Good afternoon, ladies and gentlemen, welcome to Swisscom's full year results presentation here in Zürich. After this short introductory movie with impressions on our activities for the technology progress in Switzerland and the inspiration of Swiss people, we now start the presentation with the program and a quick introduction of today's speakers on slide number three. Urs Schaeppi, our CEO, starts with the chapter group results, where he dives into last year highlights commercially, operationally, and financially. In chapter two, strategic update, Urs will elaborate on trends, our strategic answers and priorities. In chapter three, Swisscom Switzerland, our CEO gives you a short overview on our 2018 achievements and explains our activities and ambitions along our strategic framework, best experience, operational excellence, and new growth for B2C and B2B.
Thereafter, Alberto Calcagno, CEO of Fastweb, will discuss the industrial and financial performances of our Italian business and its plans going forward. After Alberto's presentation, we will have a 20 minutes break for coffee, we'll continue at 3:00 P.M. with the group results presented by our CFO. Mario Rossi, our CFO, will discuss in detail our financials, including the outlook for 2019. In the last chapter of the presentation, some final remarks from our CEO. Thereafter, we move into Q&A session. For this chapter, Dirk Wierzbitzki, our Chief Marketing Officer, and Urs Lehner, our Chief Business Officer, will support in case of specific Swiss questions. Therefore, may I kindly ask you to keep all your questions until the foreseen slot at the very end of the presentation. With that, I would like to open the conference and hand over to Urs for his part.
Urs, the floor is yours.
Thank you, Louis, welcome from my side. I would like to start with the group results and some highlights. If we look to the 2018 overall, we have another successful year. We were able to perform on the network side. We won all the network tests in Switzerland, we are not a marketing test company. I would say more important is the customer feedbacks on networks, also there we have superior KPIs. Overall, we are performing on mobile. We were very active on the rollout of our fiber networks in Switzerland. Just to give you an example, each day we are building out a new small city or a village with ultra broadband. We are on a very high rollout speed on our fiber networks.
On All-IP, we are in the retail market through 99% are migrated on IP and in the B2B market, large customers, we are at 75%. On the product side, we had a successful bundled product inOne. We have about 1 million additional customers on our quadruple play or triple-play offer. We also increased our experience on the TV platform, and we are gaining market share. On the customer service side, we have excellent customer service. That's extremely important because in a saturated market where we are building on your customer base an excellent customer service is extremely important, and Swisscom has a good service. On operational excellence side, we actually perform on our guidance or even we slightly over-perform on the cost-saving side. Italy is certainly also a good message. In each segment, we were able to grow. Alberto will come later to it.
In the B2B market, we are able to grow on cloud products and also security products. Our debt portfolio was rebalanced, and we have an overall interest rate of 1%, so very favorable conditions for our debt portfolio. We are now 20 years on the stock market, and if you take the total shareholder return, you see that we are in the region of 5%. These are some highlights, I think that's one of the very important chart because it shows that Swisscom is able to keep his market position in all the segment and that we are performing on the operational level. You see we have solid market shares in the B2B and also in the B2B market, also on mobile.
If I look to the market share on mobile, we are stable in B2B, but we have, and we see it later, a strong price pressure in the connectivity portfolio in the B2B market. On the residential part, maybe one message. The inOne product portfolio is performing well, and we are able to reduce our churn rate. We are on a churn rate for inOne customers in the region of 5%. I think that's an important message because the strategy, if you go for a value-based management, the churn figures are extremely important. Here, an overview on our financial results. Overall, the results are solid. If you compare it to the EBITDA on a like-for-like basis, underlying EBITDA, you see that we have a decline of CHF 34 million EBITDA with different dynamics.
In Switzerland, we have this decline of CHF 174 million. The main impacts are the ones which we already know, and they are also actually as forecasted. We have the structural decline in voice lines with CHF 64 million. On mobile, you see that on outbound roaming, it is a bit flattening out. It's CHF 21 million. Converged discount is CHF 85 million. On the B2B, where we have this price pressure in the connectivity portfolio on wireline and wireless, we have this CHF 97 million. On the other side, we are able to reduce our indirect costs by CHF 121 million, which results at the end in this CHF 137 million. Fastweb is growing and other is growing, so that at the end we have this CHF 34 million decline, what means a quite stable EBITDA. The operational free cash flow or the operational free cash flow proxy is CHF 1.8 billion.
We are in a comfortable situation to cover our dividend of CHF 22. Maybe one remark to our equity ratio. It is 36%, and we have a debt ratio of 1.75 multiple. Overall, solid figures. Solid figures with a different dynamic in Switzerland and Italy. Some remarks to our strategy. This chart summarizes actually the high-level picture of the strategy of Swisscom. You see we have three main pillars for our strategy. The first one is delivering a superior customer experience. I will come later to it, what is behind this. Second, because we are in a market which is transforming, operational excellence is extremely important. The third pillar, creating new businesses in, let's say, around our core business is also extremely important. These are our three pillars for the strategy.
In the third pillar is also Fastweb, which has the potential for further growth. On customer experience. Delivering an excellent or superior customer experience is the combination of an excellent network. We are convinced that an excellent network is the base for the success in the market. Because you are connected all the time, you want to have coverage everywhere, and therefore, the importance of excellent networks is becoming even more important. That's why we are investing, continue to invest in our network and also optimizing our networks. The second pillar are the offerings. We are in a market which is becoming more and more converged. Delivering seamless experiences through the different product areas is an important topic. Multi-brand is also important in our business because you have different segments. I will come later to it.
Certainly a potential for a company like Swisscom is to grow in the ICT space, not only in the big corporate market, but also in the SME market. As already explained, the customer service is at the end the crucial point. You know, as a company like Swisscom, everybody in Switzerland has a connection with Swisscom. If we don't perform on the customer service, we will very fast get, let's say, a reputational problem, and this has a spill-over on the customer satisfaction. That's why customer service is so important. Net Promoter Score is an extremely important KPI for Swisscom. On operational excellence. Our forecast was to deliver savings of CHF 100 million per year. You saw the savings in 2018 is CHF 121 million. We have also the ambition to deliver CHF 100 million on a solid base also in the next years.
This will be a combination of digitalization, of CapEx efficiency, but also on working on stability. I'll give you an example. We were able to reduce the calls in our call center in 2018 by 13% through a better performance on our product portfolio, through simplifying our product portfolio to have more stable service. This actually results in a lower volume in our call center, and then these are indirect cost savings. We are working on very different angles to reduce our costs without getting actually a quality impact or a negative impact on the customer service. I'm confident that we will be able to deliver these savings. On growth, I think we can actually grow very high level set in two areas. The first one is on the connectivity side, increasing our share of wallet. That's what we are doing with inOne.
Trying to upsell like we do it with our new product, inOne mobile go. I think that's one of the bigger element to create growth in a saturated market, share of wallet and upselling. Besides, we have the potential to go in adjacent business. This is simply said, it's IT. IT solution, cloud solution, security. The third pillar is 5G. When we will have 5G. On 5G, we will be able, with our capabilities, which we have in the Swiss market, also to go much more in campus solutions, Industry 4.0 as an example. I think there are a lot of opportunities for Swisscom. Certainly, last but not least, Fastweb, where we can grow. There are growth opportunities for Swisscom. If we go to our Swiss business. Our strategy in the Swiss business is value over volume because the market is saturated.
We should work on the value on our customer base. That means defend our market share and trying to keep the ARPU where it is or even to increase the ARPU. This chart shows that we are able to defend our market shares. We have a market share in broadband of 53%. If you include also the wholesale business, we are at 67%. On TV, we have an increasing market share. We are at 35%. In fixed voice, we have the structural effect as actually planned or seen. It's flattening a bit out, but we have the structural effects where we lost around 260 subscription in 2018. They not went to the competition. They are actually out of the market. Or if they went to the competition, in the calculation of the competition, normally it's a free access. They will not have an ARPU.
On postpaid, we are on a stable market share of 60%. inOne, maybe one remark to inOne. On the left side of the chart, you see what is the penetration of inOne. We are above 50% inOne penetration, and the churn is lower, as already explained. We are able to increase the customer lifetime value in the inOne portfolio by approximately five years. On this chart, some information to the financials. You see that we have a decline, a lower service revenue of CHF 240 million. The effects, I already explained it. Actually, they are all on the level where we gave the guidance, with one exception. In the B2B market, we had in the third and fourth quarter more pressure on the connectivity revenues. All the other elements are where we guided them. Mario will explain it during the guidance.
You can see that there we'll have some improvements on these different categories of the service revenue so that the hit, we assume, will be lower in 2019. Costs went down over what we guided by CHF 120 million. As already said, CHF 1.8 billion operating free cash flow proxy. More or less a stable operating free cash flow. Now, some remarks to the network, to our network strategy in the wireline area. Our ambition is 190, 80 ambition for 2021. That means all the municipalities will be modernized or roll out with fiber technologies, and we will have a coverage of 90% on average over Switzerland, which has a speed of over 80 megabits per second. We will have really a fast network, full coverage network over Switzerland.
Over 80 megabits per second means that the minimum is 80, and the majority are in a speed of 200, 300, up to one gigabit per second. In 2021, 75% of the households will have a speed over 200 megabits per second. I think we will be in a very good shape to compete also against cable operators and to win market share from cable operators. On All-IP, as I explained, All-IP migration, we are almost through in retail market, 99%. If you take the whole average of all customers, we are at 94%. 94% All-IP migration is done. This will give us the opportunity to switch off the old TDM technology in 2019 or 2020. Some information to mobile. We have an excellent 4G network.
