixed mobile converged penetration. So we are actually at 41.2% of customers which are in a quadruple play offer. That's important because digital also stabilize our customer base. You see on the bottom line of the chart, our churn and ARPU fix.
So we have a churn on total space of 7.7 percent, very low churn on total space. And on the ARPU side, you see that we have a blended ARPU of 40 and on postpaid, 58 where we have a small pressure on ARPU by CHF4. And how do we explain this for CHF2 Swiss francs are coming out of the arc, who are coming from fixed mobile converged headcounts because we are pushing our quadruple play offer. And CHF 2 are coming from the RGU mix, and this is mainly the result of some right tradings, but also second and third brand penetration, which is increasing. But overall, good KPI figures for postpaid.
If you go on Slide 8, you see some fix to our fixed business in the retail market. Also here some net add growth on broadband and TV. And also here the penetration fixed mobile converged penetration is at 40.3%. It increased by 3% points on a year on year level. Churn figures are lower than previous in the previous quarter, so we are at 9.1% on churn broadband and the broadband R2 is stable.
So I think that's a good performance in this competitive promotion oriented business. If you go on Slide 9, some explanation to our B2B business. So we are facing still some pressure on the connectivity side. On the other side, we have a very solid and strong positioning in the B2B market. So we are a full ICT provider.
We have a strong partner network and a broad unique project portfolio. What we are facing with some top line pressure on the telecommunication project and there are different effects. One effect is the final migration to all IT and where we see some cancellation or substitution to IP voice over IP. Then some digital consolidation also driven by IP products and then a general price competition, mainly in the mobile market. So the ARPU in mobile B2B is on a euro level.
And I think we will have a surge of competition in the B2B segments. But overall, if you look to the market shares, they are plusminus stable. On the right side of the chart, you see also our service revenue or revenue mix. You can see that our solution revenues are higher than the telecommunication revenues. On Slide 10, some remarks to our operational excellence.
So we are on track. We are delivering the decrease of indirect costs. In the 1st 9 months, we were able to decrease our indirect costs by €107,000,000 and this is a combination of different actions, simplification of the product, increasing the stability of our products and being a bit leader. And you see the benefit at the end, and I think that's a good performance. We were able to reduce the service requests for the field force intervention because we have a much more stable product portfolio and a simpler product portfolio than years ago.
If you go on Slide 11, you see some more detail to the financial performance of Swisscom Switzerland. So we were able in Switzerland to mostly compensate the top line pressure through cost savings. And so operating free cash flow is at 1.25 €1,000,000,000 and the main effect why it is lower is the spectrum CapEx in the beginning of this year in the reach of €200,000,000 So overall, also a stable situation. You see on the left side of the chart, the net revenue development, you see the erosion on the service revenue and the increase of retail rental revenue. In the middle, on the bottom, you see the main drivers for our EBITDA.
So overall, the EBITDA after lease line expenses went down by 44,000,000 dollars and there are different dynamics. The one is still this decline of the fixed voice lines by 30 $2,000,000 then fixed mobile converged rebates by $47,000,000 and then the revenue generating mix in wireless, which has an impact of €32,000,000 On the other side, the erosion as explained on B2B and then the positive impacts from costs and others. So overall, this leads to this minus €44,000,000 EBITDA impact on Vikram Suttelin. If you go on Slide 12, some remarks to Fastweb. And first, an update on our 5 gs coinvestment partnership with Windjet.
We are progressing as planned. We get regulatory approvals on the MNO side. That's one part an important step. The last week, we get also approval to our contract with WindCheck. So we have the clearance from the Italian regulator.
And we are progressing as planned on the 4 industrial streams. So on mobile wholesale, we plan to get 4 gs roaming on the wind trade network in the Q1 2020. We will have ready for service on ultra broadband wholesale area for wind chair in the second quarter, and we are beginning to deploy sites 5 gs sites also in the beginning or in Q1 2020. On the fiber backhauling, we are starting to deliver fiber connection to the market. So overall, progressing as planned on our partnership with Windchain.
If you go on Slide 13, some remarks to our commercial performance in the consumer market. So overall, despite the tough environment, market environment in Italy, it's a good result. So increased subscription base on broadband by 4%. And importantly to say that we are able to upgrade our customer base to ultra broadband. So we are now at 62% penetration.
