This conversation will be recorded.
Good morning, ladies and gentlemen, welcome to the first quarter results 2019 presented by Urs Schaeppi, Mario Rossi and Louis Schmid. Louis, the floor is yours.
Good morning, ladies and gentlemen, welcome to Swisscom's Q1 results presentation. My name is Louis Schmid, head of investor relations, and with me are our CEO, Urs Schaeppi, and Mario Rossi, our Chief Financial Officer. The first part of today's analyst and investor presentation, hosted by our CEO, Urs Schaeppi, consists of three chapters: a quick overview of the highlights, and an update of our activities and performance in Switzerland, and some explanations on the Fastweb results. In the second part of the presentation, Mario runs you through chapter three, the financials and unchanged full-year guidance. With that, I would like to hand over to Urs to start his part of the presentation. Urs?
Good morning, ladies and gentlemen. I would like to start with chart C, the Q1 in a nutshell. Overall, we have a good Q1. We were able to successfully launch our new mobile offer inOne mobile. After five weeks, we have more than 250,000 customers on this product. We also were able to acquire spectrum, 45% of the spectrum, all the spectrum which we were able to acquire for a reasonably good price. We have all the ingredients to successfully build out 5G. On Swisscom TV, we were able to have a continuous growth. In all the tests on mobile, we performed. We were the winner of all these tests. Also a positive event from Q1 is certainly the revision of the Telecommunications Act. There is no change on the access regulation, we have a stable condition as today.
In Italy, with Fastweb, we have a resilient performance. Overall, a good Q1. On slide 4, you see our market share or market performance. On broadband, we had minus 3,000. I am not concerned about this development. There are some spillover effects from Christmas promotions. We have a clear value strategy on this side. If I look to our market share on the revenue side, we have here stable conditions. Also our churn figures on broadband are on a low level. Overall, I'm not concerned about this development on broadband. On TV, you see that we were able to slightly grow. We have a market share of 35%. On fixed voice, you see that the losses are lower. We are almost through in the retail market on the All-IP migration.
We can say that these losses will slightly reduce also in the future. On broadband, we had a net add of 31,000. The main driver behind it is the good acquisition of Coop Mobile, our third brand of Swisscom, where we get a new MVNO contract. On the other side, we are successful with our value management on the postpaid customer base, where we have also low churn figures. In Italy, you see on broadband growth and also on mobile. A good market performance in Italy. On slide 5, you see our key financial figures. Q1 is a robust quarter. We can reiterate our full-year guidance. On the net revenue side, we are approximately flat. We have minus CHF 25 million on net revenue. On EBITDA, we have plus 5.8%, so CHF 61 million. I will come later to it.
There are some reconciliation effects or IFRS 16 effects. Also the net income is slightly increased by 1.1%. Operating free cash flow is at a stable, robust level of CHF 533 million. If you go on the bottom line of the slide, you see a bit more details to the development of the EBITDA. On a comparable base, the EBITDA increased by CHF 9 million, so 0.8% on a comparable base if you took out the reconciliation leases or this IFRS 16 effect. Swisscom Switzerland has slightly decreased on the EBITDA, minus CHF 6 million. We were able to compensate the reduction of the service revenue by lower costs. In Italy with Fastweb, we have EBITDA growth of CHF 11 million. Overall, a stable good Q1. On slide 6, you see our operational priorities. No changes in it. We want to keep our technology leadership.
We are doing a lot on the roll-outs of wireline networks, but also wireless networks. We launched our 5G network in mid of April. We have now our first 5G smartphone in the shop, an Oppo shop. Our ambition is to have a coverage over Switzerland above 90% at the end of this year. Value management of our customer base is the core of our strategy. We are successful in it. On B2B, we are in the phase of our IP migration. I will come later to it. We were able to generate growth.
Sorry
on security.
Was in line with our expectations.
IoT.
Swisscom is 2% ahead.
Operational excellence remains important for us.
Okay, fine.
These are the key priorities.
With this growth.
As you can see on slide six.
Just to be comparable with.
If we go on slide seven, you see some remarks to the spectrum auction, which was finalized at the end of January. Swisscom was able to acquire 200 megahertz spectrum. You see that the distribution of the spectrum, a good distribution in lower bandwidth, in lower frequency spectrum, 700 megahertz also, we get a share of 50%. Then also we have the spectrum to also make our 5G network fast. We paid CHF 196 million. I would say if I compare it with other countries, for a good price, we get the spectrum. Important is to say that from the spectrum, Swisscom has 45% of the whole spectrum. On slide eight, some remarks to our new offer inOne mobile. The main idea behind this product is that in Europe, roaming is included. We have a very good momentum on the market. Good feedbacks from customers.
