Good morning, ladies and gentlemen. Welcome to the third quarter results of 2019, hosted and presented by Urs Schaeppi, Mario Rossi, and Louis Schmid. Louis, the floor is yours.
Good morning, ladies and gentlemen, and also welcome to Swisscom's Q3 2019 results presentation from my side. My name is Louis Schmid, investor relations, and with me are our CEO, Urs Schaeppi, and Mario Rossi, our CFO. The first part of today's presentation, hosted by our CEO, consists of two chapters. First, a quick overview of the highlights, operational performance, and financial results of the first nine months. Second, an update on our activities, performances in Switzerland, and some explanations on Fastweb's doing a nine-month results. In the second part of the presentation, Mario runs you through the 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. 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 an example, Ookla. On 5G, we were the first provider which is offering 5G roaming. On Fastweb 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 Tre. Overall, we are progressing as planned and financially, as on our cost saving, we are on track.
If you go to slide four, you can see that we have a solid market performance in Switzerland. A small growth on TV and broadband, and also on postpaid mobile. Less decrease on fixed voice. Overall, a solid performance. We will come later to also the churn figures. 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. Overall growth in all segments in Italy. If you go on slide five 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 is losing in the third quarters.
In the first three quarters, -CHF 42 million. On Fastweb, we are able to grow by CHF 38 million. Overall, we have a stable EBITDA on an underlying level. You see also that the operating free cash flow with CHF 1.32 billion is solid. Overall, a stable financial performance. If you go on slide 6, only one or two remarks to our market activities. Our strategy is to focus ourselves on our customer base, to have the customer base stable, to have a stable ARPU. On a temporary base, we are doing some promotions with inOne Home, with our quadruple play offer. The activities in the whole Swiss market had in Q2, it's very promotionally driven. There is also a kind of, let's say, a washing machine in the price-sensitive part of the market.
If you go on slide seven, you see some figures to our postpaid subscription in the B2C market. Net adds are fine, are good. Also on inOne, you can see that we are able to increase the penetration on our new product inOne. I think important is to look to the right side of the chart. There you see the fixed mobile converge penetration. We are actually at 41.2% of customers we try in a quadruple play offer. That's important because this will also stabilize our customer base. You see on the bottom line of the chart, our churn and ARPU figures. We have a churn on postpaid of 7.7%, stable low churn on postpaid. On the ARPU side, you see that we have a blended ARPU of CHF 40, and on postpaid, CHF 58, where we have a small pressure on ARPU by CHF 4.
How do we explain this CHF 4? CHF 2 of the ARPU are coming from fixed mobile converge discounts, because we are pushing our quadruple play offer. CHF 2 are coming from the RGU mix. This is mainly the result of some right-gradings, but also second and third brand penetration, which is increasing. Overall, good KPI figures for postpaid. If you go on slide eight, you see some figures to our fixed business in the retail market. Also here some net add growth on broadband and TV. Also here the penetration, fixed mobile converge penetration is at 40.3%. It increased by 3 percentage points on a year-on-year level. Churn figures are lower than the previous quarter. We are at 9.1% on churn. Broadband and the broadband ARPU is stable. I think that's a good performance in this competitive promotion-oriented business.
If you go on slide nine, some explanation to our B2B business. 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. We are a full ICT provider. We have a strong partner network and a broad, unique product portfolio. We are facing with some top-line pressure on the telecommunication products, and there are different effects. One effect is the final migration to All IP, and where we see some cancellation or substitution to IP, Voice over IP. Some digital consolidation, also driven by IT products, and then a general price competition mainly in the mobile market. The ARPU in mobile B2B is on an EUR level. I think we will have a fierce competition in the B2B segment.