And on a yearly basis, we have an increase of 19% points. That's important because if we have customers on ultra broadband, we get also better churn figures and slightly better ARPU mix. Mobile is performing well. So 100 and 30,000 net adds and you can also see that we were able to decrease churn quite sustainable and on 35% lower churn figures on mobile, so more stable business in mobile. Our converged penetration is at 34%, it went up by 6% on a year on year basis.
And you see also on the bottom of the chart the benefits of this converged project, lower churn and a better R and R quarterly. So this is working initially, this transition. If you go on Slide 14, some remarks to our B2B performance. So we have a strong performance in B2B, plus 12 percent revenue growth, 2 digit growth in the Public Administration segment, 1 digit growth in Private segment and Medium segment. So good momentum in the B2B market and also on the core services of wholesale, we were able to grow by 8%.
The financial performance of Fastweb on Slide 15, So you see that our revenues went up by 5% and the EBITDA by 7%, and EBITDA after lease and the expenses went up by 5%. So growth and in line also with our expectation and the full year guidance. So I would like now to hand over to Mario for financial details. Thank you, Urs, and good morning from my side. Just a few additional remarks on the financials.
They show unchanged trends on service revenue, slightly more pressure coming from promotion, seasonal effects in the residential segment. And again, as you saw, very strong progress on cost cutting and also in other operations in Italy. On Slide 16, on revenue, the retail that revenue on retail customers decreased, the service revenue decreased by €54,000,000 in Q3. We see here the main elements, €24,000,000 is coming from RQ mix and the right rating of our customers, €14,000,000 from conversion discounts and €10,000,000 from the voice line loss. Net enterprise, we have the same trend in the first two quarters, decline of €29,000,000 on service revenue, 50% coming from fixed, up to 50% from mobile.
And in fixed, let's say, half of the pressure comes from price pressure and the rest is the effect of the migration to All IP. The All IP migration will also come in this segment to an end by end of this year. On Wholesale, we see an increase of revenue of €25,000,000 in Q3, €8,000,000 comes from higher broadband capital activity and infrastructure services. Another €8,000,000 comes from the MNO revenues. So that's the impact of the UPC MNO activities we have on our network.
Around €9,000,000 with the impact of higher inbound roaming gravity and other effect on the cost side that's more or less neutral on EBITDA levels. As we've explained, Fastweb is growing in all segments in revenues. Just a few remarks on OpEx. Direct costs, we have this lower acquisition retention cost. That's the result of the decoupling of the SIM and subscriptions, which we started in February this year.
This business case works. Costs are coming down. Their churn rates are very stable and net debt are satisfying. On the out payments, we have higher out payments in Q3, €16,000,000, that is a seasonal effect because of the higher roaming activities of our cost of our customers. And as Urs mentioned, a very strong term outperformance on the cost side, savings coming from both workforce reduction and also reduction of other expenses.
Lastly, on Slide 18, to the EBITDA development. In the retail segment, as I mentioned, we have some higher out payments for roaming and the impact of the ride creating stronger impact of ride creating of our customers in Q3. Now straight quarter to quarter, more or less the same strong performance on the EBITDA level. That brings me to the Slide 19. In terms of net income, the payments for net interest are now down at €44,000,000 for 9 months.
So we refinanced now all the high compound bonds. The average cost of our debt is 0.9%. Then we have again the impact on taxes, maybe a few explanations. So the tax expenses of €230,000,000 include a positive noncash impact of €62,000,000 In the first half, we had €32,000,000 now €29,000,000 in Q3. And called the tax reform led to lower tax rates in some countries and that's the impact.
Tax liabilities has to be adjusted. And in Q4, we expect an additional positive impact of around €200,000,000 And for 2020, the tax rate for the group will be around 19.5 percent. So you can that put into your models. On Page 30, no additional remarks on CapEx. Rollout is going like planned in Switzerland.
On free cash flow, the next slide, we have this increase of 20% in free cash flow, excluding the expenses for Spectrum. The reason is we have a better development of the working capital because we had some extraordinary impact in 2018. I skip the next slide on finance, on the maturity profile and that brings me to Page 23 because we can, for Q3, confirm our full year guidance 2019. So I hand over to the operator.
Thank
Okay.
First question, Roman Arbuzov.
Good morning. Thank you very much for taking my questions. I had two questions, please. The first one is on the Swiss service revenue. So that's been decelerating and has been relatively weak over the last couple of quarters despite the strong momentum that you enjoyed on the net adds.