Good feedbacks from our sales channels. As mentioned, after five weeks, above 250,000 customers on this product. Also the distribution or the mix of the acquired subscription are as we planned it. We are here on the plan, we will also have, in the future, lighter subscriber acquisition, subscriber retention costs. On slide nine, some more information on our converged strategy. Our ambition is to drive the convergent penetration. You see it that on mobile we have now a penetration of 56.6%. We increased on a year-on-year level by 19%. On broadband, we are at the penetration of 60%. inOne is very successful. We have 2.5 million customers on inOne, and the average revenue generating unit per bundle is CHF 1.95. Overall success story with inOne, also important for our value-based management.
On slide 10, you see some more information on the B2C market and also the dynamic on revenue generating units. A solid performance on the net adds and a slightly better performance or less negative performance on fixed voice lines. Penetration ratio, you can see in the middle of the chart. Always you can see that the penetration is increasing. Fixed mobile share of our postpaid value-based is today at 37.4%. Interesting is to see the ARPU development on the right side of the chart. You see that on wireline we have increased ARPU on a high level, good performance on ARPU. On postpaid wireline, you see that we have an ARPU of CHF 59. Which is 3 CHF lower than previous year. The main effect behind it is the converged rebate.
On the other side, we have the higher ARPU on the bundles, and the higher loyalty. Overall, a good performance in the bundle market. On the bottom of the line, you see our churn figures. They are on a low level and in a solid area. Actually, a solid positioning in the B2C market. If I come to slide 11. Some remarks to our B2B business. We have price pressure in the B2B telecommunication business, and some special effects in the solution business or in the ICT IT business. If you look to our wireless performance, you can see that we have ARPU pressure. This is mainly driven by competition. We will also facing in the future some ARPU pressure in the wireless business. On the other side, it's also driven by all-inclusive models.
Overall, I think that we are already today on a quite low level of an ARPU in this B2B market. We have a stable customer base, and we were also able to win back some customers. The competition in wireless is high, and I would say it remains high. That's why it is important for Swisscom to have a good customer base management through a broad product portfolio. In wireline, so we have a solid revenue development on business networks. We have some price pressure on the connectivity side, driven by All-IP migration. You can also see that we are now at 80% of All-IP migration. This effect of access on traffic cancellation on wireline will certainly reduce in the future because we are now at 80% of the All-IP migration. Some remarks to our solution business.
Swisscom is very well positioned in this business. We have a unique positioning. If you look to the product portfolio, the wide product portfolio we have. We have a mixed development. On some areas, we are growing. We are growing with digital solution. We are growing with security, cloud, data center. On the other side, on workplace, we had less workplaces installed. That's why we have a slight decrease on the workplace. There is also the migration to unified communication and collaboration. On the banking segment, we have this effect from last year, where we lost a client. You see this also in the year-on-year comparison. Overall, I remain unchanged positive for this solution business. We will face in the B2B markets with further price pressure. On the other side, we have opportunities in areas like cloud security.
That's why we say that we are unchanged positive on this solution business. If you go on slide 12, you see that we deliver what we actually announced. Savings decreased in the first quarter by CHF 31 million. We are on the way to deliver cost savings in the region of CHF 100 million plus. Successful on cost management. If you go on slide 13, some remarks to the financial performance of Swisscom Switzerland. You can see that cost savings are compensating the top-line pressure. If we have a look to our net revenue, you will see that the net revenue decreased by CHF 41 million on CHF 2.16 billion. You see that the service revenue decreased by CHF 52 million, and there, half or CHF 30 million is coming out of the retail market, and CHF 22 million is coming out of the enterprise market.
We have a service revenue pressure still. On the other side, on other segments, a slight increase on the revenue side. On the EBITDA side, you see that approximately stable EBITDA in Swisscom Switzerland, minus CHF 6 million. You see the EBITDA dynamic in the middle and bottom of this chart. A reduction of the EBITDA driven by fixed voice line by CHF 12 million, CHF 18 million from the converged discount, and CHF 28 million coming from B2B wireline and wireless, mainly wireline and wireless. On the other side, we were able to compensate it through better indirect costs, plus CHF 31 million and CHF 27 million others. In these CHF 27 million others, the majority are lower SACs, subscriber acquisition, subscriber attention costs. This leads to an operating free cash flow of CHF 520 million. On slide 14, some remarks to Fastweb.