It's nice to see that we have a coverage of more than 99% LTE coverage. LTE Advanced, which gives us speeds up to 300 megabits per second is at 95%. We have really an excellent full coverage 4G network. We won all the tests on mobile, and we will invest in 5G as soon as the spectrum auction is over. I can't say anything to the spectrum auction. It's forbidden. As soon as the spectrum auction is over, we will begin to make the rollout. Our ambition is to have a partial rollout in 60 cities or villages in Switzerland. We made in 2018 a lot of pilots in different cities to see how these new technologies working. We are confident that we will be able to have a fast rollout of 5G in Switzerland. We are prepared for it.
All our base stations are fiber connected. With our dense fiber network, we are in a good situation to have a fast rollout. In 2020, the ambition is to go broad in the whole country, also in 2020 handsets will come. The majority of handsets will come. The first one will be certainly in 2019, but in 2020 there will be a decent portfolio. 5G. Why is 5G interesting? You know it better than I. There are some new functionality in it. Speed, but also latency and the virtualization of the networks, which you can do, then you can deliver more reliable services. That means we can also go in Industry 4.0 application on campus networks. Therefore, from the volume side, I would say there are a lot of opportunities on 5G. Our industry must be now skillful in monetizing these 5G investments.
It's only the ambition of Swisscom to get something more for 5G. I hope that our competitor will behave in the same way, that we can charge better prices for 5G than for 4G. Regulatory update. We had extremely important regulatory topics in the last year in Switzerland. Actually, the outcome is a good one for Swisscom. The revision of the Telecommunications Act, if I look to the most important topic for Swisscom, it was the regulation of Fiber to the Home is actually in our favor. There is no regulation on Fiber to the Home. No extension of regulation in the Swiss market, in the wireline market. There are some regulation on roaming, but the impact for Swisscom will be negligible. You know we also introduced now our roam like at home offer in Switzerland. Actually we are through this.
I don't think that the impact on roaming will be big. All this regulation will not come before 2020. In 2019, there will no impact from this revision of the Telecommunications Act. I would say good news from the regulatory side. If I go to our customer value management, we already touched it. I think I can go very fast over it. You can read it in the airplane if you are traveling back. Some words to the advantage or to the impact of inOne. You see that we are able to decrease the churn from 7.5% to 5.4%. If you calculate this up on the whole portfolio, you see that the customer lifetime value is going up by five years. I think it pays out.
We have a small impact on ARPU if you go in a quadruple play offer. On the other side, we have an increased customer lifetime value, and at the end it pays strongly out this migration to inOne. Some words to our retail strategy. In the B2C market, we had always a strategy where we gave some hints to the market. We introduced in 2012 Infinity, the first flat rate offer for Switzerland. In 2014 and 2015, we included a part of roaming. Each time we get a positive momentum. In 2017, we introduced inOne. Now in January, we announced our new product portfolio inOne mobile go, where we have a flat rate offer for Switzerland and whole Europe. Roaming is becoming more important.
10 years ago, roaming was not so important. Today you have a smartphone, and if you go outside of your country, you want to use your smartphone as at home. Serving is extremely important. That's why we are convinced that including roaming is the right time now, where we can gain additional momentum in the market. You see here the portfolio. It's not only inOne Go. inOne mobile go is our main product. Beside, we have also another areas of the product portfolio. We have a premium, we have a basic. Then for the ones who don't want to have roaming included, we have a Swiss proposition. We are convinced that we have a good, attractive product portfolio, and we will begin to have the marketing on it to sell it at the end of February.
If I look to the reservation list, I am quite optimistic that we have a good momentum. Huh, Dirk?
I think so.
The question is now what is the impact? We will have a kind of impact on the revenue because we have a debundling. We also debundled the handsets. That's why we will have an impact on top line, but not on EBITDA. EBITDA will be neutral because we are able to save some subscriber acquisition, some subscriber retention costs. This is an outline of our multi-brand portfolio, you see also the positioning of the different brands, value on the Swisscom brands and the more price competitive positioning on our second and third brands. This product portfolio works. We have a good momentum on the second and third brand product portfolios and a stable situation on our Swisscom portfolio. Swisscom TV is our hero product in the wireline market. That's why we developed this product in, let's say, quite in a monthly way.
We improve the customer interface, the usability. We improve our content portfolio. This at the end pays out to a higher market share and also increasing customer base. I'm optimistic that we are able to get a strong position in the TV market, even if the TV market is turning more in an OTT market as we see it with Netflix and so on. Netflix is kindly integrated in our product portfolio, you will have a coexistence of a TV platform, linear TV with a lot of nice functionality and OTT applications. We also entered the esport market, so we will build up a Swisscom Hero League in Switzerland. Esport is a very popular topic today, not only for the young people, that's interesting to see. Also for Mario.
He's also a gamer, normally with the figures and not with esports, it's really a broad topic, esport. That's why we introduced the Swisscom Hero League. SME market is an important market for Swisscom. We have strong market shares in the SME market. We have a very strong distribution network. We have a broad, extensive partner network, that's extremely important for the go-to-market in the SME market. We are strong in connectivity, we have still a quite untouched space in the ICT business. That's why we begin to enter last year in this market, we have now a very good momentum also in the ICT business in the SME market. There is potential to grow. On the big corporates, on this slide, you can see what is our product portfolio. You see it's much broader than connectivity.
We are a full service provider in the B2B market. You know it, we are doing approximately 50% with connectivity and the rest we are doing with IT solutions. It shows that we have a fragmented business in this B2B market, and the ICT business is actually, and solution business, is the growing part in this area. Cloud, security are growth dimensions. The connectivity business is under pressure as you have saw it during the financial figures, when I showed the financial figures. You see that we lost in the wireline and wireless market through price reduction. It's purely price-driven. We don't lose market share, but we have quite an aggressive competition on pricing. On mobile, it's Sunrise who tries to attack the market. They don't gain market share. Sometimes they take customers from us, sometimes we get customers from them, but price level is coming down.
On wireline, we are facing more with price competition from UPC. We're on the MPLS networks, this actually leads to this price pressure in the service business. This price pressure will continue also in 2019. I don't think that it will accelerate, but it will continue. On B2B, wireless, I already explained, can go through. Maybe on the solution portfolio, that's the ICT business in the B2B market. You see in what areas we are in. We are not only connectivity. We have cloud solutions. We are also awarded of this. We have the broadest cloud portfolio for corporates in Switzerland. It's a hybrid product portfolio. We have our own enterprise cloud, which is operated out of the data centers of Swisscom. Then we have also solutions from Amazon or Microsoft, where we are in a reselling and system integration role.
We have a broad product portfolio on cloud to deliver all the demand in this B2B market. Security is growing. That's clear. The complexity of security is increasing. There is a trend to outsource security to companies like Swisscom. On banking, we are a strong supplier for ICT solution in the banking market. We had some price pressure also in the banking, but long-term banking is an interesting segment for Swisscom because the financial industry, you know it better than I, is under strong financial pressure. That is actually a big opportunity for a company like Swisscom to get additional outsourcing or IT business. Healthcare market, this is an interesting market. The digitalization of the healthcare market is still underdeveloped, and this is an opportunity for a company like Swisscom to digitalize the hospitals or the whole ecosystem in the healthcare market.
You see we have a broad product portfolio on the solution side. I skip this. Service is also very important in the B2B market. It's not so easy to build up a decent, very good customer service in the B2B market because you need incident management. You need a lot of technical skills. Swisscom has certainly a USP on the customer service side in the B2B market. On this slide, some remarks to our operational excellence. You see on which pillar we are working to get this CHF 100 million+ cost savings per year. I don't want to go through. It's not only a workforce. There is a lot of automation, digitalization, which bring us lower costs. Now on CapEx, it's the same. I would say 5% inspiration, 95% transpiration to increase the efficiency, but that's important to do. And some words to our growth opportunities.
These are the growth opportunities in our core business. Very simply said, it's about share of wallet and upselling through a lot of different initiatives. Multi-device is one entertainment proposition, another topic. Cloud solutions, we have application myCloud where you can store all your different content. A lot of different actions to work on this revenue or ARPU. Actually, in the next years, that's the biggest growth potential which we have. In B2B, I already explained it. It's more about IT, it's about cloud, it's about security, and then with 5G on campus networks. We are here in a very good position with all our IT capabilities which we have. On wholesale, that's also certainly a market where we can gain some momentum. You see some of our customers in the wholesale area.
It's not only on MVNO, it's not only on fixed access, it's also for OTT players. Now I would like to hand over to Alberto for the Fastweb part.
Thank you, Urs. Welcome, everybody. Good afternoon. I guess I have also a little bit more minutes, maybe. As an Italian, I will take it. Okay. I think that 2018 has been a tremendous year for Fastweb. The good thing is that we were able to achieve growth in every segment we are in. Specifically, if you look at the B2C, we hit almost 4 million subscribers. We now, also in the future, as convergence will become more and more important, with some fixed and mobile customer. If you go in details and look at fixed, we now reach almost 2.6 million broadband customers. What we like to see actually is the growth of the ultra-broadband customer. Normally, as Fastweb, quarter after quarter, we try to push just ultra-broadband customer.
