Good morning, ladies and gentlemen, and welcome to the Q3 Results 2018 presented by Urs Sheppley, Mario Rossi and Louis Schmid. Louis, please, the floor is yours.
Good morning, ladies and gentlemen, and welcome to Swisscom's Q3 results presentation. My name is Ruud Schmidt, Head of IR and with me are our CEO, Uwe Seppi and Mario Rossi, our Chief Financial Officer. The first part of today's analyst and investor presentation hosted by our CEO consists of 3 chapters, a quick overview of the highlights, operational performance and financial results for Q3 in the 1st 9 months, an update on our activities and performance in Switzerland, and finally, some explanations on the Farfetch results. In the second part of the presentation, Mario runs you through the financials and the unchanged full year guidance. With that, I would like to hand over to Urs to start his part of the presentation.
Urs?
Good morning, ladies and gentlemen.
I would like to start with Page 4, the highlights. So our financial our assets expected and we are also on our guidance, so we reconfirm our guidance for 2018. If you look to the Q2, 3 EBITDA, you can see that the margins are slightly up on a year on year comparison. And also Fastweb is on track. Industrial wise, we have an EBITDA growth of 5%.
In the market, we are successful with our bundle offer. In 1, we have 2.1 1,000,000 customers on our computer, play or triple play offer. And also with TV, we have a solid momentum. So overall, the trends are the same as in the previous quarter with stable market performance, stable market share and good choice. I will come later to it.
On the regulatory side, we have the Telecommunication Act, which is under revision. So it's now it will go to the 2nd chamber, and we expect decisions at the end of this year in December. So if you go on Slide 5, you see our operational performance. A solid RQ momentum in Switzerland with a small growth on broadband, but also on TV and postpaid and also a slightly declining reduction of voice line, which is a substitution business by mobile and IP. Fastweb, we have net positive net adds in broadband and also mobile, the Q3 mobile was slightly weak.
But if I look to the October figures, we see much better figures on mobile because we made a readjustment of our product in mobile. So overall, a good and successful customer based management and growth in Italy. If you go on Slide 6, the key financial figures. You see that we were able to have a slight growth on our net revenue, up by €85,000,000 Dynamics are, as in the previous quarter in Switzerland, a reduction of EUR 140,000,000, dollars mainly driven by price, price cash and substitution fixed to mobile substitution. And in part, we have positive revenue increased by over €100,000,000 On the EBITDA level, if you look to the EBITDA organic in the 1st 9 months, you can see that our EBITDA is stable.
And in Switzerland, we have a declining EBITDA by €77,000,000 driven by this voice line declines from conversion discounts and B2B price pressure, but then better indirect costs and some positive dynamics on IT products. So overall, if you take out the one offs, stable EBITDA. And faster has an increasing EBITDA by EUR 26,000,000. If you go on Slide 8, you see our priorities in Switzerland. Priorities are customer based management, so a clear focus on value focus.
Then further increasing in our networks to have this high quality network in mobile and broadband, pushing the banking migration to increase their customer lifetime value and in the B2B market to leverage our strong customer base that means share of wallet in the B2B market. Besides this, as already mentioned in the last 4, is efficiency programs where we are on track to achieve our target. If you go on Slide 9, you see the situation in the Swiss market. So the market is a mature market. You see that on mobile, we have high figures or quite high figures on retention, 190 1,000 retention offers.
We have a postpaid customer share of 71%. And I think that's important to say, we have stable postpaid churn figures or even slightly decreasing churn figures. Also in the B2B market, we don't have an acceleration of the churn if I look to our churn figures or to our market change, the B2B market. We have a stable condition. We lose some customers that we also mentioned wind back.
If I go to the broadband in the middle of the chart, you see also stable churn figures at 9%, which shows that we are successful with our assessment based management. And on the fixed mobile rentals, at the bottom of the chart, you see the churn figures. So we have churn figures of in the region of 5% if you are in 1 in a converged basis. So strong growth momentum on customer base management. On Slide 10, you see our activities on the network upgrade.
As planned, you see that we have 61% of our network is now in speeds of 80 megabits per second. And this is the target is that we will have 90% in 2021. We are there on track to with the rollout of ultra broadband coverage. And also on mobile, we are on track to have an excellent network. We also made pilots, we standardized 5 gs networks in some states.