A resilient growth of Fastweb increased the broadband customer base by 4%. Important to say here that we are able to increase the value of this customer base. The growth on ultra broadband is plus 32%. That's important because on ultra broadband, we have a lower churn and a higher ARPU. The ultra broadband penetration in Italy on Fastweb is now at 58%. Also on mobile, we have a good momentum, and we were able to reduce the churn. The churn is 22% lower than previous year. You see on the right side of the chart that the performance of the converged offers. We are now at 31% fixed mobile converged penetration. The benefit from this is a 27% higher ARPU and a lower churn in the region of 40%. That shows that the strategy of converged bundles is working.
On slide 15, some remarks to the B2B performance of Fastweb. We have a 12% increased revenue in the enterprise market. On wholesale, we are slightly lower, but the figures on wholesale are also lower. We have a revenue of CHF 43 million. There are some seasonal effects in it. Overall, the core wholesale business is in a stable and good situation. Now, on slide 16, the financial performance of Fastweb. A solid performance and also in line with our full year guidance. The net revenue increased by CHF 22 million to CHF 514 million. You see that we have the growth on enterprise and consumer, then on wholesale, slightly lower because of these seasonal special effects of last year. Overall, a solid development in enterprise and consumer on the revenue side.
You see that we were able to grow on wireline, wireless, but also in the enterprise market with value-added services by CHF 21 million. EBITDA increased by 6%. Our full year guidance of a growth of 5% is on the good way. Now I would like to hand over to Mario to give you some more results on the financial side. Mario.
Thank you, Urs, and good morning, everybody. A few additional remarks to the financials on revenue on slide 17, which say overall, all trends we saw in Q1 are as expected, maybe the B2B segment was a bit lighter than expected. On retail customers, the decline of the service revenue of CHF 30 million or 2.3% consists of CHF 12 million impact from the loss of voice access lines. This comes down. Please remember last year we had an impact of CHF 64 million. The same is for the impact from convergence discount, CHF 18 million in Q1, CHF 85 million in prior year. Also here we see a reduced impact. We have a negative impact from roaming of CHF 4 million, which is compensated with additional incoming roaming revenue. On enterprise, service revenue went down by 8.1% or CHF 21 million, CHF 11 million coming from wireless and CHF 10 million from wireline.
Urs explained the pressure we see in wireless. In wireline, we'll say 50% of the impact comes from price pressure. The other 50% from the structural effects of the All-IP migration. We think that by the end of the year, all lines will be migrated, practically all lines. On solution and ICT business. We have a decline of CHF 14 million or 5%. Two main reasons. Banking, we have this spillover from Q1 2018. We have lower volume in the workplace business. We benefit from higher trading revenues. We have there an increase of CHF 18 million. The overall trading revenue in this segment is CHF 72 million in Q1. On point four, wholesale. For the increase of the wholesale revenues, we have three main reasons. We benefit from the MVNO business. Second point, growth in the B2B connectivity.
The third point, as I mentioned, the inbound roaming additional revenues of CHF 4 million. Coming to Fastweb. We see growth in consumer and enterprise, CHF 12 million and CHF 22 million. We have a decline in wholesale. As important, the core services in wholesale are stable. We have these non-core low margin revenues from Flash Fiber last year. This is coming to an end in 2019. The full year revenues on this business last year was around CHF 100 million or EUR 100 million?
Euro.
EUR. Okay. On slide 18, a few remarks on OpEx. On direct costs, we saw lower acquisition and retention costs of CHF 21 million. On goods purchased, we have this impact that is driven by the higher hardware sales in the enterprise segment. On the indirect costs, as was mentioned, we are well on track to deliver the CHF 100 million cost savings. We saw savings in all Swisscom divisions. Workforce costs went down by CHF 22 million and CHF 9 million other is mainly coming from lower IT costs in the network division. I think on EBITDA, in the retail segment, -2%. The decline of service revenue of CHF 30 million was partly compensated by lower indirect costs and lower subscriber acquisition costs. The enterprise segment was not able to offset the pressure on service revenue. We have some higher costs in the IT and solution business.