Overall, if you look to the market shares, they are plus, minus stable. On the right side of the chart, we 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. We are on track. We are delivering the decrease of indirect costs. In the first nine months, we were able to decrease our indirect costs by CHF 107 million. This is a combination of different actions: simplification of the product, increasing the stability of our products, and being a bit leaner. 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. We were able in Switzerland to mostly compensate the top-line pressure through cost savings. Operating free cash flow is at CHF 1.25 billion. The main effect why it is lower is the spectrum CapEx from the beginning of this year in the region of CHF 200 million. 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 bundle revenue. In the middle, on the bottom, you see the main drivers for our EBITDA. Overall, the EBITDA after lease line expenses went down by CHF 44 million. There are different dynamics.
One is still the decline of the fixed voice lines by CHF 32 million, fixed mobile converged rebates by CHF 14.7 million, the revenue-generating mix in wireless, which has an impact of CHF 32 million. On the other side, the erosion, as explained on B2B, the positive impacts from costs and others. Overall, this leads to this minus CHF 44 million EBITDA impact on Swisscom Switzerland. If you go on slide 12, some remarks to Fastweb. First, an update on our 5G co-investment partnership with Wind Tre. We are progressing as planned, we get regulatory approvals on the MNO side. That's one part, important step. Last week, we get also approval to our contract with Wind Tre. We have the clearance from the Italian regulator. We are progressing as planned on the four industrial streams.
On mobile wholesale, we plan to get 4G roaming on the Wind Tre network in the first quarter 2020. We will have ready for service on ultra-broadband wholesale area for Wind Tre in the second quarter. We are beginning to deploy 5G sites also in the beginning or in Q1 2020. On the fiber backhauling, we are starting to deliver a fiber connection to the marketplace. Overall, progressing as planned on our partnership with Wind Tre. If you go on slide 13, some remarks to our commercial performance in the consumer market. Overall, despite the tough market environment in Italy, it's a good result. Increased subscription base on broadband by 4%. Important is to say that we are able to upgrade our customer base to ultra-broadband. We are now at 62% penetration. On a yearly base, we have an increase of 19%.
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 130,000 net adds. You can also see that we were able to decrease churn quite sustainable, and on 35% lower churn figures on mobile, so a more stable business in mobile. Our converged penetration is at 34%. It went up by 6% on a year-on-year base. You see also on the bottom of the chart, the benefits of this converged product, lower churn, and a better ARPU. This is working in Italy, this transition. If you go on slide 14, some remarks to our B2B performance. We have a strong performance in B2B, +12% revenue growth. Two-digit growth in the public administration segment. One-digit growth in private segment and medium segment.
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. You see that our revenues went up by 5%, and the EBITDA by 7%, and EBITDA after lease and expenses went up by 5%. A growth and in line also with our expectation and the full-year guidance. I would like now to hand over to Mario for financial retail.
Thank you. Also good morning from my side. Just a few additional remarks on the financials. They show unchanged trends on service revenue. There is slightly more pressure coming from promotion and seasonal effects in the residential segment. Again, as you saw, very strong progress on cost-cutting and also in our operations in Italy. On slide 16, on revenue. The revenue on retail customers decreased. The service revenue decreased by CHF 54 million in Q3. We see here the main elements, CHF 24 million is coming from ARPU mix and right-grading of our customers, CHF 14 million from conversion discounts, and CHF 10 million from the voice line loss. In enterprise, we have the same trend as in the first two quarters. Decline of CHF 29 million on service revenue, 50% coming from fixed, the other 50% from mobile.
In fixed, I would 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 CHF 25 million in Q3. CHF 8 million comes from higher broadband connectivity and infrastructure services. Another CHF 8 million comes from the MVNO revenues. That's the impact of the UPC MVNO activities we have on our network. The CHF 9 million is the impact of higher inbound roaming, where we see another effect on the cost side that's more or less neutral on EBITDA level. Was explained, Fastweb is growing in all core segments in revenues. A few remarks on OpEx.