And you've touched upon some of the drivers of that weakness. But as we think about going forward, is there a hard for improvement? And especially if we look to 2020, I guess some of the drivers, some of these negative drivers will be falling away. For example, the OLED migration, which is weighing heavily on BTG, that will be falling away. But can you just give us some sense of when would you expect the improving KPIs that we've seen this quarter to actually feed through to improve service revenue growth?
Ketur, can we start with this one please?
Okay. So the main drivers for this decline in the service revenue is on the one side driven by B2B, where we will have a continuing price pressure also in 2020. The pressure on fixed voice line, it will certainly becoming smaller. You will see those, so if you compare the different quarters that there we have the chance, which is improving. Converged discount will also become a bit lower because we are on a penetration rate, which is now over 40%.
So the growth rate will decrease, so there will be also a smaller impact. On the revenue generating mix, I think this is strongly related to the promotional competitive environment in the Swiss market. If this will reduce, I think we are slight, we are not on having an improvement on the service revenue dynamics. And so it's mainly driven by this business competitiveness and promotion activity in the Swiss market. But you see, we are successful on retaining our customer base.
We have a really good churn figures and most of the output development is,
yes, I would say is
a good one if you compare it to the market activity. So I think it's hard to make an outlook. It's mainly driven by competition, but there is some hope that this service revenue decline is becoming smaller.
And the second one, I guess somewhat related is just on the launch of a digital sub brand by Sunrise called Swipe. And if you look around Europe, there are quite a few operators who are looking at this digital only segment. Typically the price points of the segment are much lower, but at the same time the cost to serve also much lower. So my first question is, when you look at the digital sub brands and I'm not actually sure whether your sub brands are 100% digital or not, I'm not sure if it's fully compatible with this slide, but perhaps you can provide some general observations. I'm curious whether the cash flow per customer of these digital brands is actually similar to your high end brands or are they possibly less profitable?
And the smaller cost is so don't actually make up for the lower price points? That's the first one. And then secondly, also, when you think about the current demographic for these digital brands, It's not just the price conscious customers who are typically interested in these. At least that's what happens in other parts of Europe. You get highly educated millennials and kind of digital natives as well as some smart shoppers with high income who also take up these products and these offerings.
So what's the situation in Switzerland? And how attractive do you think of this segment? How important it is for you to develop this segment? And how large is the target demographic? That the market will be extremely helpful?
Thank you.
The digital sub brand, so how would it be to sell brand between So that's a brand which is online only and with high performance on the network side and the good price. So what we see is actually that this market is still quite a small market. It's not really a big market. And it's not only the millennials who are going to such a brand. It's also, let's say, middle aged people.
So I think it's more a question of digital and seeing customers or which has a higher maturity in this market. And then Jure, your question is on the cash flow. Is a lower priced product and savings on the digital channels lower than the price. The trend over there is the margin of such a brand is a bit slow. But on the other side, our strategy to push continuing to push Swisscom brand and digital brand is just, let's say, a second brand.
I don't think that this will now have a fast growth in the next month or years. I think this will be let's face it like this, simplicity, convenience, differentiated product is still very important in Switzerland.
Okay. Thank you so much. Thank you.
Next question, Ghazi Usman.
So thanks for taking my question. I have
2, please. Firstly, Firstly, on the B2B side, where we are seeing this impact of, I guess, rationalization of the traditional lines as customers move to IP, I mean, is it that once all IP migration is done and that revenue headwind just disappears? Or is it that you expect just an ongoing rationalization of the back for longer than just Q4 2019 that this will be a trend that possibly continues over 2020 2021? That was the first question. The second question is just coming back to the B2C environment.
And I see that the RGU mix effect of €52,000,000 on the EBITDA that you're disclosing that for the first time. Is it because this trend I'm just wondering is that just a big disclosure on your part or is it that this has had a bigger, more costifiable impact this quarter than previous quarters? And if that is the case, I mean is this spilt down happening in mobile, so people moving from the higher brands to the low brands? Or if you could just give some color as to how you're calculating this effect? Thank
Well, I will take the first question on B2B and Mario then on B2C. So in the B2B market, this IT substitution, so today, we are mainly facing with voice line substitution because they migrate to IP. So this effect will be lower. And on the other side and that's one point. And on the other side, the voice revenue in the D2B market of Swisscom is already on a low level.