On Fastweb, as expected, we have this EBITDA growth of 6% in Q1. A few remarks on slide 20 on net income. You see now all the details on the IFRS 16 impact on depreciation and interest. Just to remind, prior year is not restated. Secondly, on net interest is now down to CHF 15 million per quarter. On a comparable basis, that's CHF 14 million less than 2018 Q1. Net income for the group went slightly up by 1.1%. On the next slide on CapEx. CapEx in Q1 in Switzerland are higher than the prior year. As we had a very slow start for the FTTS rollout in Q1 2018. We are well on track for the full year guidance in Switzerland for overall CapEx of CHF 1.6 billion for the Swiss business. The spectrum we allocated.
Spectrum will be booked in Q2, CHF 196 million, and also paid in Q2. There are no special remarks on free cash flow. That brings me to slide 23. On the financing side, there you see net debt. You see the impact of IFRS 16. As expected, the net debt goes up by about CHF 1.3 billion. We had one financing transaction in Q1 at CHF 200 million. 10 years at the interest coupon of 0.5%. Very favorable, thanks to our credit ratings. That brings me to the guidance. As mentioned by Louis and Urs, it's unchanged for the group. Around CHF 11.4 billion revenues, more than CHF 4.3 billion EBITDA, and CapEx of around CHF 2.3 billion. With that, I hand over to Louis or to the operator. Operator?
Okay, thank you for your attention. You have now the opportunity to ask questions by dialing star one four on your telephone keypad. Once you are in the question queue, at your turn you will hear a short announcement saying, "Unmuted." I already have some questions. I will open the first one from Simon Cole from Barclays Bank.
Morning, guys. Thank you for taking the question. Simon from Barclays. The first one is on your new mobile tariffs that you launched in the quarter. They're clearly very attractive and competitive to pricing from peers. We've seen some response by them cutting some of their roaming pricing. Your results today show the success that you've had. I was just wondering, how is competitive intensity going in mobile, and do you see a risk that your competitors respond aggressively to try and take back some of their market share? Secondly, on service revenues, you touched on it in the call and you gave us some good, clear, defined guidance at the CMD in February. I'm just wondering, has anything really changed? I think you said B2B has got a bit worse as fixed loss is maybe getting slightly better than previously expected.
If you could give us any more color on how you expect that to trend going forward, that would be great. Thank you.
Well, on our new offer inOne mobile. That's just a competitive offer. I don't think that this will actually lead to a lot of, or to additional price competition in Switzerland because the market is very promotion driven. If you look to the main net adds of our competitors, a lot of them are coming out of promotion. I think that the reaction will be more on the promotion side than on the list prices of the products. Since we launched inOne mobile, we see some reaction also rolling on the promotion side. I don't think that we will now have a new dimension of competition in mobile. For us, it is important to improve our price performance ratio to have a good value management and to get some customers from prepaid to postpaid.
That's the main idea behind it, and it is working well. To the service revenue development. Mario.
If you take the details, it was explained on page 13 of the presentation. I would say that the impact on fixed voice line losses and fixed mobile conversions in the retail business, there's no big seasonality. You can take them around four times for the full year impact. On B2B, as was mentioned, we think that the second half we should see a better performance. Please don't take the CHF 28 million, four times for the full year impact. It should be lower, what we see today.
Thanks, guys. Very clear.
Thank you. I'm having another question from Ulrich Rathe from Jefferies.
Thanks very much. I have three questions, please, if that's all right. The first one is on the wholesale revenues. You highlighted some of the factors there. Could you comment maybe whether there are any one-off-ish type of contributions there? I'm thinking about things like connection fees rather than sort of monthly recurring fees. Could you give some color on whether the sort of one-off fees compared to the sort of recurring fees in the first quarter? The second one is on the broadband, the minus 3,000. I think in the presentation, you said this is a spillover from Christmas and you're not concerned. Could you just describe that? Give a bit more color on that, about what this means, spillover from Christmas and what the dynamics of this is and how this could unfold and repair itself in future quarters.
The last one is on the cost savings, CHF 31 million versus the CHF 100 million target. Looks like it's front-loaded. Does this mean the target is maybe looking slightly conservative at this stage, with CHF 31 million already achieved, or is there sort of a phasing that's front-loaded in the year? Thank you.