Those are the customers that we think are the best customers, clearly, if there is someone inbound that comes and wants a broadband connection, we connect him. Our focus is on ultra-broadband. The good thing also that we are reaching almost 60% of ultra-broadband penetration. I think that our strategy to push on quality to satisfy customer needs as best is perfectly in line with our expectation. On mobile, very good year. We will talk in a second, but in the annus horribilis of mobile in Italy, or at least that's what experienced our competitor due to the Iliad entry, we recorded the best year ever for our mobile revenues. We reach almost 1.5 million customers with a 30% penetration in convergence. Another important pillar which also Urs mentioned, which is very important for Swisscom, but is also important for Fastweb is the customer satisfaction.
We are definitely leader for so many years in the Net Promoter Score in the fixed line, and we have a huge gap versus the second operator. The good thing also that the perception of our customers vis-à-vis also our mobile services is very high, and we were able to now have a similar NPS score, Net Promoter Score on mobile. As I said, similar to the top performer in the mobile space. Very good the B2C. For B2B, I would say also another year of solid growth. The revenue were up 10%, and I think that also here, we grew nicely on the public administration, on the private. Also, if I look at the services, not just at the segment, I think that also we are very good to exploit growth on the value-added services, namely data center.
We acquired new top customers, this is something that we are used to. Banco BPM is within the top five banks in Italy. A2A is also top five in the energy. Here we are now, we overcame 30% market share, and this is something unique. You will not find any attacker anywhere that has reached such market share in the enterprise. Also the reason that we have reached such market share probably relies on the quality of our services, because here the Net Promoter Score is 60%. There are, I would say, probably 10 companies in the world that can exploit 60% Net Promoter Score in a specific segment. Also, wholesale has been very good, especially as expected in the second part of the year. The revenues were up 11%.
Definitely, we will see in a second, but this is the time to connect with dark fiber, the BTS, because otherwise 5G will not be possible. We have a very good fiber extended network to serve our customers. In the future, we do see a lot of opportunity also in wholesale access services. If it comes to the network, here other good news, because we were able now to secure also a very good fixed wireless access footprint, because now we have 6 million home that we can cover with fixed wireless access. Over 800 BTS already available. This is a very good step forward for us because we will be able to deliver giga performances in area that today were called white areas. That's an important, I think, competitive advantage that we will exploit in the future.
Overall, we are hitting almost 50% coverage with our own ultra broadband, this is something that is in line with our fiber strategy since many years. Good news also comes from 5G. Also there, we will see in a second, but we were able to position now Fastweb also in the 5G space with a solid position because we have now very good package of 3.5 giga frequencies and 26 giga frequencies from the auction. We are definitely ready to start the rollout. Actually, we already started to do the rollout. It was in a nutshell the 2018, very strong year, one of the best in our history. If we go in details in the financial, as I said, if I look at the revenues grew 8%.
The good thing that the growth, as I said, was basically coming from each market because consumer went up 7%, enterprise 10%, and wholesale 11%. EBITDA grew 6% organically, and also this is a very good result. The difference in growth, 8% revenues and 6% EBITDA, relies on the fact that especially on the enterprise, we are broadening our offer to ICT solution, to security solution that clearly have lower marginality if compared with the pure connectivity type of services. In terms of CapEx, if we don't consider the money that we spent for the frequencies, I would say that we are more or less in line on what we spent with last year. Actually, sorry, 2017.
What you will see in the future, I think that Fastweb will continue to invest similar amount of money, and what will change is that fiber will be decreasing in favor of 5G investment. As a consequence with the margins that are growing and CapEx that are stable, our organic operating free cash flow basically double year after year, and we hit more than CHF 80 million, and it compared with the CHF 40 million of 2017. If I look, as I said, operational was very strong, but also if I look from a financial point of view, I think that we did achieve a very good year. It's also good sometimes not always to talk in first person, but also to refer to third parties.
That was a report from Mediobanca that certifies that in basically in the four years from 2013 and 2017, definitely Fastweb was the one that was growing the most in terms of revenues, that was investing clearly as a percentage of its revenues the most, and also that was expanding the most the network. That was referred to Italy, but also, if we look bigger, broader to the big five market in Europe, so Germany, U.K., France, Spain, clearly also Italy, we are the company that if you look at just telecom and organic growth, we are the company that grew the most in all Europe in the same period. Again, I think that's something that we are proud of. If I look at our network, as I said, we do confirm all our fiber footprint and strategy.
We definitely, we are covering eight million households with our fiber, let's say network. What will change our future landscape is the fixed wireless access because through the acquisition that we made of Tiscali frequencies, we also acquired their fixed wireless access network, and we will be able to exploit such network. We will upgrade this network rapidly to 5G, and this will be a fundamental pillar for our strategy, as I said, also in covering areas like white areas that will contribute to us significantly and where we will build a very strong competitive advantage. If we think to the 5G for Fastweb, this is a tremendous opportunity because 5G is not the evolution of 4G. 5G is a technology that stays between, let's say, fixed and mobile. Specifically in 5G, you can do point-to-point fixed wireless access type of connection that will be extremely powerful.
With 26 gigahertz type of frequencies that we have, we will be able, in the future, to exploit giga connection. That's an important, let's say, step forward, especially for Fastweb in areas where we don't have directly the fiber network. As I said, a company like Verizon, for instance, in the U.S., launched exactly these type of services. They launched in cities like Los Angeles, Sacramento, Indianapolis. After five months of operations, basically the average connections ranges around 800 megabit, sorry. It means that in the future, 5G and this type of use of 5G will change significantly the customer experience and also the future operations of our company.
Coming back for a second now to the B2C, I think that what is paying off, especially in this segment, is not only the superior quality of our network, but also the positioning that we are consistently making of ourself in the last three years as customer champion. We basically, two years ago, started to follow a super transparent strategy versus the consumer customers, which means, for instance, that they don't have any time obligation for the contract. They can quit whenever they want if they are not satisfied without paying anything. If we publish or if we release new offer more convenient, if compared with the past, they can switch immediately when they want to the new offer without paying anything.
We are basically working a lot in making, as I said, super transparent our relationship, because we do think that this is the correct recipe for the future evolution of the market. On top of that, we are really working on the product because we don't believe that just having giga connection will be enough. Operator should focus also on product, we are launching basically one every year, a WOW type of product. In the past was WOW FI, our community of Wi-Fi. Now, this year, actually, sorry, 2018, we launched the WOW Space, which is an unlimited cloud for pictures, video that is, as I said, unlimited for all the customers that are choosing a mobile connection of Fastweb. This is something that has been particularly, let's say, it was very much liked by the customers. We did 50,000 new customer in two, three weeks.
As usual, we work also with our partners, Eni, which is the national gasoline company in Italy. The partnership that we have with them, we are bundling together electricity and gas with our broadband, ultra-broadband, is doing very well. Basically in a year, we double the contribution to our overall quarterly customer. I think it's a very good also growth engine for the future. If we look at the, I would say, commercial performances also here, I think that for us is extremely important to continue to focus on ultra-broadband, where we had a terrific year, plus almost 40%. It shows that Italy is super ready to go for ultra-broadband.
It's not true that we are always late, we are always the last country in Europe. I could rate this fake news. I think also in the future, we will see such explosive growth in Fastweb, but also in the market. If I look at mobile, as I said, we were very proud in a year that has been a disaster for all our competitor. Because of Iliad entry, we recorded the best year in terms of revenues growth. If you look at the customer performance, we were able to grow basically almost 400,000 new customer. The other important thing is that clearly all the customers that buy both fixed and mobile as a much lower churn, and specifically for almost 40% lower churn. Since this number, the penetration, the fixed to mobile convergence penetration is increasing, clearly the overall churn will benefit.
This trend will be the trend also in 2019 and the year after 2019. If I look to corporate, here, as I said, very strong, let's say, here, but I think also you get used to such performances. Specifically, a lot of growth was coming from public administration and also from value-added services. Value-added services means cloud, data center, managed services, security services, which clearly have different marginality if compared with pure connectivity. Especially in enterprise, we are extremely proud to be really always at the edge of innovation. This is something that is pretty much clear now in the market. Now we reach 31% market share in the enterprise market. We are actually accelerating the way we gain market share because it's a combination of two factors. One, that we are very strong, and also because competition, I think is lagging behind.
This is true for enterprise, but I think it's also true for consumer. Wholesale, which was one of the best contributor in the second half of 2018, as expected. I think there, it's pretty much clear that there is huge opportunities, as I mentioned, as anticipated. 5G is now coming, and 5G requires dark fiber backhauling. We, in the past, with dark fiber, backhauled basically all the BTS of Vodafone. Now we started with Wind Tre ones, with Iliad ones, and we are just at the beginning. They have plenty, they have 1,000 of BTS that needs to be linked through fiber. We do expect also in the future, a huge activities versus these type of services. It's not only that, because also in the future, there will be new players coming in the wireline market. Some of them have already announced, like Sky.