So I think that the impact will be not so big in the future. And in the B2B market, you see much more also front of top. So to look only on one process, I think it is quite difficult because you get more workplace solution, cloud solution where we have a bundling on connectivity with IT solution, which also where we will be able to stabilize the revenue pool of our customers. 3rd, IP consolidation or digital consolidation will be a trend also in the B2B market in the future. On the other side, there is also growth in the B2B market because if we have a more digitalized product, everything is connected and IT solutions are becoming more important.
Can I just follow-up on that? I mean, are you seeing any pressure from SD WAN as a substitute for on business connectivity revenues?
Yes, SD1 will have some pressure on the MPLS networks, you are right, but they are still low.
Right. Okay.
And your question on the ARPU impact, yes, we decided to disclose this impact because it started in Q2, let's say, distribution of the €32,000,000 is 50% Q1. Q2 50% Q3, I expect a similar amount in Q4 and that's driven by promotions. So we mentioned several times that this promotion activity has an impact on our P and L. And the second reason is that net debt are coming more on second and sales plans than on the first brand on the Swiss combined. And I would say this impact will continue also into 2020.
I don't expect less promotion activities in the month. So right now we don't see any signs. Just a follow-up on, I mean, so for this to
have an impact on your EBITDA would suggest that you're seeing a replacement of that there is a spin that there is either a spin down from your high back up prices to the low front book?
No, it's not the spin down of the existing customer base. It's more what you get on the market. What new customers you get on the market are, A, coming from a promotion or, B, coming on the segment sales brand. But it's not that clear. Of course, we have sometimes customers who switch from the Swisscom brand to, let's say, to the Wingo or Coke brand.
But the disease cannibalization effect is negligible. It's really the impact which comes from the market, from the growth Okay. Thank you.
You're welcome.
Next question is George from Citi.
Hi. Thanks for taking my questions. I've got one on Fastweb. And I was just wondering if you can give us a little color on how you saw the Q3. The net adds were a bit perhaps lower than you would have expected.
But I think you can take some price action. So I was just wondering if there's something in the market that has changed, which will be slow as well or whether it was a competitive side effect? And then my second question is more around the mobile market. And I appreciate all the comments you just made on the differences between the brands and the mix within that. Just wanted to understand a bit more on that.
Obviously, you are also winning a lot of secondary and third and fourth SIM cards on your conversion offers as well. So is more of the ARPU weakness coming because of the success of convergence or because of the change in the mix between the brands? And if you could comment also as to how you think the rest of the market is performing based on this because obviously, convergence is perhaps a bit more effective for you than for the others? Thanks.
Thanks for the question on mobile in Switzerland and Mario can take the one on the last one. This ARPU dynamic, which we have in the Swiss market on postpaid is driven by CHF 4 decline is driven by 2 Swiss francs are coming from the 2nd and third brands. So more and other product portfolio mix, which brings some dilution to Swiss francs from the second and third brands. And the other 2 are more driven by optimization of our clients in the project portfolio. So it's that and also that the fixed mobile converged discount, which we have there in the Q3.
So these are the 2 main factors. And on Italy? Italy, Q3, Italy is always a bit range because of the Lagosco. It's weak usually, it's weak quarter if you compare to the prior year, where we had only 18,000. This year we had 10,000 net adds in broadband and we expect in general in the market relatively weak net debts and often months in the second half or in September October, that has always been the case.
That there's no it's not an impact on any changes of the product.
Okay. If I could follow-up on the question around mobile marketing in Switzerland. Basically, what I'm after is we are seeing revenue weakness as we go through this process. And you mentioned earlier that you are you've seen 40% plus penetration now convergence. The incremental, let's say, penetration will be less dilutive ARPU.
So my second question was more around, if I would simplify, service revenues are worsening. Does it mean now that they're starting they will start to stabilize and recover? Or is it still a peak migration into 2nd and third quarters which could last for years? That's basically what I was after.
There are effects which gives hope that the Turkish revenue decline will be better. That is the topic of voice, the topic of the penetration of fixed mobile conversions. And these are positive things. And I also don't think that second and third brands will really accelerate very strongly. So the main problem is or the main impact factor will be the competitive dynamic on the promotion side in Switzerland.