Well, I will take the broadband question and cost question, Mario then on wholesale. On broadband, this spillover from Christmas. During Christmas time, there are a lot of aggressive promotions in the market. Normally, the churn in January is a bit higher. That's the spillover effect. If I look to our net debt, what we have, and if I look to our whole churn figure, I don't feel concerned about the broadband penetration. We are able, with a strong bundle inOne mobile and inOne home, to gain some, let's say, some market share in a saturated market with our strong TV platform and if we bundle it with our new mobile offer. That's why overall, I think that we will have in a saturated market with a network which is becoming faster because of the rollout of our ultra broadband strategy.
I am not concerned about this development. If I look to the last week, I also can say that I'm not concerned about this. On the cost side, we were able to save CHF 31 million. We feel ourself comfortable that we can save CHF 100 million or even maybe slightly over CHF 100 million, but not in factors. Overall, we feel ourselves comfortable to deliver this CHF 100 million plus.
On the wholesale revenues, there are no one-offs. Maybe the MVNO benefit is around CHF 5 million, broadband connectivity is also around CHF 5 million. As I mentioned, inbound roaming, which is compensated by higher outbound costs, is CHF 4 million. You have CHF 14 million of this CHF 20 million growth, and the rest is related to termination fees, and this is practically no margin.
Thank you very much. Thank you.
I have the next question from Mike Bishop from Goldman Sachs.
Thank you very much for taking the questions. Two questions from me, please. Again, I'm picking up on the margin, but more on the SAC and SRC costs. They were down in the quarter, which led to the quite strong margin performance in Switzerland. Do you think this is just phasing, or is this more a structural decline in SAC and SRC? Because I noted in your comments that with the inOne mobile tariffs, you mentioned structurally lower SRC costs. Secondly, given your very rapid progress on 5G, I was really keen to get some initial feedback from a real-life situation in terms of the speed you're seeing. Also as a quick follow-up, what sort of pent-up customer demand do you think there is in Switzerland for 5G and potential early adopters? Thanks very much.
I take the 5G question, and Mario, the question on subscriber acquisition retention costs. On 5G, as I mentioned it, we launched the first network, the 5G network. Also with a smartphone. The smartphone is in our shop. We have the first smartphone in our shop. We are here in a very early phase. Your question is how is the pickup? 5G will have, on different levels, an impact. Certainly on the enterprise market, Industry 4.0, campus networks, and all such things. You can do the more IT-oriented projects through 5G. On the other side, you have all this potential in the B2C market, the IoT, and also virtual reality, augmented reality cases, and so on. My belief is that 5G will be an important technology which will change the mobile communication.
The key question is how skillful our industry will be in monetizing these advantages. The strategy of Swisscom is to charge CHF 10 more for 5G speeds. We are not alone in this market, so we will see how skillful we are. On the other side, we will get more SIM cards also in the market. We will be able to differentiate ourselves. 2019 is still a starting year. We will have now the first smartphones. The majority of the smartphones will be in the market at the end of this year. Then we will have a good coverage on our 5G. I think to really get a take-up on 5G, you need also first the coverage. The main impact of 5G will be in 2020 plus.
Now we are in the beginning phase, and our strategy is to be really a technology leader in this area. Mario, on the subscriber acquisition. On the acquisition retention costs, they went down by CHF 21 million in Q1. 60% is coming from the mobile business and 40% of the fixed line business. On mobile business, the acquisition costs were more or less stable. On the retention costs, we had a lower amount of subsidy per contract. The volume was more or less unchanged, I would say. The saving in the fixed business, in Q1 2018, we were still in the middle of the all-IP migration. During this migration, you had to grant higher subsidies for router and set-top boxes. Looking ahead in the next three quarters, we will see the impact from the inOne mobile go.
Then we will have reduced acquisition retention costs, that will be compensated in the next three quarters by the release of the IFRS 15 asset we have in the balance sheet. The full impact on this changed model, you will see only in 2020.
Thank you. That's very clear.
I have a next question from Frederic Boulan from the Bank of America.
Hi, it's Fred Boulan at Bank of America. Just to follow up on the previous question on costs. We had almost stable domestic EBITDA in the quarter, I think. If we look at some of the one-offs you flagged in Q1 last year, maybe the trend is about minus two. What kind of trends can we expect for the rest of the year? In particular, we had very strong wholesale IT. Is this sustainable, or you would point to some elements that we need to bear in mind in terms of not extrapolating that more stable trend for the rest of the year? Second, slightly smaller question, if you could just quantify for us the impact of Coop Mobile on your revenue and subscribers. Thank you.