So there I am also convinced that you are in front There are always a lot of tests, as Trent mentioned, 2 of them where we have the best performance. If you go on Slide 11, some information on the revision of the Telecommunication Act. So the main topic in the Telecommunication Act out of the perspective of Swisscom is the fiber regulation. The first chamber rejected it. So that is a good sign for Swisscom.
Now it will go to the 2nd chamber in December, and then we have more clarity. There is still some discussion on net neutrality. I think we should wait for the discussion in the second chamber and some discussion on roaming. The law proposed to set some price caps in roaming. So we will have no effects on this revision of the Telecommunication Act a bit by forecast before the second half of twenty nineteen.
But I think also that we should look quite relaxed with this revision. If I go to Slide 12, you see some activities which we are doing to stimulate the retail market performance. The market is very strong promotion driven in Switzerland. I would say that the acquisitions are primarily promotion driven, not only in the flight to the hotel, but also in other activities. And so the liquidity of the market is mainly in the very price sensitive area of the market.
That's also the reason why we have so good and stable churn fixed, as I mentioned before. Slide 13, you see the performance of InOne. We have 2,100,000 InOne customers. We are at the penetration in the region of 50%. So 50% of our customer base is now in this InOne offer.
And the impact on the financials of InOne are as expected, and we have an increasing lifetime value because the churn is in the region of 5%. On Slide 14, the service revenue performance in the retail market. You see that we have stable ARPUs or in the bundled products, even an increasing revenue per bundle. The revenues on wireline are at 6.40 $2,000,000 This is minus 12,000,000 compared to previous year. This is mainly driven by voice, voice of substitution.
And then on mobile, we have 662 €1,000,000 which is €26,000,000 below previous year. The main effects here are the converged discount and roaming. With overall, stable ARPUs and increasing revenues in the bundle. Aerie, we drove our strategy. Enterprise Business on Page 15.
So increasing slightly increasing revenue generating units in mobile, which shows that we are able to keep our strong market position. Declining subscription invoice, this is driven by IP substitution and all IP migration. And then you see the service revenues, which is slightly down by €17,000,000 on to previous year year on year. And there is that the main effect is general price pressure, price competition and all IP migration. The solution revenue is in the region as we forecasted the last time in the region of EUR 250,000,000.
We have stable market shares. We have the good win ratio and the good order intake. But the solution revenue is slightly lower than previous years because we have always a project impact with a seasonal business. And then we have, as already mentioned the last time in the banking area, some changes also on the accounting level and we lost 1 customer, but we have a good order intake in the banking segment. So overall, I would say also a good performance in the B2B business, but there is price pressure in these segments.
On Page 16, our activities on cost reduction. So we are well on track to achieve this EUR 100,000,000 savings. At the end of Q3, we are at €82,000,000 decreased in direct costs. On SaaS, we have some remarks on Page 18. You see here on a high level perspective what is our strategy in the network side.
So we are targeting hybrid fixed wireless technology network with our own network where we have a footprint of 8,000,000 households with 5 to 6. And then on the mobile side, we have now some spectrum, and you can see on the chart, we have the 200 megahertz, 26 gigahertz. And we are on the way to get the spectrum of this 40 megahertz in the 3.5 gigahertz area, and this will enable us to get a very selective coverage in hotspots to deliver a good mobile customer experience. So this is a bit our strategy in the network area. So the focus is the fixed network where we are on the way to migrate much more faster on ultra broadband.
On Page 19, the consumer performed faster. You see that we have a customer base increase of 4%. Also our broadband customers grew by 35%, And so we have now a penetration of 52% of Ultra Broadband customer in our customer base. And on mobile, you see that we have 1,300,000 mobile customers, so an increase of 13.4 percent and 28% of our mobile or we have 28% mobile penetration in our customer base of converged customers. And there in such in this customer base, we have 30% lower churn.
If you go on Slide 20, you see the B2B performance and wholesale performance. So increased order book and important to mention 31% market share in the B2B market. And I'm convinced that we are also here in the B2B B2B market, we have further potential to grow. If you go on Slide 21, you see the financial performance. Net revenue on a comparable base, up by 7%.