Direct costs, we have these lower acquisition retention costs as a result of the decoupling of the SIM and subscriptions, which we started in February this year. If this business case works, costs are coming down, churn rates are very stable, and net adds are satisfying. On the outpayments, we have higher outpayments in Q3, CHF 16 million, and that is a seasonal effect because of the higher roaming activities of our customers. As was mentioned, a very strong promote performance on the cost side. Savings coming from both: workforce reduction and also reduction of other expenses. That leads on slide 18 to the EBITDA development. In the retail segment, as I mentioned, we have some higher outpayments for roaming and the impact of the right-grading, a stronger impact of the right-grading of our customers in Q3.
Fastweb, quarter to quarter, more or less the same strong performance on the EBITDA level. That brings me to the slide 19. Interest to net income. Payments on net interest are now down at CHF 44 million for nine months. We refinanced now all the high coupon bonds. The average cost of our debt is 0.9%. We have, again, this impact of taxes. Maybe a few explanations. These tax expenses of CHF 230 million include a positive non-cash impact of CHF 62 million. In the first half, we had CHF 32 million, now we have CHF 29 million in Q3. Of course, the tax reform led to lower tax rates in some countries, and that's the impact. Tax liabilities had to be adjusted. In Q4, we expect an additional positive impact of around CHF 200 million. For 2020, the tax rate for the group will be at around 19.5%.
You can put that 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% on 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 impacts in 2018. I skip the next slide on finance, on the maturity profile. That brings me to page 23. Of course, we can, as of Q3, confirm our full-year guidance 2019. I hand over to the operator.
Thank you. Dear participants, to ask questions, please press star 14 on your keypad. star 14. To withdraw your question or request to speak, dial star 15. star 15. Thank you. 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. That's been decelerating and has been relatively weak over the last couple of quarters, despite the strong momentum that you've enjoyed on the net adds. You've touched upon some of the drivers of that weakness. As we think about going forward, is there a hope for improvement? Especially if we look to 2020, I guess some of these negative drivers will be falling away. For example, the All-IP migration, which is weighing heavily on EBITDA, will be falling away. 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 improved service revenue growth? Can we start with this one, please?
Okay. The main drivers for this decline in the service revenue is, on the one side, is driven by B2B, where we will have a continuing of price pressure also in 2020. The pressure on a fixed voice line is certainly becoming smaller. You will see it also if you compare the different quarters, that there we have a trend which is improving. Converged discount will also become a bit lower because we are on a penetration rate which is now over 40%. The growth rate will decrease. There will be also a smaller impact. On the revenue-generating mix, I think this is strongly related to the promotion-competitive environment in the Swiss market. If this will reduce, I think we are fast on having an improvement on the service revenue dynamics. It's mainly driven by this competitiveness and promotion activity in the Swiss market.
You see, we are successful on retaining our customer base. We have really good churn figures. Also the ARPU development is, I would say, is a good one if you compare it to the market activity throughout. 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.
Okay.
Competition-driven.
Thank you so much. The second one, I guess, somewhat related, is just on the launch of a digital sub-brand by Sunrise called Yallo. 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 are also much lower. My first question is, when you look at these digital sub-brands, and I'm not actually sure whether your sub-brands are 100% digital or not, so I'm not sure if it's fully comparable with Yallo, 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 vastly less profitable? The smaller cost to serve don't actually make up for the lower price points.
That's the first one. Secondly, also, when you think about the target 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 digital natives, as well as some smart shoppers with high income who also take up these products and these offerings. What's the situation in Switzerland and how structurally attractive do you think is this segment? How important it is for you to develop this segment and how large is the target demographic that any color here will be extremely helpful. Thank you.
Good. The digital sub-brand. Our digital sub-brand is Wingo. That's a brand which is online-only, and with high performance on the network side and a good price. What we see is actually that this market is still quite a small market. It's not really a big market. It's not only the millennials who are going to such a brand. It's also, let's say, mid-age people. I think it's more a question of digital-affined customers or which have a higher maturity in this market. Your question is on the cash flow. It's a lowest-price product, and the savings on the digital channels are lower than the price trend. There the margin of such a brand is a bit lower. On the other side, our strategy is to continuing to push Swisscom brand, and digital brand is just, let's say, a key brand.