This is what actually will guide our service revenue in the future. And the question is how aggressive this promotion activities will be in the next month or years, I can't tell you. But on the other side, if I look to our churn figures, if I look to the whole market dynamic, I think if the market behaves rational, if promotion activities should come down, but hope is hope. I know it's
Next question, Simon Holmes, Barclays.
Good morning, guys. Thanks for taking the questions. My first one is just on the cost cutting slide, Slide 10. You've obviously done a
very good job and you've delivered EUR 107,000,000 so far this year, but the barter for year 2019 says approximately €100,000,000 again. So it would seem that we're already there. So does that mean that you're not
planning to deliver any more for the rest of the year? Or are you
keeping some back to be able to reinvest in the market? We know 4Q is obviously one of the more competitive quarters each year. So I'm just wondering how you want us to interpret that slide. And then secondly, I know you're going to reach about 90% of the country with 80 megabyte speeds by 2021 and 75% with 200 megabyte speeds, but we're seeing one of your competitors up their network to offer gigabyte speeds across the whole network. I'm just wondering, does that change your thinking around how you move forward with fiber to
the home? Or are you quite happy with where you
stand compared to your competitors?
So, Mario will take the question on cost and I will take the question on this fiber networks, ultra broadband network. On the cost side, we are in this program 2018 to 2020. We said we will deliver at least €100,000,000 per year. As you mentioned, we are doing a good job this year. And of course, we will deliver also cost cutting in Q4, I'd expect similar amount as we had in Q2, Q3, I would say.
And looking forward into 2020, 2020, that will then at the top of our guidance, which we will disclose in February. But we are in this program 'eighteen to 'twenty. That means also for 'twenty, you can expect SEK 100,000,000 at least. Good. Then the second question on our network strategy in the fixed market, the Internet credit market.
Now we will have in 2021 a fleet profile on our fixed networks where we have 75% of the coverage in Switzerland will have a speed above 200 megabits per second. That shows you that we will have in 2021 really performing network and 90% of the households will have speed above 80 megabits up to 1 giga to 10 giga speed. So I think from a customer demand side, we have a performing network. The customer decision is often not only driven by speed, it's driven by the bundle. And our strategy and there we are performing is to delivering the best TV products and we case in combination with the network, which has beat the BOSS 100 mega, we think that we will be competitive in the future.
But that doesn't mean that we will stop to invest in private networks. Already today, we are investing in our private to the whole network, but it will be a long term project and that doesn't mean that CapEx will now would explode. I think competition on the marketing side will be getting more on track in the next one. But our main strategy here is to have in combination with an excellent TV product to be to perform in the market and there I'm quite confident. Okay.
So
just to say if you're securing PG products, do you expect to help you offset some of the marketing from the other guys that might be advertising very, very fast speeds even if customers don't actually need them today?
Yes. Because if you look to the market actually, the speed which you really need, if you are in a household, 4 person household, where you people are using Internet, where you have the TV, even then actually with 80 megabits per second, you have enough speed. So it's telling 1 gigahertz or 10 gigahertz. Today is more something about marketing. And therefore, from the customer experience, it's important to deliver an excellent TV product.
On the other side, we will continue to ramp up speed on our network and already now with the strategy we have today, we have 75% of customers which have been above 200 megabits per second. So I think here in a good situation, but it will be a marketing game.
Yes. Thank you, Simon. Next question, Ulrich Arten, Jefferies.
Three quick questions, please, if that's all right. The first one is on the other sort of units. I mean, compared to market expectations, there was a bit soft on revenues and EBITDA. You call out in the report a loss of a contract for the collection of national TV license fees. Is there anything else going on or is it all that particular contract?
That's my first question. 2nd question is on the slide where you discuss the success in cutting SAC and SRCs, I mean, you're saying the reason is, in particular, the decoupling of mobile device sales. So in other words, what you're not saying is there sort of a benefit from bundling in the lower churn. I'm just wondering why that is. Is it because the incremental bundling benefit is now decreasing given you are so high already or any other reason there?
The last one is the broadband and fixed net adds are quite nice this quarter as several as discussed already on this call. I was wondering, in the quarter itself, is this more a factor of higher gross adds or lower churn in the quarter? Are you giving data only for the first 9 months in the presentation? I was just wondering what happened in the quarter on that count?