Sorry, Fred. Can you repeat the second question? It was not very clear for us.
Just the impact of Coop in subs and revenue. The migration to your network.
The migration to? Of sold?
Coop Mobile. Yes.
Okay.
Thank you.
Okay. Good. The question of Coop Mobile, that's the third brand. We are gaining customers with this new product. Overall, if you take the whole amount of it from the network load, that's negligible. We get some additional net adds. This will also a bit flattening out. You have the first peak because we could get a lot of customers back, and then this is flattening out, but the offer is an attractive one. That I think we will also have in the next month a good momentum with Coop Mobile. That is certainly not the main pillar of our strategy. The main pillar of our strategy is to have a value management on postpaid. On the second part of the question was cost. What are the trends?
Actually, as Mario already mentioned, we have now saved CHF 31 million, and we are really confident that we get CHF 100 plus at the end of the year. There are a lot of different actions behind it to make these savings, and there is not really a very special seasonal effect in it.
Okay. If I may follow up. Thank you very much. If I may follow up on mobile. On the non-convergent offer now, Swiss Mobile, you have a core offer, a Swiss Mobile flat at CHF 65. If I look at the range you've had of offers historically on mobile only, and the tiering on speed, you had offers which were priced substantially higher than that, above CHF 100. Can you talk a bit about dynamics here going on in terms of, is there any repricing at all, or you managed to keep customers or to move them to inOne Mobile with no significant impact on the ARPU? Thank you.
Yeah. On inOne Mobile Go, the CHF 60, that's the converged offer. That's less CHF 20 discount. The face value or the value for a mobile-only customer is CHF 80. That you can compare to the former M subscription, which stood at CHF 99. Don't forget, we have now the savings on the acquisition costs. As we mentioned when we introduced the inOne Mobile Go, we think the overall impact of this introduction in 2019 on the full year will be EBITDA neutral. We can give you some more color on the ARPU development after Q2. Now it's too early. We have just five weeks in the market. It is too early.
Thank you very much.
We have the next question from Polo Tang from UBS.
Good morning. Thank you very much for taking my questions. I have three on Swiss enterprise and one on Fastweb, please, if I may. Firstly, I wonder if you could talk a bit more about the competition you're seeing in the enterprise mobile space. Have you seen any changes in the behavior of your competitors, given there appears to be a renewed focus on B2B from at least one of them? You highlighted how RFPs are explaining some of the ARPU pressure you're seeing in B2B. I appreciate it may be commercially sensitive, but I wondered if you could give us any color on what proportion of your enterprise mobile base could perhaps re-tender in the next year, or any other way of quantifying the potential ARPU risk from future RFPs. Finally, on solutions. The disclosure around the different moving parts of the solutions business was interesting.
I wondered if you could give us any color on how much your solutions revenue is still from Workplace and UCC solutions. Just finally, the one on Fastweb was, obviously, your wholesale revenues were under pressure in Q1. You mentioned how this basically reflected the phase-out of Flash Fiber-related projects. At the full-year results, I felt wholesale was an area management quite confident about. Obviously, you highlight the core revenues are stable this quarter. I just wondered how we should expect core wholesale revenues to trend during the rest of 2019. Thank you very much.
Well, I take the question on enterprise, and Mario will give some flavor on the wholesale revenues. The competition in the mobile space in the B2B market is
Let's say, is a very fragmented one. What we are seeing is attacks from Sunrise, not with a clear pattern, but on very specific customers with really very aggressive prices. That's a bit the dynamic in this market. Overall, that's why I think the competition or the price pressure on mobile will continue, maybe a bit on a lower level, but we will have further pressure on mobile service revenue, because also in the B2B market, the contracts are normally two-year contracts, and then you have a renegotiation on these contracts. On the other side, we are at an ARPU of CHF 26, and this is already low. I think the effect can't be a huge one. Competition will remain on wireless business in B2B. Our strategy is to differentiate ourselves through an excellent customer service, through full portfolio solutions.