EBITDA on a comparable base, up by 5%, so a growth on net revenue and EBITDA. Mario will give you some more flavor on its nature. Now I would like to hand over to Mario to the financials. Thank you, Jules, and also good morning from my side. We start on Page 23 with some additional information on the financials.
As was mentioned, on the top line, on a like for like basis, we are accumulated, we can show flex development, But in Q3, other than the 1st 2 quarters, the growth of assets is not sufficient to compensate for the revenue decline of the Swiss business. A few remarks on the segment. In Retail Customers, we lose €38,000,000 in Q3. That's a similar amount like in Q2. And also the driver behind that we claim are the same, that convergence decrease of access lines and has a much lower amount roaming.
I will give you some details later on before the guidance. Also in enterprise, similar evolution like in Q2 in both in service revenue and in the solution business. And again, as I've mentioned, we have the same effect in Q3 and in Q2. We lost 1 banking client and we have some new customer requirements, which result in lower revenues. Maybe few remarks on the segment other.
I saw some remarks, some notes this morning. On revenue, the €25,000,000 is a cumulated number for 9 months. And the main reason for the increase of revenue comes from our subsidiary, Coblex, where we have a huge contract in the installation business for the Swiss Railways. It's more or less the full effect of this €25,000,000 A few rounds on Fastweb's evolution of Q3. So in Consumer, we are able to grow revenues by 4.3% compared to accumulated growth of 8.6%.
The reason for the lower growth is we don't see any more effects of the 4 weeks bill because we implemented that in Q2 2017. On enterprise, we had a steady growth of the revenues of north of 7% in all three quarters. And in wholesale, we post revenues of $52,000,000 in Q3 2018 compared to €62,000,000 in 20 18. The reason is there is some seasonality, and we had a very strong Q3 back in 2017. If I look at our expectations for Q4 on the revenue side of Fastweb, we do expect same growth in Q4 and in Q3 for the both segments, Enterprise and Consumer, but we expect a very strong Q4 in wholesale.
A few remarks on Page 24 on OpEx. Maybe on acquisition and retention costs, we have in Q3, dollars 11,000,000 less subsidized Internet rooms and TV boxes. The reason is we had to last with the all IP migration, and we replaced a lot of devices for free. And then we had $20,000,000 less acquisition and retention cost in mobile in Q3. On the out payment, we had lower out payment for outbound roaming because of price increases.
I think these are the main effects on the ZYRAX costs. On indirect costs, as was mentioned, we are well on track to reach our €100,000,000 savings on indirect costs. Main part comes from workforce, close to €60,000,000 but also other cost elements like external workforce, IT marketing, we are ready to reduce our expenses. Next page, on EBITDA by segment, Can say on retail, we have more or less a flat Q3 compared to the prior year. But here, we have to take we have 2 main effects.
We have €20,000,000 less acquisition and retention costs in Q3, and we have $15,000,000 less out of payments, which I mentioned before. On enterprise, similar development in Q3 as in Q2. So we were able to absorb part of the price pressure on the top line on the cost side. On wholesale IT and network, first, we have here the impact of the cost reduction. And then Q3 wholesale revenue was impacted by lower inbound revenue of €13,000,000 That's the reason why we have a negative impact of €8,000,000 On Farstad, in all three quarters, we have a comparable EBITDA growth of around of exactly 5%.
Here again, if you will from other, again the EUR 45,000,000 are the 2 related numbers. So top quarter around EUR 50,000,000 and there are 2 reasons. One reason is we have some margin on the revenue growth I mentioned before on the top line. But the main reason is the IFRS reconciliation. In the operating segment, we show the cash payments of the pension funds.
The reason is that we have more comparable situation along the course of the year. And in the reconciliation in this segment, other, we have the difference between the payments and the contribution the payment and the calculation according to IFRS 19. Again, in the segment, contribution payments And in other, we have, let's say, the calculation according to the IFRS rules. And in 2017, we had higher payments because we had a lot of early retirement cases. That gives us this positive impact.