Iliad is thinking about that. We do think that for us it's a very good opportunity also to start wholesale the access. We are already doing it with Tiscali. In the future, definitely we will do for also other clients. We think that for us, at the end of the day, it's anyhow a value creation. Even if we are theoretically making some advantages versus our competitor, the Fastweb brand in the retail market is very strong. On the contrary, actually, we can exploit some wholesale business that anyhow some other competitor would have done. I think it's a very good business opportunity for us. This is, for me, one of the most important slide of the presentation. One that I'm proud of because here we are talking about Net Promoter Score. Customer satisfaction, so a way to measure the quality of our services.
As you can see, I think that if I look at the wireline, the fixed in the consumer space, there is a huge difference between us and the rest of the market. Actually, this difference is increasing. I think that in the future, we will be able to reach a much higher Net Promoter Score, and continue this growth. In the mobile, that's another important topic. In the mobile, we are able now to be the top performer, even if we are still now an MVNO, because we will be MNO in the future. This is because it's a combination. Clearly, the possibility to rely on the TIM network, which is a very good network, helps with the Net Promoter Score. Also, in the Net Promoter Score, it's very important, the niente come prima, the transparency approach that I described you before.
Customers are not looking just the performance, are also looking in the way the supplier, the provider of telecommunication interacts with them. Finally, on medium and enterprise, as I said, here we have a market where we are growing and where we have a huge customer satisfaction with no, I would say, rival, no competitor that can be even close to us. In the medium customer, we are at 40%. In the corporate customer, as I said, we are continuously, surprisingly also for ourself, growing, even if we work hard every day and hitting 60%. All these numbers are telling you that the possibility in the future of having churn, especially in the enterprise space, is very limited because with such Net Promoter Score, no customers will abandon us. Finally, say if I look 2018, as I said, it was a very good year.
Solid, strong-From whatever angle we see it, so from operational, from commercial, and from financial. If I look at the future, 5G will be definitely for us an important pillar of our strategy. We do think that we have unparalleled assets because we have a huge fiber network that can support the 5G. In terms of frequencies, we are basically very close to the one, in terms of 5G, that TIM and Vodafone acquired, and we have double the frequencies that Wind Tre and Iliad got. For a company that launched the 5G strategy two years ago, it's a very strong asset to leverage. In fact, our ambitions are there because in the mobile space, we want to try for basically our market share, hitting by 2022, 5%.
Wholesale, as I said, will be very important also in the future for us, because we do see that there will be an acceleration in the dark fiber backhauling and also in the wholesale of asset needs. There, also, the ambition is to basically more than double our current market share, which is already very good. You don't find anybody in any other country to have such market share in the wholesale market, which is typically an incumbent market. Our strategy is to go there and to double and to find our space. Finally, if I look at corporate, definitely there is a huge possibility to continue to grow our market share and then the share of wallet.
Because market share, because we are able to get new customer, and the share of wallet because we are broaden our offer with security, with data services, much far beyond the pure connectivity. Also there, we think that in four years, we will be able to hit 40% market share and overcoming TIM and the incumbent. To do all this, clearly, it will be for us always key to deliver a significant free cash flow growth, because as I said, we do see also in the future a cost and growth coming from revenues and margins with CapEx that will be always in the regions that we experienced in the past. As a consequence, the end goal will be a further cash generation. Thank you, everybody, and I leave the floor to Louis.
Thank you, Alberto and Urs, for your presentation. Let us stop, as indicated, the first part of the presentation here and have a 20 minutes break. Around 20 minutes. Outside this room, there is coffee and some cakes available, the presentation restarts at 3:00 P.M. sharp. Thank you.
[Break]
I just want to do one more close-up. Not too classy. No, not too down and out, just right.
Italian one, huh? In time. Okay. Welcome back, everybody. First of all, I know it's not wise to object to CEO, but I have to make one point very clear. I am not an esports gamer. My favorite sport is here in road cycling. That has to be said, huh, Wolf? Let's come to the financials. Overall, the financial performance is in line with the guidance, and we are overall satisfied with 2018. The revenue like-for-like is stable at CHF 11.6 billion. On EBITDA, we have to make some adjustments on the 2017. You're aware of the litigation we had last year. We have to correct the EBITDA by CHF -102 million, and then we booked in 2017 the provision for restructuring. There we have to add CHF 61 million. The same exercise on the 2018 numbers, we have to adjust for IFRS 15 impact.
It's CHF -43 million, and we have Forex impact and revenues or gain from sale of real estate of CHF 40 million. The underlying performance on EBITDA is for the group -0.8%, and all the following explanations and comparisons are based on a like-for-like basis. On revenue. The Swiss revenue went down by CHF 250 million, and I think the bad thing on it is these CHF 243 million are coming from the high-margin service revenue. I will come later to all the drivers of that. The retail segment lost 3.2% or CHF 173 million comes from service revenue. I will come later, as I said to you, to the main drivers of this decline. In the enterprise segment, we lost 6.4% service revenue at CHF 70 million and another CHF 24 million in the solution business.
I think the negative surprise in the enterprise segment was the performance in Q4 in service revenue. We lost there overall CHF 24 million, CHF 14 million from mobile. We had there quite heavy price pressure and CHF 10 million in the fixed line business, mainly coming from All-IP migration. As you all know, in the residential business, we are through with the All-IP migration. 99% of all clients have been migrated to the All-IP network. In the B2B segment, the migration is still going on. We stand there at about 75%. In the solution business, since Q3, we are losing revenues compared to prior year. We explained that at the Q2 conference call. We lost one banking client, and we had one big contract being renegotiated. Overall, we lost in the banking CHF 42 million in revenues.
On the other side, we were able to increase revenues from cloud, security, and hardware business. On wholesale, we have loss on inbound roaming of CHF 20 million. That's not a bad thing, because that's compensating on the costs on the inbound roaming, and we had higher wholesale revenues, high-margin wholesale revenues of CHF 15 million. As Alberto explained, we have a strong growth in our Italian business, an 8% increase in revenues reaching CHF 2.1 billion, and I think the important thing is that we were able to increase revenues in all three segments. A few words on the OpEx of Swisscom Switzerland. In the direct costs, we have a better performance on subscriber acquisition and retention costs. We have about CHF 40 million less subsidies for routers and TV boxes because we have had a big impact in 2017 coming from the All-IP migration.
We have about CHF 23 million less cost for acquisition and retention costs in the residential business. The out-payments went down by CHF 44 million, I mentioned before, because of less inbound roaming. We have a compensating effect here on the out-payments. We have higher costs for goods and services. There are three main elements. CHF 60 million is directly connected to higher hardware revenues with no margin impact. We have CHF 50 million additional costs for assurance material, and in 2018, the costs for the sport content was around CHF 10 million higher compared to prior year. I think the important thing is the indirect costs. We guided for CHF 100 million saving. We reached CHF 121 million. On workforce, we were able to reduce personal costs by CHF 77 million and external work costs by CHF 10 million.
I think the main driver for the workforce reduction, beside reductions in the overhead, is coming from the call centers. We have 13% less calls in our call centers. That's because of stable products, stable networks, and stable platforms. Also in the field force, we had 7% less intervention. Main reason is because the All-IP migration is more or less through. On other costs, we reduced those by CHF 34 million. 50% is coming from IT costs. On EBITDA in the Swiss business, we lost CHF 137 million, and in retail business, the reduction is 3.1% or close to CHF 100 million. So we saw before that service revenue declined by over CHF 170 million, EBITDA by only CHF 100 million. That means the difference is cost management. It's the same situation in enterprise customers. There we lose 8.2% on EBITDA level, reaching CHF 755 million. There we have the same.
We can part of the reduced service revenue compensate on EBITDA level. But again, we have the highest negative impact on enterprise customers in Q4 with CHF 25 million coming from before explained performance in the service revenue. On Fastweb, 6% growth. As expected, we had a very strong Q4 in wholesale, in high margin wholesale business. In the segment Others, the CHF +62 million. There we have the following composition, CHF 32 million come from reconciliation from pension costs, IAS 19. Then we have reductions on the headquarter of CHF 10 million and another CHF 10 million are coming from a sold company, from the PubliGroupe takeover. We sold this company at the end of 2017, and this improved digital company produced losses of CHF 10 million in 2017. Therefore, we have the positive impact. A few words on the underlying changes of Swisscom, of the Swiss business.
You know this slide from the earnings calls, and I think all drivers developed as expected except the B2B business. Fixed line loss, that's structural driven. I think we had there the peak in 2017. This year, the negative impact is CHF 64 million. We expect a lower negative impact in 2019. The same for roaming, CHF 20 million negative in 2018. I would say in 2019, the impact is close to zero. Even with the new portfolio, where roaming is included. On convergence, we saw the peak also this year. Where we saw the peak this year with a negative impact of CHF 85 million. There, we expect this impact to slightly soften in 2019. In B2B, we expected CHF 50 million to CHF 60 million, and for the reasons we explained before, we stand here at CHF 97 million before the cost reductions.
I would say this impact in 2019 will be slightly lower than CHF 97 million. The cost savings, we discussed CHF 120 million, and for 2019 we expect CHF 100 million, which is part of our three-year cost-saving program. Below EBITDA, there is nothing special to report. We have more or less stable depreciation with a CHF 20 million currency effect from Italy. Net interest is CHF 21 million lower compared to prior year because of the low interest area, and we did quite a success refinancing and the tax rate is at expected 20.6%. Net income lands at around CHF 1.5 billion or 4% below prior year. A few words on CapEx. In Switzerland, CapEx were slightly below 2017. If you look at the composition, wireless network, around CHF 310 million. There we invested CHF 36 million more than prior year. That is the preparation for the 5G rollout included. The first preparations.