I don't think that this will now have a fast growth in the next months or years. 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, Usman Ghazi.
Thank you for taking my question. I've got two, please. Firstly, on the B2B side, where we're seeing this impact of, I guess, rationalization of the traditional lines as customers move to IP, is it that once All IP migration is done, that revenue headroom just disappears? Is it that you expect just an ongoing rationalization of the back book for longer than just Q4 2019, that this will be a trend that possibly continues over to 2020 and 2021? That was the first question. The second question is just coming back to the B2C environment. I see that the RGU mix effect of CHF 32 million on the EBITDA, that you're disclosing that for the first time.
I'm just wondering, is that just a bigger disclosure on your part, or is it that this has had a bigger, more quantifiable impact this quarter than previous quarters? If that is the case, is this spin down happening in mobile, so people moving from the higher brands to the low brands? If you could just give some color as to how you're calculating this effect? Thank you.
Well, I will take the first question on B2B and Mario then on B2C. In the B2B market, this IP substitution. Today, we are mainly facing with the voice line substitution because they migrate to IP. This effect will be lower. That's one point. On the other side, the voice revenue in the B2B market of Swisscom is already on a low level. I think there, the impact will be not so big in the future. In the B2C market, you see much more also bundled offers. To look only on one product, I think is quite difficult because you get more workplace solution, cloud solution, where we have a bundling on connectivity with IT solution, where we will be able to stabilize the revenue pool of our customers.
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? Are you seeing any pressure from SD-WAN as a substitute on business connectivity revenues so far?
Yeah. SD-WAN will have some pressure on the MPLS networks. You are right, but they are still low.
Right. Okay.
Your question on the RGU impact. Yeah, we decided to disclose this impact because it started in Q2. I would say distribution of the CHF 32 million is 50% Q2, and 50% Q3. I expect a similar amount in Q4. That's driven by promotions. We mentioned several times that these promotion activities have an impact on our P&L. The second reason is the net adds are coming more on second and third brands than on the first brand on the Swisscom brand. I would say this impact will continue also into 2020. I don't expect less promotion activities in the market. Right now, we don't see any signs.
Just to follow up. For this to have an impact on your EBITDA, would suggest that you're seeing a replacement of That there is either a spin down from your high-
No
from high back book prices to the low front book.
No, it's not a 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 second and third brand.
Of course, we have sometimes customers who switch from the Swisscom brand to, let's say, the Wingo or Coop brands.
This cannibalization effect is negligible. It's really the impact which comes from the market.
Right.
From the growth end.
Okay. Thank you.
You're welcome.
Next question, George from Citi.
Hi. Thanks for taking my questions. I've got one on Fastweb. I was just wondering if you could give us just color on how you saw the third quarter. The net adds were a bit perhaps lower than you would have expected. I think you did give some price action. I was just wondering if there's something in the market that has changed, which will mean slow as well, or whether it was a temporary effect. My second question is more around the mobile market. I appreciate all the comments you just made on the differences between the brands and the mix within that. I just wanted to understand a bit more on that. Obviously, you are also winning a lot of secondary, third, and fourth SIM cards on your convergence offers as well.
Is more of the ARPU weakness coming because of the success of convergence or because of the change in the mix between the brands? 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.
I will take the question on mobile in Switzerland, and Mario can take the one on Fastweb. This ARPU dynamic, which we have in the Swiss market on Postpaid is driven by these CHF 4 decline. It's driven by CHF 2 are coming from the second and third brand. Other product portfolio mix, which brings some dilution to CHF from the second and third brand. The other two are more driven by optimization of our clients in the product portfolio. It's that. Also that the fixed mobile converged discount, which we have there in the CHF 2. These are the two main factors. On Italy.
In Italy, George, hello. In Q3 in Italy is always a bit strange quarter because of the Ferragosto. Usually it's a weak quarter also if you compare to the prior year. We had only 18,000. This year we had 10,000 net adds in broadband. We expect in general, in the market, relatively weak net adds. The important months in the second half are really September and October. That has always been the case. It's not an impact on any changes of the prices.