But on a quarterly basis, the difference of this effect is around €10,000,000 So I think that's an accounting issue at the end. On net income, below the EBITDA, I think there's nothing special to mention. We had start 1 refinancing in Q €350,000,000 and you find the debt portfolio at the maturity profile on Page 50. On the next page, CapEx. Switzerland, we are the priority, no less.
Fiber rollout is performing well. We invested in Q3 20,000,000 in fiber and pace accelerating. And then Q1, the basis on mobile, we invested in 3 quarters €250,000,000 Fastweb in local currency is 2% below prior year and the CapEx the main CapEx drivers are in general and customer driven CapEx. On the operating free cash flow, you see this negative change in net working capital, it's relatively high amount, but that's due to seasonality on the full year basis, I expect an impact of minus €80,000,000 to €100,000,000 coming from change in net working capital. That brings me to the underlying EBITDA trend 2018 of the Swiss business.
You see here the growth and evolution in the retail business of fixed line loss is outbound rolling and the convergence discounts. I think on fixed line and conversion discounts will be a bit higher impact will be a bit higher than we guided. We guided for fixed line €60,000,000,000 we spent now €50,000,000 Commercially guided €80,000,000 we spent now at 65,000,000 The B2B segment, we guided for a margin loss of €40,000,000 we spent now at 56,000,000 But the B2B business is able to concentrate part of it in the line indirect cost savings. So I would say overall, after 9 months, we have from this structural effect, a negative impact of €77,000,000 and for full year, we expect €100,000,000 less EBITDA, and I think we are well on track to deliver this guidance. And then that brings me to the last slide.
As Louis mentioned in the introduction, of course, we confirm also 9 months before your guidance and with that, I hand over to the operator.
Thank you. I have already some questions. The first one is coming up from Simon Cowell from Barclays Bank.
Hi, guys. Thanks for taking the questions. I have one on Switzerland. So you're still making steady progress on fixed mobile bundling. Do you see any need to accelerate that?
Because it's in a lot of promotions this summer. I'm guessing you're not seeing much impact from Salt, but any color on how competition has been progressing would also be helpful. And then the second one, on Farfetch in Italy, I was just wondering how you feel about MVNO Economics now versus OMA Economics because we're obviously seeing mobile data increase quite substantially in tariffs in that market and we've seen headlines around potential M and A there.
On the competition or on Switzerland on this commercial offer in 1. So we have a good momentum on in 1. We don't see that we have to change in our sensing. So as you see in the presentation, the penetration is increasing. It will continue, but it is certainly the speed of adoption of A1 will be declining a bit because we are already now at 50%.
But I think we are well positioned with our in-one project and our strategy on this front of the project is is to further increase the USP on the advantage on our TV products and ramping up the speed in the ultra broadband product. So we don't see there actually a need to change the strategy in the brand offer. Competition is, as I mentioned, it's very, very promotion oriented, very short term oriented. Competition in trying to get some customers with aggressive promotion. And the liquidity of the market is mainly in the low end, in the very price entity failure.
We have we are certainly not subsidizing the MVNO business and because we are talking about margin. So we do our business in a way that we will have a margin on mobile and we are doing a customer based management because then you are able to decrease the churn. But the whole strategy of customer base management of Fastweb is to bring in more customer on our ultra broadband networks and having a mobile product to get more converged customer base. That's a bit our strategy. And M and A, so we don't don't comment through our M and A.
But we think that we can develop faster.
Okay, that's great. Thanks so much.
Then I have the next question from Jakob Bluestone from Credit Suisse.
Hi, good morning. I've got a question looking at Page 6 in your slides where you sort of break out the quarterly development of your revenues, particularly for Switzerland. And one of the things that sort of jumps out is that every quarter, the decline in Swisscom Switzerland revenues gets a bit bigger. So you lost 39 year on year in Q1, 47 in Q2, down 57 year on year in Q3.
And I
was just wondering, do you think we're sort of at a low point? Or do you think we should be looking for continued erosion in your Swiss revenues? And then just secondly, can I just follow-up? I think you mentioned the weakness in wholesale was due to lower inbound roaming. Should we basically be sort of expecting wholesale revenue be shrinking going forward, given this is, I guess, annualizing some of the roaming changes last year?