On the question on ARPU, on revenue, we lose $14,000,000 because of the lost contract you mentioned, that was decided, I think, about 18 months ago. And then compared quarter to quarter, we had some positive impact in Q2 coming from our cable construction company, which will update in Q3. But the main impact is coming from this contract and the company called Gilag. So it's in fact we won't have anymore in 2020. Then on broadband net debt, we have stable churn rates over the course, sorry, coming from the market.
And on acquisition and retention costs on accumulated savings on acquisition and retention costs on mobile of €108,000,000 in 9 months. That's partly compensated from the impact of IFRS 15, which is washed through the P and L, that impact is €94,000,000 negative. So the net impact of this acquisition, retention and IFRS 15 for 9 months is €34,000,000 and we didn't put the calculation in this presentation, but it was the impact on the lower term or the conversion impact, just give you the cost and revenue elements. Because the rest, hypothetically, you don't know what would have happened with the churn without introducing this new inbound mobile go.
Okay, I understand. You can't separate that. Okay, makes sense. Thank you.
Thank you. Madison Lionors is next.
Yes, good morning. The first one, you're saying that your big net adds a big part
Sorry, can you speak a little louder because we cannot hear you.
Is it better?
Maybe better, so you can improve.
Could you give some color on the net adds in mobile? How many as a percentage, how many is actually coming from these 2nd and third brands? Because I believe that in the second quarter, it was around 50%. Do you see an increase? And the second one is on the net adds in fixed, another question.
From whom are you grabbing
these customers? Could you give some more color on the actual competitive environment? Who has been you obviously being more promotional than competition, but if you could give some color on the fixed costs.
Okay, good. I will take the one on the Janessa had fixed Mario will go on mobile second and third brand. On the fixed, so the additions which you get, they are coming from everywhere. So I would say the majority is coming from cable operators, that's not only that's UPCs, but also the other cable operators, the majority is coming from there, but they have also the highest market share in this area. So and but we will also have some customers from us, competitors.
I think it's the mix of wind banks or market shares. And the net debt from mobile rates in Q3, we saw a slight increase. The first half, we had about 50% coming from 2nd and first brands and that's slightly higher, close to 60% in Q3. Thank you very much.
Thank you. Jack Wolf Bluestone is next.
Hi, good morning. Thanks for taking the questions. I've just got a couple of short questions. Firstly, just going back to the Slide 11, the EBITDA after leases bridge that you've kind of shared. You've obviously discussed most of the drivers within that, the lower line loss, lower drag from convergence, given some guidance on indirect costs and B2B.
Could you maybe just comment on the sort of missing dip, which is the others, so the combination of the roaming, the CMVNO and a few other items? How recurring do you think that growth is within the sort
of rest of the business?
Do you think we should continue to see growth
given it's obviously quite a
big positive contributor. So just any thoughts on that sort of last element of the bridge? And then secondly, just very briefly, can you just give a little bit of guidance on the cash impact from the tax reforms you mentioned? I think you
just mentioned the cash
P and L impact, But just any guidance you can give on that would be quite useful.
On the offer, the main elements and then also the high margin elements are coming from the wholesale services, taxes and infrastructure. And that has been 147,000,000 in the 1st 9 months as we continue also in Q4. And then in the next year, it depends on, let's say, 1st on the market success of our wholesale customers, where we have 2 big ones, that's Sunrise and Solven. And then the lower leaf of stocks of business, for example, connections to the peak, yes, that's hard to say that we grow also in 2020, but for the Q4 this year, you can expect the same growth as we have in the 1st 9 months. And the growth on inbound roaming, the total revenue in 9 months was around €60,000,000 was about 10% growth, but that has no margin impact.
Usually, in this case, you also have higher out payment that was also the case in the 1st 9 months. So Then on taxes, as I mentioned, the tax rate will be 19.5% going forward in 2020. And mid long term tax charges and tax payments is more or less equal, then you have some fluctuations between quarters and years. And roughly spoken is the impact of this more than CHF200,000,000 adjustment of IFRS taxes will be around CHF20 1,000,000 per year.
Thank you.
So do you
have I
think the model long term is to calculate 19.5%, but it's long term the same amount in the P and like
in payment.
If I could just ask one
brief follow-up as well. Urs, you mentioned that you were mostly taking broadband sets from cable operators. And fairly late in the quarter, we had the launch of the 1 gigabit per second product from UPC. Is your expectation that you will that it will perhaps become a little bit tougher to take as much share from cable? Or given the launch of this new product and some other measures?