In FTTx, we invested close to CHF 500 million, in line with expectation, CHF 21 million more than 2017. We had some savings on IT systems, All-IP, et cetera. There we invested CHF 324 million, around CHF 100 million less than the prior year. In Italy, net of the spectrum we acquired, the CapEx are more or less stable, and the amount for the spectrum in Italy is €64 million. An operating free cash flow. We have quite an odd picture on net working capital. Maybe a few words on that, on the change on net working capital. In 2017, we had an increase in trade payables of CHF 120 million, and the booking of the provision for restructuring of CHF 50 million. That gave a positive impact in net working capital of CHF 184 million. In 2018, we had it exactly the other way around.
We had to pay these provisions, we have a decrease of provisions of CHF 57 million, and we had a decrease of the trade payables of CHF 95 million. There is no structural effect on the free cash flow generation. If we balance out this swing in net working capital, we could say operating free cash flow in 2017 would have been CHF 100 million lower, and in 2018 would have been CHF 100 million higher. No structural effect, just this change in net working capital. I think we can skip this slide and go directly to the shareholder return. Urs mentioned it already. If somebody invested 20 years ago in Swisscom share, he received a total shareholder return of 5%. Overall, these 20 years at the stock market, we distributed CHF 32 billion to our shareholders, under different titles: ordinary dividend, power reduction, and also share buybacks.
Our financial policy is unchanged. We aim for a predictable and stable dividend. We want to maintain a single A-rating. The unadjusted leverage at the year-end stands at 1.9, also before IFRS 16, you are aware that the maximum level given in the strategic objectives from the government stands at 2.1, we have enough room. Our debt portfolio, I think we have a well-diversified debt portfolio of the CHF 6.5 billion you see on this slide. The average interest rate is at 1%, and 74% of the portfolio is fixed, we are well protected against any potential interest hike. A few words on IFRS 16. This new standard for leasing is effective from January 1st, 2019. The lessee has to recognize a right of use asset on one side and a lease liability on the other side.
The reported EBITDA goes up because the distinction between operating lease, where you book everything in OpEx, and finance lease, where you book in depreciation and interest expense, is disappearing. Everything is treated like a finance lease. The impact of this new accounting treatment is more or less neutral on net income and 100% neutral on free cash flow. The future higher lease liabilities are leading to higher net debt, of course, and higher interest. Our reporting approach will be the following, no restatement of 2018 figures, in 2019 we report the EBITDA without lease expenses, and we give you all the details on the lease expenses below EBITDA. We fully disclose that you have the full comparison. The outlook, to which I will come later, includes the new IFRS 16 requirements. What are the financial implications of this new standard?
The reported EBITDA goes up by around CHF 200 million. Net debt will go up by around CHF 1.3 billion. The leverage, the adjusted leverage, stands at 2.0. We do not expect an impact on credit ratings because these operating lease contracts were fully transparent to the rating agencies, and they adjusted already for these contracts. Some words and explanations on the guidance 2019. You see that the revenue, we expect it at around CHF 11.4 billion. The EBITDA more than CHF 4.3 billion. CapEx for the group of around CHF 2.3 billion. The EBITDA number includes a positive impact of IFRS 16, as mentioned before, of CHF 200 million. Free cash flow proxy of around CHF 2 billion is as reported. If you take out the CHF 200 million IFRS 16 impact, we land at CHF 1.8 billion, which is more or less the same free cash flow generation as in 2017.
Some flavor on the different components on this guidance. The revenue Swisscom without Fastweb will be at around CHF 9 billion. That means a revenue decline of CHF 300 million, which might look a little bit high for you. We have the following main components, just the main components. Fixed line loss, I gave you the details before. Less negative impact than in 2017. Conversions lower than 2018. We saw the impact at the peak already. Roaming impact practically zero. The B2B impact, the negative impact slightly better than 2017 despite stable market shares in the B2B business. We don't lose SIM cards. If I look at the in and outportings, we don't lose SIM card. It's just the price pressure within that market. On the other side, we have a positive contribution from the wholesale business.
You are aware that the UPC mobile business is coming to our network. These side effects have a direct impact on EBITDA because that's high-margin business. We have an impact from the new mobile offering. This debundling effect from the new mobile offering will be in the area of negative CHF 60 million to CHF 80 million on revenue. That will be EBITDA neutral thanks to compensating lower subscriber acquisition costs and some IFRS 15 impacts. Of course, in this new portfolio, you always have the risk that at the beginning you have some customers who can optimize their actual subscription. That's the risk of every new portfolio. EBITDA Swisscom without Fastweb, we expect less than CHF 3.6 billion. The negative effect from the top line, which we just discussed, will be partly compensated with cost savings of around CHF 100 million.
CapEx Swisscom without Fastweb at around CHF 1.6 billion, including 5G rollout. Of course, without any spectrum costs. Few words on Fastweb. Fastweb will be able to slightly increase revenue in a market where we see, and Alberto explained it, where we see overall declining revenues. The growth rate will be lower than in 2018 because we saw some non-recurring low margin business in 2018, hardware and Flash Fiber revenues of around CHF 100 million. At EBITDA, we expect an organic growth of around 5% thanks to a better revenue mix and also thanks to efficiency gains. CapEx volume will remain stable at around CHF 0.6 billion, and that means Fastweb will also have a growth on free cash flow proxy. If we meet all these targets, we will again propose a dividend of CHF 22 per share to the AGM.
With that, I hand over to Urs for some final remarks.
Good. Thank you, Mario. Some short final remarks. What are the business tendencies and what is our focus in 2019? The first point is certainly to have a good value management on our B2C customer base. That means, on the product side, inOne, making a good fixed mobile penetration, increasing the share of wallet, and also get a good momentum with our new product inOne mobile go. That's certainly the important topic on the retail market. The Swiss fixed trends will slightly improve, as already Mario mentioned. We have certainly also some potential to gain market share in the broadband market. With the increased footprint of ultra broadband, we can gain market share from cable operators. Operational excellence will be crucial. We have all the actions in place, and we are working on it. We are confident to deliver this cost savings of CHF 100 million.
We will work on new revenue streams in the IT space, wholesale space, but also on the value-added area in the retail market. More for more is the approach where we have here. That means leveraging our customer base, which is a loyal customer base, leveraging on this with value-added services. Fastweb, Alberto already explained it. We are confident to further increase the penetration or to have a growth on broadband. There are business opportunities in the B2B market and the wholesale market so that we will have a growth, as Mario already mentioned it, on EBITDA level in Italy. What is our credo? I think that's important to know what we are working on to deliver a reliable cash flow, to have a solid shareholder return. For this, it's important to stabilize our top line.
The measurements or the actions are actually on the way or in place. This service revenue decline which we had in 2018, we have to flattening it down, working on the cost level. That's the second very important topic. Through a technology mix to improve our CapEx efficiency, that we can do the same with less CapEx. You see that the guidance for this year is CHF 2.3 billion, and last year we had CHF 2.4 billion. We do not actually reduce our ambition on the investment side, but we do it in a smart way. That's a bit our credo for 2019. I would like to hand over to Louis.
Thank you, Urs and Mario. Now it's time for the Q&A session. As previously indicated, our two other guys from the management, Dirk and Urs Lehner, if there are specific questions, may support. Two points. May I kindly ask you to use the microphones because there are also people being on the webcast so they can follow our discussion. Second point, if you have a question, please let us know the name and bank you're representing. Who can I give the first question? Georgios?
It's Georgios from Citi. Maybe a couple of questions. The first one on slide 57, where you show us the different moving parts for the guidance for 2019. One of the things I was wondering is the MVNO agreement with UPC, whether that will have a meaningful delta and maybe offset by something else, because I did not see it in the main drivers that you showed there. Maybe a question. I remember last year, there was not a single question on Enterprise. I think today there will be more. There are some rumors that two of your competitors may get together and form a more integrated player. In the B2B side, can you give us an idea of whether that really changes the dynamics around how the bidding works between the different contracts? Maybe a very quick question on Fastweb and around the BT Italia situation.
If someone were to buy BT Italia, I understand they get the chance to bid for some of the public administration contracts that come available. Would that potentially change some of the dynamics in the market? Thanks.
Okay. Mario?
I'd like to give you the answer on the MVNO contract and the impact on the guidance. First of all, we don't disclose the numbers on the UPC contract. That we cannot do. The impact on the guidance. We gave you the main drivers. Also in 2018, we had one line, all other. We cannot guide each and every element. Therefore, you can assume it's limited, the positive impact. It's material, high margin, but limited.
Thank you, Mario. Urs?
The first part of this B2B question, Urs can then give some more flavor on it. If Sunrise and UPC would merge, they could do some connectivity bundled offers, but they still don't have the ability to do IT business. We are much broader in our footprint. I think we can handle such a merge in the B2B market. That wouldn't actually increase the pressure for us, because already today, in the connectivity side, normally you have an RFP on mobile. You have an RFP on MPLS. This will not change the dynamic. For the big IT business, actually today, they don't have the ability to compete with us. There would not be big changes there. Urs, what's your view on it?