This is actually working out because if you look to our churn figures in the B2B market, they are really low. On the solution side, your question was how many business we are doing in the workplace area on solution. We don't disclose this figure. What we are seeing in the workplace area are actually two dynamics. The one dynamic is that you have workplaces in a traditional model, on-premise workplaces, which are migrating on a cloud-based solution. That's one effect. On the second effect, that was the effect which we see in our figures, is actually that some customers have less workplaces, some volume effects on workplace. This was the case which Mario explained. Overall, I think workplace remains an attractive business unit for Swisscom because it's moving more in workplace. It's getting more connected with the connectivity part.
With the migration to unified communication, we will be able to get there a good business out of workplace. Mario?
On your question on Fastweb wholesale. As I mentioned, the decline in Q1 revenues was fully attributable to these low-margin Flash Global revenue. The full year in 2018, we had revenues out of this business of CHF 100 million, out of the CHF 275 million wholesale revenues we have in Fastweb. For the full year this year, on Flash Global, we expect, I don't know, CHF 30 million-CHF 40 million from this business. In the high-margin core business of wholesale, we still expect a small growth in 2019.
Great. Thank you very much.
I have the next question from James Ratzer from the New Street Research.
Yes, good morning. Thank you very much indeed. I have two questions, please. The first one just from a kind of market-
Could you speak a bit louder, please? We can't hear you.
Yes, sorry. Can you hear me now?
Yes.
Yeah, great. The first question I have is just about the competitive impact you're seeing in the market at the moment on the fixed line side from Salt, whether you are really seeing any pickup at the moment. I know there was a question earlier around some of the broadband customer losses in Q1. Do you think any of that can be attributed to a slightly higher loss to Salt? The second question I had, please, was around plans and timetable for rolling out your three and a half gigahertz network in Italy on Fastweb. Have plans on that firmed up a little bit more? When can we think about you being able to reduce some of the MVNO costs you pay to TIM and migrating onto your own 3.5 gigahertz network? Thank you.
On the competitive dynamic of Salt, let's say, we don't feel actually Salt as the reason why we had this -3,000 net adds in Q1. As I mentioned, it's more an overall very aggressive promotion topic in the market, and we have more a value-based approach. If you look to the figures, at the end, if all figures are out in the market
I'm quite confident that you can see that we kept our market share in this B2B broadband market. That is more a question of volume-driven topic here. The impact of Salt on the side of Swisscom is, let's say, is slow. On our plans of the 3.5 gigahertz in Italy. It's too early to disclose it. What I can tell you is that we are operating successfully the mobile business in Italy, also with the contract which we have today as an MVNO. It's not our intention to cross-subsidize mobile with broadband. We are happy with the development also on the margin side on mobile in Italy. Currently, we use the 3.5 gigahertz spectrum for the fixed wireless access business from Tiscali. It's a small one, but we use it.
As was mentioned, we are now studying and planning the future potential rollout in the cities. It's too early.
Is it your intention then to be able to use that to help save costs on your MVNO?
Yeah, that's the ultimate target.
Is that a 2020 impact we'll start to see that, or is it further beyond that?
I think it's too early to give here a clear message. The main idea is, and that's the strategy of Fastweb, to use assets which we have in the wireline market, and now some spectrum assets to get a better positioning in the mobile market.
Great. Thank you very much.
Today we are on an MVNO, and we are doing fixed-wireless access offers out of the business of Tiscali, which we acquired.
Great. Thank you.
I have next question from Guy Peddy from Macquarie Group.
Morning, team. Just a couple of quick questions, please. Could you just elaborate on what your pitch to the consumer is for your 5G services? Are you just selling speed or capacity, or what else are you doing in order to try and sell it? Secondly, with the IP migration now to the consumer SME market complete, what do you think that means for your cost stack going forward in 2019, with regard to duplication of spend? Are we going to have to wait till 2020 for when all the IP migration is done before we see the visibility of that coming through? Thank you.
I'm taking the question on 5G and more than on our whole IP migration and costs. To pitch to our customer, it's very different on B2B and B2C. On B2B, we have a strong value proposition which we can deliver through campus networks, Industry 4.0 solution optimization of the whole production. There we already made some nice showcases with B2B customers, and this is very compelling. This is a project business. This is a business which need specific projects. On the B2C market, the pitch is also a fragmented one. On the one side, you have speed. That's important for downloading, for cloud solutions, and such things. I think that's not the major value add we can bring in the beginning. The lower latency is certainly another point, and this will bring us new forms of application.