Or do you think it's do you expect that perhaps to remain fairly stable? Thank you.
I think what we will have is certainly louder marketing communication on this big topic. That will be for sure. There will be some customers, the fee oriented customers, which will churn. But on the other side, I'm convinced that we will be able to get other customers because our network is improving also on the speed side and our TV product will really improve. So in the next, let's say, in the next time, we will continue to improve our TV product for line comps and that we will be we will have a good performance on B2B or broadband.
Next, Frederic
Hi. Thanks for taking the question, Frederic at Bank of America. Firstly, a question on enterprise. Pretty strong level of revenue reduction. You mentioned some of the drivers.
If you could discuss in terms of next couple of years, you mentioned in the past some broader structural competition in the ICT ICT segment. Solution seems to be pretty stable now at €250,000,000 per quarter in the scope to grow here. And maybe a question
at the
fast track level where here it's
the opposite very strong trend there. So in particular, you called the public inflation contracts, if you can maybe extrapolate this on the expectations in the medium term. And then second part of the question around so second question on 5 gs. If you could discuss both in terms of monetization, so you're selling that premium fee that CHF 23, if you're coming broadly on the Brazilian prospect both in retail and B2B? And also for the network side, because the progress in terms of rollout, equipment, what's the roadmap from a network perspective?
Thank you very much.
Good. I will take the question on 5 gs, Mario then the one on B2B, B2B faster. So on the on 5 gs, I think monetization, you can do it over different elements. The one and I think that the most important one is what will be the pricing of mobile broadband in the consumer market because that's the biggest part. And there the idea of Swisscom is to charge more for 5 gs and that was that is our offering.
The question is what competition will do. And if we look back to our industry, maybe our industry is too stupid to monetize this mobile broadband have long digit of 5 gs. But there are other elements to monetize 5 gs. I think in the B2B part, we will be able to monetize 5 gs through Industry 4.0 application. So we will get more connections On second things third things, I think there also through IoT, there is potential to monetize 5 gs.
And so I think that's a bit the whole dynamic. Overall, 5 gs will bring us also a differentiation. The most important topic is how our sales for our industry will be to monetize the pricing or to set the pricing for 5 gs in the retail market. And then our strategy on 5 gs is to go for a vast footprint. We believe that this is more important than speed because if you have 2, 3, 400 or 1 vehicle, that's enough for the next time.
And but we are still very early on 5 gs. There is the networks are not rolled out. The handsets are actually only a few handsets out there. So I think that the 5 gs will be more in 2020 and more in the second half of the year than the first half. Mario, the B2B segments, in Italy, we have clear targets to continue the growth of FastSlash in the B2B segment because there we are still the attack.
We have a very good market share in the meanwhile, but we see room for growth now. And it also had a better position in the 5 gs. I think then we have a value proposition for our B2B customers as we will certainly bring some additional business in Fastweb. So we are quite confident about our B2B business in Italy and Switzerland. It's the opposite side around.
Here we are being confident. We are under attack mainly on mobile. I think we discussed it in the last earnings call. It's difficult to predict. And we have already seen the end of the ARPU decline.
It really depends on the competition and on the I think we discussed the impact, also some negative maybe some negative impact from this legacy Genchem Networks and in solution business, albeit we stopped the decline and I think there is also in the solution business some room for growth coming from cloud business, security business and also from banking. That's how we see this development in these two countries. It's really a different situation in Switzerland compared to Italy because there we are the attack on.
Okay. Thanks a lot.
Thank you, Frederic. Now Steve Malcolm, Redburn.
Good morning, guys. Thanks for taking the questions. I'll defer 3 if that's possible. First of all, just on Sunrise UPC.
I mean, you've clearly been opposed
to merger. Now that it looks like it's not going to happen.
How do you think about that strategically? I mean, are you relieved that you're not going to lose the
wholesale revenues you might have lost? Or are you more fearful that it will create a more competitive environment longer term? Secondly, just coming back to wholesale. You may have told a bit, I might have missed it, but
I'm just trying to get a sense of what sort of recurring in the one off revenues are there. Maybe you
can give us a sense
of what the underlying growth rates are in both
of those. Obviously, you're benefiting from infrastructure sales.