I fully see it the same way. On the mobile side, I don't see additional competition due to such a potential move. On the wireline side, we anyhow would have a strategic transformation towards SDN, which is ongoing over the next years. Also there, such a move wouldn't change the landscape for us from a competition perspective point of view in a fundamental way. As mentioned, we are more than sure that we are strong in our overall offering towards ICT. These are not our main competitors in this field at all. They are not visible in the enterprise market for larger ICT services business. Therefore, as mentioned, I don't believe either that it wouldn't change the dynamics a lot on the B2B space.
Thank you, Urs. Then the last part, Alberto.
Yes, if I understood correctly, the question was related to the possible sale of BT Italia and on the fact that BT Italia won a piece of the contract with the public administration. I would say that from what is concern us, honestly, we are just focusing on our organic operations. Remember that Fastweb, along the years, have been able to won a lot of, let's say, bid related to the public administration. Connectivity, the one that BT won, is just a little piece because then in the years we had voices, we had IP telephony, we had security, we had workforce management. I would say that the position that we build with the public administration is very strong and most importantly, is supported by multi-year contract. We are not really worried at all on the result of this process.
At the end of the day, I think that the competition will not change in our position and most importantly, in the corporate space will not be weakened.
Okay. Thank you. Jakob, second one.
Hi. Jakob Bluestone from Credit Suisse. I've got two questions, please. Firstly, to prove Georgios' right, a question on enterprise, secondly, a question on the balance sheet. On enterprise, I was just hoping you could maybe give a little bit more sort of clarification of why you don't expect a further deterioration over the course of 2019. If I look in your annual report, it says that incoming orders in the enterprise business fell from CHF 2.7 billion to CHF 2.5 billion over the course of 2018. I guess, that's an 8% drop. Your revenues fell 4% in enterprise this year. Just sort of treating the orders as a leading indicator, wouldn't that suggest that things actually would get worse? I guess also just the fact that you exited with Q4 being under pretty heavy pressure.
Just if you can maybe explain a little bit more why you don't think the enterprise business will deteriorate, if anything, will actually improve from the Q4 run rate. Secondly, on the balance sheet, I think you've got about 1.8x net debt to EBITDA. I think you have a target of 1.9x. You've got the spectrum auction coming up where you'll presumably pay something. You've got IFRS 16. You've got EBITDA, which is declining on an underlying basis. I was just wondering, can you maybe give us a little bit more sort of comfort on why you're comfortable with leverage and you see the dividend being sustainable given that it sort of feels like you're sliding slowly towards the upper end and maybe even beyond your sort of 1.9x leverage target. Just any clarification there would be useful as well. Thanks.
Thank you, Jakob. I think the first part, the B2B, is a question for Urs.
Sure. The link from order entry to turnover, there I have to, let's say, lay out a little bit the structure of our order entry. Usually we count order entries, which are relevant on a TCV basis up to five years. There is no short-term link by definition from an order entry perspective towards just a one annual revenue piece. That's one element. The second one, we had in 2017 a very large contract which was resigned in December. We had a very large contract which was resigned 3rd of January 2019 as being a game of 2018. Having said that, I'm pretty convinced that, let's say, we have a very stable order entry outlook, which is also looking very good from a site sales pipeline perspective point of view for 2019. I don't have any intention, that's one, that we should be worried.
On the second one, we are learning also that order entry in a consumption-based model in cloud business is not always directly related to revenue due to the fact that we have to migrate workloads until they provide revenue. There, we are working very hard at, let's say, we get better in the allocation of revenue out of order entry in the cloud transformation. That there, I'm pretty convinced that I don't see an additional drop, as Mario explained already, in 2019.
Maybe two remarks from my side, just to underline what Urs said. The order entry, you can't correlate it directly with the revenue development. Because if you make a contract extension or renewal, it's also order entry. A lot of contract renewal, again, is not good for the turnover because normally you have lower prices. You can't just correlate order entry with revenue development. We had a good order entry also in January, as you told it. We have a very good win ratio. What's the win ratio?
On volume base, it's in the high 70%. Almost CHF 4 or CHF 5 that we are offering, we are winning.
On the connectivity side, we have now All-IP migration is at the level of 75%. That means also the hit on fixed voice should be lower.
Thank you. The balance sheet?
Balance sheet. In 2018, we slightly reduced net debt by CHF 50 million, and the ratio was 1.75 compared to 1.73 in 2017. Only a slight increase. We really don't care about the IFRS 16 impact because that's included in the ratings. If you look on the spectrum auction, this impact, we cannot give you any details, but I always explain it the same way. One indication is 2012. There was a lot of spectrum on the market, and we paid CHF 360 million. That's less than 0.1 leverage. I think the more important thing about how we feel comfortable around dividend is the free cash flow production. There we have the same free cash flow proxy of CHF 1.8 billion. I see a maximum amount for payment for interest and taxes of around CHF 0.4 billion.
We have CHF 1.4 billion free cash flow, and the dividend sum is CHF 1.14 billion. There is enough room for some deleveraging or for some small M&A activities. We, as management, we feel quite comfortable that we have a good dividend coverage and there is enough room in the balance sheet.
Thank you, Mario. Guy?
Thanks. It's Guy Peddy from Macquarie. Just one quick follow-up question on the IP side. Can you talk about whether we should start to see any cost savings come through in 2019 from the fact that you're going to be reducing the amount of duplication you've got in your networks? Looking forward in CapEx, can you actually quantify how much the move to IP has cost you from a CapEx line, and when should we actually start to see that come through? Will it be 2020 before we start to see that? Thank you.
Good. On this whole IP migration TDM phase-out, in 2019, we will be able to begin with some phase-outs. The impact will be more in 2020, where we can switch off more equipment. This will be part of our whole saving plans. On the CapEx, we don't need actually new CapEx to do it because we have actually done the investments for this IP infrastructure.
Sorry if perhaps my question was confusing. I understand you've done the investment for the IP, but obviously once you've moved to IP, you don't have to repeat it. Is there an element of your CapEx budget that will fall away once you've actually moved to IP? Will it be allocated to something else, is what I'm trying to get at.
Yeah. Sure. The whole CapEx mix will change over time. If we make a guidance of CHF 2.4 billion, the mixture of CapEx is another one. We are now strongly investing in the access network, then this is slowing down, then we will invest more in 5G. These IP investments are not actually the biggest part of it. You can think that our CapEx will stay for the next years in this region where they are, or maybe midterm slightly trend down. That's also driven by competition, how we see the competition in the fixed business.
Maybe to add, these IP investments were included in the maintenance CapEx. That's around CHF 0.5 billion in the CHF 1.6 billion of Swisscom Switzerland. There goes a lot of CapEx in the transport networks just to handle the capacity. We expect those-
A maintenance CapEx remaining stable between CHF 0.4 billion and CHF 0.5 billion as it was in the prior years.
Mm-hmm. Thank you. Next question, Usman.
Hi, it's Usman Ghazi from Berenberg. I've got three questions, please. The first one was just on, again, enterprise. I guess in other markets, I'm just thinking about the Netherlands, where again you've got three, four high-quality mobile networks. You had a situation where the SME market in particular got very pressured by the mobile-only challenges, where I guess there's less demand for bundling ICT with connectivity. How do you see that evolving in Switzerland? The next question was just on 5G, particularly. I mean, Sunrise has spoken about offering 5G fixed wireless access in rural areas and then migrating or cost savings potentially from wholesale fees to their own kind of 5G network. I mean, is this a real risk that you see or is it just technically not possible what they're saying? The final question was just on 5G again.
I mean, given that your competitors seem to be distracted by deal-making, et cetera, was this not the time to step up the CapEx, gain the advantage on 5G deployment, and extend that network perception gap that might have been lost in a 4G world as Sunrise has managed to, at least from a network ratings perspective, they managed to catch up to Swisscom. Thank you.
Thank you, Usman.
I take the 5G questions and then Urs can take this enterprise question or SME, or Dirk, you can take the SME question, otherwise you have nothing to do here.
Okay, I take it. Good.
Good. On 5G, fixed wireless access is you will have a niche in the market where you have a substitution from internet. The majority of the market will be in a coexistence. I don't believe that fixed wireless access would really make a big substitution of the internet. If this would be the case, why wouldn't it be already today? If you go on the Swisscom mobile network, you will see that you have speed in the area of 40 to 50 to 200 Mbps already today. Actually, you could do it already today. The mobile is a shared medium. If you have more load on it, you don't have the speed. The reliability of an internet access is much higher than on a mobile access. You will have a niche, but not the majority.
That would mean that Sunrise, in my view, will not be able in Switzerland, and you know Switzerland and Italy is another topic because Alberto mentioned the fixed wireless access strategy in Italy. I'm not afraid that because of this, we will lose a lot of wholesale revenues. The second point on 5G, to increase actually the network advantage of Swisscom. These tests, we shouldn't overestimate all these tests. You should once go to the internet and looking where Connect is measuring. Connect measures only in cities and some axis. 60% of the calls or data sessions are done inside, in-house, and all such things are not measured in these tests. Swisscom has the better network. I'm confident. You are right, we will try to increase our advantage on 5G, that's why we have an aggressive rollout strategy on 5G.
Okay. SME?