Okay. If I could follow up a bit on the question around the mobile market in Switzerland. Basically, what I am after is we are seeing revenue weakness as we go through this process. You've mentioned earlier that you've seen 40% plus penetration now on convergence. The incremental, let's say, penetration will be less diluted ARPU. My second question was more around if I would simplify. Service revenues are worsening. Does it mean now that they will start to stabilize and recover? Is it still a big migration into second and third brands which could last for years? That's basically what I was after.
Yeah. There are effects which give hope that the service revenue decline will be better. That's the topic of voice, the topic of the penetration of fixed mobile convergence. These are positive things. I also don't think that second and third brands will really accelerate rates only. The main problem is, or the main impact factor will be the competitive dynamic on the promotion side in Switzerland. I think this is what actually will guide our service revenue in the future. The question is how aggressive these promotion activities will be in the next months or years? I can't tell you. On the other side, if I look to our churn figures, if I look to the whole market dynamics, I think if the market behaves rational, if promotion activities should come down. Hope is hope. I know.
Okay.
I can't tell you.
Understood. Thanks.
Thank you. Next question, Simon Coles, Barclays.
Morning, guys. Thanks for taking the questions. My first one's just on the cost-cutting slide 10. You've obviously done a very good job, and you've delivered CHF 107 million so far this year, the bar for full year 2019 says approximately CHF 100 million again. It would seem that we're already there. Does that mean that you're not planning to deliver any more for the rest of the year, are you keeping some back to be able to reinvest in the market? We know Q4 is obviously one of the more competitive quarters each year. I'm just wondering how you want us to interpret that slide. 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.
We're seeing one of your competitors up their network to offer gigabyte speeds across their 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?
Mario will take the question on cost and I will take the question on this fiber networks, ultra broadband networks.
On the cost side, we are in this program 2018 to 2020. We said we will deliver at least CHF 100 million per year. As you mentioned, we are doing a good job this year, of course, we will deliver also cost-cutting in Q4. I expect a similar amount as we had in Q2, Q3, I would say. Looking forward into 2020, that will then be part of our guidance, which we will disclose in February. We are in this program 2018 to 2020, that means also for 2020, you can expect CHF 100 million at least.
Good. The second question on our network strategy in the fixed market, the internet-based market. We will have in 2021, a speed profile on our fixed networks where we have got 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 a performing network, and 90% of the households will have speed above 80 megabits up to 1 giga to 10 giga speed. 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. Our strategy, and there we are performing, is to delivering the best TV products. We did in combination with the network, which has speed above 100 mega, because we think that we will be competitive in the future.
That doesn't mean that we will stop to invest in these fiber networks. Already today, we are investing in our Fiber to the home network, but it will be a long-term project, and that doesn't mean that the CapEx would explode. I think competition on a marketing side will be getting more on speed in the next months. Our main strategy here is to have, in combination with an excellent TV product, to perform in the market. There I am quite confident.
Okay. Just to say, if your superior TV products 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 really?
Yeah. If you look to the market actually, the speed which you really need, if you are in a four-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, huh? It's selling 1 giga or 10 giga today is more something about marketing. 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 networks. Already now with the strategy we have today, we have 75% of customers which have speed above 200 megabits per second. I think we are here in a good situation. Speed will be a marketing game.
Yeah. Thanks very much.
Thank you, Simon. Next question, Ulrich Rathe, Jefferies.
Yeah, thanks. I have three quick questions, please, if that's all right. The first one is, on the other sort of unit, compared to market expectations, that was a bit soft on revenues in the quarter. 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 was my first question. Second question is, on the slide where you discuss the success in cutting SAC and SRCs, you're saying the reason is in particular the decoupling of mobile device payers. In other words, what you're not saying is there a sort of a benefit from bundling and 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? Any other reason there?