You've had a pop from the MVNO contract from UPC. Maybe just
give us an underlying sense of the growth rates of those 2 components would be very useful. And then thirdly, just a sort of longer term question on fiber. I mean,
I guess, we're trying to figure out, I agree with you that the 1 gigabit is
a marketing sum, but it may
be relevant nonetheless. When you
look forward to 2030, maybe 10 years out, what do
you think fiber coverage and SCCP coverage in
Tesla will be at that point? Thank you. Well, I will take the first and third question and Mario the second one. On this possible March Sunrise UPC, it's not on my side to comment this deal. Just from a competitive dynamic, I think that the competition will stay high with or without the merge.
So I think there is not at the end such a difference. For Swisscom, it's important that we continue our way to be a differentiated operator to performing on our strategy. So we are executing our strategy and then the other things we can't influence. But I don't think that the competition will fundamentally change in Q1 or the other scenario. And Twistcam will be still very well positioned.
We are even then at the scales, have the capabilities to compete with all these different environments. On Pfizer, you are right, long term, 5 to the home will be the technology. But we have actually the possibility to have an incremental upgrade from our pipe to the home, pipe to the street networks to pipe to the home with less CapEx. And also, we have the ability to go for a hybrid strategy so that we can do it in a CapEx efficient way, but long, long term, yes, you are right to go on with the technology. And then this is certainly also in the view of Swisscom, so Swisscom will not work to invest in networks.
Question is on which level, on which CapEx level and this is also driven by competition. And on the wholesale business, so the impact of the business from UPC, it's approximately €5,000,000 to €6,000,000 per quarter growth. And that started at 0 in Q1 because we have the whole migration from Solsys Network to other network. So looking forward in 2020, this growth will be lower, of course. And then I think you mentioned Coke, that's it.
Coke Mobile is our it's one of our first brands. That's included in the retail revenue.
In the 1st 9 months, just to understand how we think about those lumpier elements of the wholesale revenue stream going forward looking into 2020 and beyond?
No. I think I mentioned it before. It depends on the market success of our competitor in the retail area. And I think we will not see the same growth rates that we saw this year in the whole trend.
Next question, Luigi Minerva, HSBC.
Yes, good morning. Thanks for taking my two questions. The first one is on Italy, and it's about your FTTH JV with Telecom Italia Flash Fiber. I wanted to ask you how core is that minority stake for you And whether you would be interested in swapping a stake for a stake in a larger network FTTH company, if, for example, there is an agreement between TI and OpenFiber? And second is just an update on the technology.
I think Fastweb together with Swisscom more broadly is probably one of the largest advocates in European Telkom fixed wireless access. So do you have any update on how the tests are going? And are you still confident that it is a strong and solid solution? Thank you.
The JV, I think it was good for us to have the past joint development together with Telecom Italia in this particular cities of the cycle. Operationally, it works very well. And we never talk about potential activities, how we would behave, indicate such network virtual merchant would have to be meaningful. I think we have now this expectation. We are satisfied with both participation flash fiber and the operational.
Exactly like Mario said, I think we don't speculate. It's too early to say. I think there is value in flash fibers. On the test on net they're ongoing and in some cities, we are doing tests on the equipment and so called the results of the cytokine and everything is on time. But I think important to this fixed wireless access, I think you have to look at market by market.
What is the potential of this technology. And it depends on the performance of the wireline networks, the coverage of the wireline network. So in other view, you can't compare Italy with Switzerland. So we see more potential for an attacker of fixed wireless access in Italy than in Switzerland. Thank you
very much. That's helpful.
Thank you. Gazzi Usman.
Hello. Thank you for taking the follow-up. I just got one, please. You mentioned that you've got a maybe I'm I probably have missed this, but you said you have a wholesale relationship with Salt on the fixed side. I mean, it was my impression that Salt was really just
wholesaling the utility networks fiber in
the urban areas and that they didn't have a nationwide
offer on say, copper VDSL or something. So could you perhaps
just indicate what is the initial wholesale arrangement that
you have with sourced on the fixed side? Thank you. Yes, yes, all these wholesale units is sold, connecting the bare antenna, As you said, this is on the
mobile backhauling kind of side of things?
Yes. We don't disclose our contracts results. But on type of footprint, they are also contents on our interest.
Right, right. Okay.
All right. Operator, perhaps one last question before we close the conference.
This was the last question, Louis.
All right. So thank you guys. And with that, I would really like to conclude today's conference call. And if you have any further questions, please from the IR team. Speak to you soon, and
have a great day. Thank you.