Okay. With respect to SME, we are pursuing a total offering strategy that includes fixed and mobile, includes connectivity, communication, and IT as a new space to come into. Connectivity is obviously, as I say, mobile, also to the different locations that any businesses would have, which in many cases is not only one location but several. We are offering cloud-produced solutions there. I mean, the keywords are the network function virtualization and so on and so forth. That allows nowadays also small businesses to profit from features that otherwise would be for corporates, like VPNs, bringing the mobiles back into the business, management of LANs and wireless at their sites and so on and so forth. All that in a very cost-effective and scalable approach. It's just not like providing a SIM card, it's like a total connectivity solution.
The same is true for communication, where it's just not any longer like a phone that you put on anybody's desk, but it's like also a converged solution. Be it a phone, a smartphone, be it a PC, laptop, whatever. There's a program that goes beyond than just communication as voice would be, but data exchange, collaboration, productivity tools, and so on. Lastly, on IT, we're providing the entire bit from the operating system and the equipment on-site, obviously also a big part of it is cloud produced with server infrastructure, backup, and so on and so forth. Every business needs that. Every business these days, let's say, is also in a transition from on-premise IT into cloud IT. Every business asks itself, "How can I be more competitive, more cost-effective?
How can I profit from digitalization?" That is basically what our proposition is. It's like a 360 degrees proposition that goes way beyond just handing over a SIM card. The world is a bit more, I wouldn't say complex, but is a bit more richer and a bit more of opportunities for these small businesses.
Which is why also the others can just not easily replicate it with running around and offering a couple of SIM card connectivity. That is not doing the trick.
All clear. Thank you. Josh, next question.
Thanks. It's Joshua Mills from Goldman Sachs. I had a couple of questions on enterprise and then one on cost-cutting. Firstly, on enterprise. Mario, I think you said that that was the area that surprised negatively this year. I just wanted to ask, was that because of the extent of competition? Was there anything in there from the fact that some of these higher growth new solution businesses maybe aren't as profitable as had been initially expected, or was it just the competition? Following up on that point, I think if we look to other telcos, KPN, for example, has recently said, "We don't want to focus on non-profitable revenue growth." And I think in the presentation, you've laid out areas where you can grow revenues, IoT, security, et cetera.
Out of interest, are there any areas which you've consciously stayed away from because they're margin dilutive or maybe not profitable? I was just trying to get a sense of where EBITDA margins end up, in the B2B space versus where they are today. Finally, on the cost-cutting, you've exceeded expectations this year. What specifically drove that, and how sustainable is that beat? I'm trying to understand whether the CHF 100 million guidance for this year and next is conservative. Those are the three. Thanks very much.
Thank you, Josh.
Mario, take the cost.
I can take the cost. Yeah, we beat our CHF 20 million better than expected this year. Very especially in the first half, we had some tailwinds in the cost-cutting in the area of call centers and field forces. The impact of the all-IP migration, the positive impact kicked in earlier. Of course, we took that benefit with us, and that was the main reason for the beat of the CHF 100 million. I would say, no, 2019 is not conservative. We stick to the CHF 100 million. If things develop better, of course we take it with us.
On the B2B, maybe you can give them some more flavor, Urs. Actually, we were a bit astonished about the development on the wireline side because of the all-IP impact. That was the topic. We had more cancellation because of the all-IP migration, not only because of competition. Yeah, if we are in a non-profitable business, our ambition is certainly to increase the profitability. In the businesses where we are in, we have margins. It's not the case that we are running businesses without margins. The IT solution business has a lower margin than the connectivity business. If I look to cloud, if I look to security where we are growing, we have a nice EBITDA. If I look to data center, we have a nice EBITDA. Urs.
Sure. I guess we have a very solid growth, as already mentioned, in security and cloud and also in IoT, where we have some very solid double-digit growth and also planning to do so in 2019 further on. There I'm pretty convinced that we will deliver that, at least on the expectation and in the plans. On the other side of your question, we are in consolidation of our portfolio, we have in 2018 at least 40-50 products which were end of sales. Let's say that we have a clear focus to shrink down our larger portfolio towards a more focused and standardized approach, which is a mid to long-term activity until it's in operation. This is one of the policies we are really working on very hard, yeah.
Okay. Thank you. Luigi.
Yes, good afternoon. Luigi Minerva from HSBC. Three questions. The first on 5G. If we look at the CapEx profile in 2020 to 2022, assuming you get the spectrum, it's reasonable to assume an increase in CapEx. Maybe if you can help us understanding if there was a change in the electromagnetic emissions legislation, to what extent it can help you on the CapEx side? Still on 5G, a point on revenue. From where you sit today, can you point us to an application or maybe better more, that really require 5G and that can bring incremental revenue? Can you make some examples in practice? Moving on to the wholesale business. Just following up from previous questions, can you give us an idea of the extent of the wholesale revenue at risk if UPC Sunrise were to merge? Finally, on Italy.
We talked about the wholesale opportunity if Sky is to enter broadband. What happens on the retail market? Because they are partners commercially with you and close to your market segment as well. Thanks.
Thank you.
I take the 5G question. Mario, then you can take wholesale, and Italy is clear. On 5G.
Because we have already a very dense network, because we have already all the base station connected with fiber, we don't see a huge peak for 5G investment. What is also the counter effect is that 4G is going down. Yes, the CapEx will go up for mobile networks, but on the other side, fiber network rollout will go down. Overall, we feel ourselves comfortable that the CapEx envelope overall will not increase. The second part of the question was this radiation question. We have, in Switzerland, a very severe regulation on it, 10x more severe than in the rest of Europe. I don't think that we will get a fast relief on it. Maybe on the measurement methods, we will get a relief which will help us to have a faster development.
The threshold which we have today, I think we will have to live with this in the next, I would say, two years. Maybe we will be able to have some changes. The result of it is that we have to find new sites. That's a bit the topic. If we would get a relief, we could save some CapEx. That's right. The third part of the question is a typical application where we can monetize 5G. I would say it's a campus solution in the industry. If you are doing networks for a fabric to have the whole connection on wire line, that's a business case. This edge networks, these campus networks where we can monetize 5G. The other topic is how skillful will be our industry in charging for speed.
I hope that the industry will be more intelligent than in the past. Hope is always the last thing you have. In B2B, we will be able to monetize, I'm quite convinced.
Can I add a word on the consumer market?
Sure.
The tariff that we just launched last week, we are also calling them 5G ready. Explicitly or implicitly means we have not yet made a decision on the existing tariffs. It might well be that we only enable this for the time being, only these tariffs for 5G. As that is a bit more like towards the higher tier of tariffs, we also can anticipate that there will be a skew towards those higher tiers for those people that want to have 5G. What do they want to have it for? There's obviously an emotional and a rational aspect to it. There's clearly an amount of people that always want to have the best and the greatest and the newest. That is 15%-20% of the consumer population. That will show.
5G over time, it will be the better network than 4G, just as it happened in the past with 4G and 3G. If you look today at a 3G symbol, you can bet the quality of connection will be not as good as in 4G. The same will happen in the transition of 4G and 5G also. It might take a couple of years, but still there's a value to that. If it's only based on the capacity, that's fine, and that will help. Obviously, there's all high speed. Yes, at 100 mega, you can download a video in two minutes or so, but there's people that are impatient for that and want to have that in seconds, and that is then what 5G does.
We delivered an option to the new tariff scheme that gives you a premium speed of, for now, one giga, and that can go even further for an additional CHF 10. We offered options for IoT, so multi-device, which in a way is not technically, basically, bound on 5G, but from a proposition perspective, we bundled it all together. I think there's clearly a value proposition, and that comes in low latency, which in the consumer space translates for now into applications like gaming, which is very popular, and will enable new scenarios, and then new scenarios that come in with AR and VR and so on. We are really confident that there can be a pull. Obviously, it depends also upon, as Urs said, are we able to sustainably, in a competitive context, monetize it? We do hope so, and we see very positive signs.
Okay.
The wholesale question, we do not disclose the revenues we have with Sunrise and Salt still. I think also Sunrise does not disclose the numbers. To give you some help to make an estimate on a potential impact. They might have 300 to 400 lines with us at Sunrise. The prices of our wholesale portfolio you'll find on page 86. You can do a rough calculation of a potential impact. Maybe one word, if such a transaction would happen, these revenues would not disappear overnight. This migration, I think that would take years. You have to replace modems, TV boxes, and maybe the customer doesn't like to change all these things at home. These revenue streams would be at risk only midterm.
Okay. For what it concerns Sky, yes, Sky will enter the Italian market. Not clear exactly when. They said within 2019. I think that at the end of the day, yes, it will be an additional player, but at the end, it's not going to change the dynamics in the market. Remember that in the last five years, the Italian market has been extremely aggressive on the wireline, and I think that prices today are already very competitive. I believe that if Sky decide to enter in a new market, they want to do it also on a sustainable basis. I think that really for us, we shouldn't be too much worried on the retail. Yes, there could be a marginal impact on retail, even if I don't think. There is much more an opportunity to provide them wholesale services.
I think that the balance for us is positive.
Thank you. Next question, perhaps we start with Simon.
Hi. Simon from Barclays. I just had a question on the new mobile tariffs that you launched last week. The first question is, you're not pricing at a premium to competitors anymore. I'm just wondering what's the rationale behind that change? It would appear to be more aggressive than it was before. Secondly, maybe it's linked to that, have you offered the convergent discounts to now price the inOne mobile go at quite a discount to competitors? Is that to maintain bundling momentum in mobile because you really want to try and protect that base from competitors? Is that more of like, say, returning the favor to your competitors who are being very aggressive in the enterprise market?