The last one is the broadband and fixed net adds are quite nice this quarter as they were, as discussed already on this call. I was wondering, in the quarter itself, is this more effect of higher gross adds or lower churn in the quarter? Are you giving this data only for the first nine months in the presentation? I was just wondering what happened in the quarter on that count. Thank you.
On the question on ARPU, on revenue, we lose CHF 40 million because of this lost contract you mentioned. That was decided, I think, about 18 months ago. Compared quarter-to-quarter, we had some positive impact in Q2 coming from our cable construction company, which will also stay in Q3. The main impact is coming from this contract and the company called Billag. This impact we won't have any more in 2020. On broadband net adds, we are stable. Churn rates over the quarter, so it's coming from the market. On acquisition and retention costs, on accumulate, we have savings on acquisition and retention costs on mobile of CHF 108 million in nine months. That's partly compensated from the impact of IFRS 16, which is washed through the P&L. That impact is CHF 94 million negative.
The net impact of this acquisition, retention, and IFRS 15 for nine months is CHF 34 million. We didn't put calculation this presentation, what the impact on the lower churn or the conversion impact. It's just to give you the cost and revenue elements.
Because-
That's hypothetically. We don't know what would have happened with the churn without introducing this new inOne mobile go.
Okay, I understand. You can't separate that. Okay. Makes sense. Thank you.
Thank you. Martijn den Drijver is next.
Yes, good morning. The first one. You are saying that your operating net adds in big parts.
Sorry, can you speak little bit louder because we cannot hear you?
Is this better?
A little bit better. If you can improve.
Could you give some color on the net adds in mobile? As a percentage, how many is actually coming from these second and third brand? Because I believe that in the second quarter it was around 50%. Do you see an increase? 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? You obviously being more promotional than competition, but if you could give some color on the fixed.
Okay. Good. I will take the one on the net add fixed and Mario will go on mobile second and third brand. On the fixed, the additions which we get, they are coming from everywhere. I would say the majority is coming from cable operators, but not only UPC, but also the other cable operators. The majority is coming from there, but they have also the highest market share in this area. We will also have some customers from other competitors. I think it is the mix of win-backs or market shares. The net adds on mobile, let's say in Q3, we saw a slight increase. The first half, we had about 50% coming from second and third brand, and that's slightly higher, close to 60% in Q3. Either way.
Thank you very much.
Thank you. Jakob Bluestone is next.
Hi, good morning. Thanks for taking the questions. I've just got a couple short questions. Just going back to slide 11, the EBITDA after leases bridge that you've kindly shared. You've also discussed most of the drivers within that: the lower line loss, lower drag from convergence, and given some guidance on indirect costs and B2B. Could you maybe just comment on the sort of missing bit, which is the others, so the combination of the roaming, the UPC MVNO, 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. Just any thoughts on that sort of last element of the bridge.
Secondly, just very briefly, can you maybe give a little bit of guidance on the cash impact from the tax reforms you mentioned? I think you just mentioned the cash P&L impact. Just any guidance you can give on that would be quite useful. Thank you.
On the ARPU, the main elements and then also the high-margin elements are coming from the wholesale services, access, and infrastructure. That has been CHF 147 million in the first nine months. That will continue also in Q4 and in the next year. It depends on, let's say, first, on the market success of our wholesale customers. There we have two big ones: Sunrise and Salt. The infrastructure business, for example, connections to the VPN. It's hard to say that it will grow also in 2020. For the Q4 this year, you can expect the same growth as in the first nine months. The growth on inbound roaming, the total revenue in nine months was around CHF 60 million. It was about a 10% growth, but that has no margin impact. Usually, in this business, you also have then higher outpayments.
That was also the case in the first nine months. There's not a bigger margin impact. The main impact comes from really the infrastructure or Salt business. On taxes, as I mentioned, the tax rate will be 19.5% going forward in 2020. Mid-long term, tax charges and tax payments is more or less equal. You have some fluctuations between quarters and years. Roughly spoken, the impact of this more than CHF 200 million adjustment of deferred taxes will be around CHF 20 million per year.