Maybe some of them will be virtual reality, augmented reality. This will take a bit time. We are in the same situation as when we launched 3G. When we launched 3G, there were a lot of ideas which application will be successful. Nobody had thought about the smartphone in the way we have it today in the market. I think we will have exactly the same effects. Mobile will becoming more important, will be more central in the digitalization, and will drive the whole multimedia world. This will lead actually at the end to more SIM cards. Maybe last point to this pitch to our customer. Another strong pitch is the service level or quality, which we can bring through 5G. Today, mobile is a shared medium. With 5G, we will be able to deliver a stronger service level agreement.
This is also important for a lot of different application and the digitalization.
Mario.
The impact of the completion of the All-IP migration, that's included in our cost saving targets, in our cost saving program 2018 to 2020, where we said that we save each year CHF 100 million. Last year, we delivered CHF 121 million. This year, as Urs mentioned, that's at least CHF 100 million, and also in 2020, it will be at least CHF 100 million. If we can deliver more, then we deliver more, but these savings are included. We benefited already last year from lower interventions on the network, lower number of calls because of the migrated customers. That's part of this program.
Brilliant. Thank you.
I have the next question from Usman Ghazi from Berenberg Bank.
Hello. Thank you for taking my questions. I've got four, please. The first question was just on 5G again. You mentioned that you'll reach a coverage rate, presumably of the population of 90% by the end of the year. I was just wondering what kind of 5G are we talking about here? Because presumably you won't be going around deploying massive MIMO or new network radio on all your sites so quickly. Just trying to get a feel for what kind of 5G are we talking about here. The second question was just on churn levels in mobile. Admittedly, the churn levels are low, but they have been trending up over the last few quarters, and that's obviously despite convergence accounting for a bigger portion of the base.
I was just wondering if you could explain why these churn levels are trending up as opposed to trending down, albeit, they are at low levels as we can see. The third question was on the TV market. I think in one of the appendices where you show the overall development of the market. The TV market as a whole seems to be shrinking. I was just wondering if you had a view on actually what is going on. Are people just not watching TV anymore? Just any thoughts on that would be interesting. Finally, I just wanted to ask a very quick one on UPC. They did indicate towards the end of last year a fairly aggressive turnaround plan. They changed their tariffs around as well.
Are you seeing them more visible in the market now than you have over the last couple of months or not? Thank you.
On 5G, our ambition is to have a coverage, as you mentioned, of above 90% at the end of 2019. We called it 5G wide. We see 5G wide solution and 5G fast solution. 5G fast solution is mainly done out of the 3.5 gigahertz, wide is done through the lower frequencies, also in a combination with our very strong 4G+ network. That's actually a combination. You will have very good speed and low latency with 5G wide.
On the churn on wireless. It went slightly up, if I look to the area, this is in the lower end of the market. These are these low-end postpaid products where you see a count of washing machine. Our ambition is certainly to increase the share of fixed mobile conversion share. We are now at 37%, this will continue to increase. This effect you feel see mainly on the value, more on the top end of the postpaid market. In the low end of the postpaid market, through all these promotions, you will have this washing machine, still on a very good churn level compared to other countries. On TV, you say that the market is shrinking. What we see in Swisscom is actually not these people who are leaving the TV market because of Netflix or other OTT solution.
We see still a momentum on TV. Important for us is to have a very attractive platform where we can have an excellent customer experience, where we aggregate all the different content and have a good usability. I am convinced that this will be working out also in the next years.
Mario.
You mentioned the appendix, I think page 30, the overall market. It's from 2014 to 2019. The overall market went down by about 3%, that's all coming from satellite. Frankly spoken, I don't know where these customers went from satellite. To the PC. For us, it's important that the market on cable and on fixed line was more or less stable. In that area, we were able to grow our market share. On UPC, turnaround on UPC, I'm the wrong man to ask this question. What I can tell you is that we don't feel UPC is stronger than in the past quarters. We don't see a change, actually.
Great. Thank you very much.
Thank you.
I have.
One last question.
Yeah, I have one last question in the queue even.
All right.
I will take it. It's from Von Lingenhorth, from the company Kepler Cheuvreux.
Yeah, my questions have been answered. Thanks.
Okay, thank you.
All right, thank you. With that, I would like to conclude today's conference call. Should you have any further questions, please do not to contact us from the IR team. Speak to you soon, and have a great day. Thank you.
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