Thank you. Dirk?
Okay. If you look at the new tariff schemes and how it compares to the existing, I think Urs or Mario said it before. There's certain consumers that can trade down and others can trade up. Basically, like sits in the middle. There's a notion of, you pay a bit more, but you get much more value for it. By way of example, let's say inOne Mobile as consumers would have an in-only tariff, like CHF 70. Now it would be CHF 80. There's CHF 10 up. Also for 3x the speed, for the whole roaming thing included and so on and so forth. At the same time, others can trade down, which obviously is not our first idea.
We have a big one-to-one campaign ongoing where we suggest to those customers to take not only the base bundle but also then added value bundles, like the Connect bundle and other international options and so on and so forth, to maintain the revenue and spend level that they already have. We are quite confident that that case will come through. In a way, it is a bit of a proactive move. You can do some scenario planning around what otherwise would have happened with roaming and so on and so forth. Puts the portfolio in a quite competitive and compelling space. That's by intention.
Okay. Thank you. Next question, Nick from UBS.
Hi there. Nick Prys-Owen from UBS. First one's just a follow-up on George's earlier question on the wholesale contribution from MVNO. I appreciate you aren't going to give a size of it. I wonder if you could just give an idea of phasing, if we're going to see the full impact in Q1 or if it's going to come in later in the year. My second question was on Cablex. I think at Q3 you highlighted the other generated about sort of CHF 25 million from a contract related to Swiss Railways. I just wondered what the full year contribution of that was and whether that kind of revenue is going to recur in 2019, or if that's going to drop out. My final question was on cost cutting. I suppose we're now two years away from the end of the plan.
I just wondered if you could give us a view on where the cost base will be at the end of the plan, potential opportunities for cost cutting, and if we might see a new target at some point. Thanks very much.
On Cablex, yeah, the impact with Swiss Railways construct a tunnel in southern Switzerland. The full year impact on revenues was CHF 50 million with no EBITDA margin. Because it's a long-term contract, is in construction. You rather realize that the margin at the end of the contract. We will have some revenue next year. Cannot give you the exact number, but maybe CHF 20 million-CHF 30 million, also with no EBITDA margin impact. That's an old contract we concluded around three, four years ago. On cost cutting, we have now this three years plan. As a management team, of course, we evaluate cost opportunities each and every year when we draw up our business plans. What I know today, of course, we are looking for new opportunities to reduce costs. I've been now in this industry for 20 years.
That has been always the case. It never ends. I didn't get the question on wholesale.
On MVNO. The impact on MVNO.
Yeah, it's just the phasing.
Can you please use microphone?
Oh, for sure.
Thank you.
On Fastweb?
No, no.
On UPC.
It's just to understand, when the UPC MVNO contract, whether we'll see a full quarter impact in Q1 or whether we might see a stronger revenue impact in H2, for example.
Okay. That one. That will gradually improve over the year. I was confused because we discussed the Sunrise MVNO before. That will improve or increase, I would say gradually we had some bit more migrations in Q1, but that's not a huge impact on a Q and Q basis.
Okay. Thank you, Mario. Matthias.
Yeah. Hi, Matthijs van Leijenhorst, Kepler Cheuvreux. First question is on Fastweb. If you look at the cash generation, it is still quite limited and it is due to the fact that CapEx to sales is still north of 30%. I am wondering, when do you expect CapEx to sales to normalize and to what kind of level? In addition to that, obviously Fastweb carries some strategic value. What is your view in the long run on your Italian subsidiary?
CapEx.
Yeah. As I said, Fastweb has been successful in the last, let's say, five years just to cut a long story short, because we were able to invest, to position ourself and to grow our margins. This will happen also in the next year. You will see margins continuously growing with the CapEx that will remains always in a region of around CHF 600 million. The free cash flow generation will ramp up accordingly. The reason why we need to invest also in the future is because, as I said, we will diminish the fiber investment, but we will need to ramp up the 5G network. At least for the next three years, that is going to be the situation. That doesn't mean that the free cash flow will not grow because the margin will grow significantly as we said before.
Thank you.
On the second part of the question, we believe that we can develop the value of Fastweb, so we are not on the way to sell Fastweb. We want to develop Fastweb. We see a lot of opportunities. Alberto mentioned them in the B2B market, in the wholesale market, but also with mobile. That's the message.
Would you consider teaming up with one of the mobile-only players?
We have our strategy on mobile to get for an intelligent rollout of 5G. That why Alberto acquired Tiscali. The rest, maybe we don't comment on just some rumor topics.
Okay, fair enough.
Okay, thank you. Next question, Andreas.
Andreas Müller, Zürcher Kantonalbank. Three question. One is on the market liquidity in enterprise. You mentioned that the All-IP migration is currently increasing the propensity of your clients to change their provider. How do you see that on the retail side? Is that since that has basically completed, is that going to change down the road? Also, could you this 7% less revenues, how much was that in Q4 out of this kind of liquidity problem? Second question then on Salt and Salt Fiber and the traction. What do you see there? Where are these new clients at Salt coming from? Then the third question, in Italy also, the fixed wireless access, the white spots. What's the potential there in millions of clients, say in the next three years or so?
Thank you. The last part is for you, Alberto.
Yeah. Okay, I'm sorry.
Okay. You can start.
As I said, on the fixed wireless in Italy, there is a huge opportunity because we have 6 million households that will be reached with a technology that is going to be extremely performing. Differently from Switzerland, in those area, white areas, the average let's say performance stays below 10 meg, sometimes between five and 10. Having a fixed wireless technology, which will be boosted by the 5G through the 26 giga frequencies will be a huge change in customer experience. Therefore, those are the families or home that will have to wait forever without this opportunity. It's a material opportunity because 6 million is a huge potential market.
Thank you.
The market liquidity in the retail business, the best indicator is the churn rate. In 2017, we had churn rates of over 10% in broadband in the residential market, that came down by two percentage points, down to 8%. I think that's a very low churn rate. I would say this impact is more or less over. We don't see increasing churn rates. Dirk? No.
No, I think the question was also related to All-IP, whether it.
No
would affect in residential and that's basically over, yeah. As was said, we are 99% through. I think there's 10,000 lines or so left in consumer. Which in the next couple of months, we will deal with, yeah. There's every now and then some optimization with respect to the voice service still in consumer, but that has more to do with when customers reevaluate what type of service they have and what is still needed, then there is a bit of an effect of fixed mobile substitution. Although that is also slowing down already.
To the question of Salt, then what we see actually is after the entrance of Salt, much more promotion activities in the Fiber to the Home footprint. That's the main impact. As Mario mentioned, our churn figures are on a low level. We see a lot of promotions. I think cable operators are suffering much, much more from these promotions than Swisscom. We have net adds in the fiber footprint which are quite well. We see more promotion activities. Actually, Fiber to the Home connections today are sold for a low bandwidth connection. That's a bit the situation we have. I think cable operators, they are suffering more from this than Swisscom.
Okay. Thank you, Urs.
I did.
No. Done.
That's okay.
Already done.
It's already done, yeah. Usman, perhaps.
Hi, Usman from Berenberg again. Thanks for the opportunity. I have two further questions. Firstly, could you indicate what is the overlap of your consumer mobile base with, say, UPC Broadband? Just to assess the potential risk if this transaction was to go through of cross-selling. The other question was just on enterprise. In the past, we've seen over-the-top risk, whether it be SD-WAN or voiceover IP that have cannibalized revenues. With 5G, there's some talk of over-the-top players being able to do network slicing, et cetera. How do you manage that risk as we go into 5G? Thanks.
Thank you, Usman.
On this question of overlapping of footprint of broadband and mobile customer from Swisscom. I'm not so concerned about this. You must have a good value proposition if we are pushing our inOne offer. I think we are in a very solid situation to compete there. The main impact of a possible merge of UPC and Sunrise, in my view, is not wholesale. What is always asked is not such question as you ask. It's the behavior of the management, how they behave on the pricing side. That's the main impact of such a merge. If you look to such a company, I think the likelihood that such a management has to behave themselves rationally is quite big. Because they have a big installed base. UPC has a high price on internet access and TV. I don't think that they are going for a strong price competition.
Therefore, I think we can look quite relaxed to such a deal.
Okay.
On your question concerning the enterprise space with SD-WAN and other OTT risk. On one side, we for sure have a well-integrated portfolio on SD-WAN proposition already in place on the lower end of the portfolio, which is already in operation since a year. We are coming to the market with the high-end SD-WAN solution within this year. I truly believe 5G is not the competition itself. It will be part of hybrid architectures in the future, given the fact that 5G has the ability to make sure that we are able to provide SLAs on mobile communication using slices, and there I see an upside potential as already mentioned in the B2B space. For example, in critical communication areas, for real critical communication use cases, which are pretty a lot out there.
For me, it's much more a synergy and a chance to drive complex network architectures into more customer-specific scenarios than today.
Thank you, Urs. Is there any other question? Does not look like. I think then we come to an end. I would like to close down the conference. At this point also thank you and invite you to have some drinks and snacks with us outside. Most of the people are still around, so you can do some informal chatting. Thanks again for your attention. Looking forward to seeing you or hearing you. If not here, then certainly on the phone. Have a nice evening. Thank you.