Thank you. Give me-
I think the model long term, if you calculate it 19.5%, it's long term, the same amount in the P&L like in payments.
Thank you. If I could just ask one brief follow-up as well. Urs, you mentioned that you were mostly taking broadband Subs from cable operators. Fairly late in the quarter, we had the launch of the one gigabit per second product from UPC. Is your expectation that it'll perhaps become a little bit tougher to take as much share from cable? Given the launch of this new product and some other measures, or do you expect that to remain fairly stable? Thank you.
I think what we will have is only louder marketing communication on the speed topic. That will be for sure. There will be some speed-oriented customers which will churn. 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 improve. Let's say in the next time, we will further continue to improve our TV product for end customers, and that we will have a good performance on B2B or on broadband.
Thank you.
Next, Frederic Boulan.
Hi. Thanks for taking the question. Fred 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 segment. Solution seems to be pretty stable now at CHF 250 million per quarter. Is there scope to grow here? Maybe a question at the Fastweb level where here it's the opposite, very strong trend there. In particular, you called the public administration contracts. If you can maybe extrapolate these beyond the expectations in the medium term. Then, second question on 5G. If you could discuss both in terms of monetization, you're selling that premium speed at 20 CHF. If you comment broadly on monetization prospect, both in retail and B2B.
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 5G, and Mario, then the one on B2B. B2B is after. On 5G, 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. There, the idea of Swisscom is to charge more for 5G. That is our offering. The question is what competition will do. If we look back to our industry, maybe our industry is too stupid to monetize this mobile broadband advantages of 5G. There are other elements to monetize 5G. I think in the B2B part, we will be able to monetize 5G through Industry 4.0 application. We will get more connections
On second things, third things, I think there also through IoT, there is potential to monetize 5G. I think that's a bit the whole dynamic. Overall 5G will bring us also a differentiation. The most important topic is how skillful our industry will be to monetize the pricing or to set the pricing for 5G to the retail market. Our strategy on 5G is to go for a broad footprint. We believe that this is more important than speed, because, if you have two, three, 400 or one giga that's enough speed for the next time. We are still very early on 5G. The networks are not rolled out. Only a few handsets are there. I think that 5G will be more a topic in 2020, and more in the second half of the year than in the first half. Mario?
In the B2B segment, in Italy, we have clear targets to continue the growth of Fastweb in the B2B segment. Because there we are still the attack. We have a very good market share meanwhile, but there is still the room for growth there. We will also have a better position with the 5G. I think we have a value proposition for our B2B customers that will certainly bring some additional business in Fastweb. We are quite confident about our B2B business in Italy. In Switzerland, it's the opposite side around. Here we are the incumbent. We are under attack, mainly on mobile. I think Urs discussed it in the last earnings call. It's difficult to predict. Have you already seen the end of the ARPU decline? That really depends on the competition and on facts.
I think we discussed impacts, also maybe some negative impacts from the legacy ISDN networks. In solution business, 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 the development in these two countries. It's really a different situation in Switzerland compared to Italy, because there we are the attacker.
Okay, thanks a lot.
Thank you, Frederic. Now Steve Malcolm, Redburn.
Morning, guys. Thanks for taking the questions. I'll be as quick as possible. First of all, just on Sunrise UPC, you clearly didn't oppose the merger. Now that it looks like it's not going to happen, how do you think about that strategically? 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 this, I might have missed it, but I'm just trying to get a sense what sort of recurring and the one-off revenues are there. Maybe you can give us a sense of what the underlying growth rates are. 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 at [inaudible] compared to the would be very useful. Thirdly, this is a longer-term question on fiber. I guess what I'm trying to figure out, I agree with you that the one gigabit is a marketing tool, but it may be relevant nonetheless. When you look forward to 2030, maybe 10 years out, what do you think fiber coverage and FTTP coverage in Swisscom will be at that point? Thank you.
Good. I will take the first and third question, and Mario, the second one. On this possible merge Sunrise UPC. It's not on my side to comment this deal. From a competitive dynamic, I think that the competition will stay high with or without a merge. I think there is not, at the end, such a big difference. For Swisscom, it's important that we continue our way to be a differentiated operator to performing on our strategy. We are executing our strategy, the other things we can't influence. I don't think that the competition will fundamentally change in one or the other scenario. Swisscom will be still very well-positioned. We are even then have the scales, have the capabilities to compete with all these different environments. On fiber, you are right. Long-term, Fiber to the home will be the technology.
We have actually the possibility to have an incremental upgrade.
From our Fiber to the Street networks to Fiber to the home, with less CapEx. Also we have the ability to go for a hybrid strategy so that we can do it in a CapEx-efficient way. Long-term, you are right. Fiber to the home will be the technology. This is certainly also in the view of Swisscom. Swisscom will not stop to invest in networks. Question is on which level, on which CapEx level, and this is also given by competition. On the wholesale business. The impact of the MNO business from UPC is approximately CHF 5 million-CHF 6 million per quarter growth. That started at zero in Q1 because we had the whole migration from Salt's network to our network. Looking forward in 2025, this growth will be lower, of course. If you mentioned Gold.
With Gold, since Gold Mobile is one of our self-brands, that's included in the retail revenue. Not in wholesale revenue.
I was more referring to infrastructure sales. Where you're selling to Sunrise and Salt. Just curious to know when you can think of CHF 147 in the first nine months, just to understand how we think about those lumpier elements of the wholesale revenue stream going forward looking into 2025 and beyond.
No, I think I mentioned it before. It depends on the market success of our competitor in the retail area. I think we will not see the same growth rate as we saw this year in the wholesale segment.
Okay.
We will see a small growth there. We will see it on the core infrastructure wholesale services.
Okay. Thank you very much.
As in 2019.
This is Steve. 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 that stake for a stake in a larger network FTTH company if, for example, there is an agreement between TI and Open Fiber. 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 Telco on Fixed Wireless Access. Do you have any update on how the tests are going, and are you still confident that it is a strong and a solid solution? Thank you.
The JV and with Flash Fiber, I think was good for us to have a past joint development together with Telecom Italia in these dedicated cities on the fiber. Operationally, it works very well. We never talk about potential activities, how we would behave in the case such a network virtual merger would happen in Italy. I think We are satisfied with both participation in Flash Fiber and the operational activities. Yeah. Exactly like Mario said, I think we don't speculate. It's too early to say. I think there is value in Flash Fiber. Well, the tests on FWA, they're ongoing. In some cities, we are doing tests also with Windows equipment. So far, the results are satisfying and everything is on time. I think important to this fixed wireless access, I think you have to look it market by market.
What is the potential of this technology? It depends on the performance of the wireline network, the coverage of the wireline network. In our view, you can't compare Italy with Switzerland. We see more potential for an attacker of Fixed Wireless Access in Italy than in Switzerland.
Thank you very much. That's helpful.
Okay. Thank you. Ghayas Usmani.
Hello. Thank you for taking the follow-up. I've just got one, please. You mentioned that you've got a Maybe I could have missed this, but you said you have a wholesale relationship with Salt on the fixed side. 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. Could you perhaps just indicate what is the nature of the wholesale arrangement that you have with Salt on the fixed side? Thank you.
Yes. Always wholesale business with Salt. Connecting their antenna, delivering backbone. We have always service revenue, wholesale revenues with Salt.
Actually, this is on the mobile backhauling side of things? Or-
Yeah. We don't disclose our contracts with Salt. On fiber footprint, they are also sometimes on our networks.
Right. Okay. Thank you.
All right. Operator, perhaps one last question before we close the conference.
This was the last question, Louis.
All right. Thank you, guys. With that, I would really like to conclude today's conference call. If you have any further questions, do not hesitate to contact us from the IR team. See you soon, and have a great day. Thank you.