Or is that sort of more seasonally driven? Just any color you can give on the wholesale outlook. Thank you.
I will take the question on service revenue in Switzerland and Mario will go to the inbound roaming question. On the service revenue in Switzerland, we will have some pressure on the service revenue in Switzerland. But if you look to the whole dynamic, so the dynamic, the negative dynamics was last year in August, you see this already today. The impact of roaming is flattening down. Fixed to mobile or fixed line will also flattening out because the majority of all IP migration is done.
And a lot of customers who made the substitution have done it. So you see those in the reduction of the lines, fixed voice lines that they are inducing. This impact will be lower and the converge discount is actually driven by the amount of migration to IN1 and this will also have, let's say, a saturation effect. So overall, there will be a less hard dynamic on the service chain in Switzerland. Our strategy is to work on the customer base to have a more for more approach and keeping the churn low.
That's a bit the dynamic which we will have in the service and in volume. And on the inbound drop in mid year, we will have also in the future lower prices. The dividend we see a decline and can expect also in Q4 a decline. But don't forget, on the other side, we will have lower out payments because that's a combined business. So the prices for the outpayments will also go down.
There you will see the positive impact, namely in the retail segment. That's very helpful.
Thanks guys.
Then the next question is coming from Frederic Boulan from the Bank of America.
Hi. It's thank you for taking the question. Just a few points. First of all, on the Telecom Act, if you could explain a little bit the range of outcomes. You seem very confident, but if you could detail a little bit the areas where things could be against you and what could be the impact for the group in the long run?
Secondly, on Fastweb, if you could clarify a little bit what actions you have in the pipeline at the cost side. I think to reach your €700,000,000 guidance, you need probably about 20% EBITDA growth in Q4. So if you could explain a little bit why we're trending a bit below trends for the time being? And what actions do you have in place to achieve the guidance that you're reiterating today?
Thank you.
I'll take the question of Telecommunication Act and Mario, the cost question of software. The Telecommunications Act is actually for Swisscom, the nature discussion is on this side regulation. And the telecommunication
act,
what is it in discussion that we get a technology neutrality. That would mean that SWICOM would be regulated also on the fiber network. Today, we are only regulated on the copper network. And that's the main discussion and the first chamber of the Parliament exactly rechecked this proposal by the regulation. So that's the 1st chamber actually made a decision, which is good for Swiss continent.
And I think we have strong arguments why this fiber regulation would be not good for the Swiss market at the end because this would reduce the investment dynamic in Switzerland. And I think the Parliament is very aware of this. So we have to wait until December, then I think we know much more about this. And then the other thing is more a question on net neutrality. There is a discussion still going on.
In our industry in Switzerland, we have a codex for net neutrality, and we don't have violation of net neutrality in Switzerland. So I think I don't know the results of the Parliament, but I'm not afraid now too much about this net neutrality topic. And also on roaming, on roaming, I would say the impact on roaming would not only be on Com, and I would say Swiss Com, it has on the rolling side, it's the one who has the strongest rolling prices. We made the most of the rolling migration also that the migration in a sustainable roaming business we actually made. So I would say you would be the one who is suffering least if there would be a roaming migration.
And I think that's also a good sign that the roaming regulation wouldn't be too strong, but that's speculation. And on Fastweb, organic EBITDA, the results, the IFRS 16 impact extends now at, after 9 months, €502,000,000 And as you mentioned, we still expect €700,000,000 EBITDA on a per unit basis. And the main driver for Q4 to reach this guidance I mentioned, so we have we expect the similar growth from consumer and corporate in Q4 as we had in Q3. And we expect a quite strong wholesale in Q4, and this payment has some seasonality. And with the wholesale business, we see there high margin wholesale revenues from the softer business in Q4.
On the cost side, you mentioned there is nothing special. So we think we can reach disconnecting with flat indirect costs in Q4 compared to Q1. So that's more as how we see the evolution of the last quarter in 2018.
Okay. Thank you very much.
Then I have the next question coming up from Matthijs van Mallingenhorst.
Yes. Good morning. Matthijs van Mallingenhorst. First question is on the competitive environment. What I understood is that in Q3, you mainly saw competition at the low end of the market.
I was wondering if this is still the case in Q4? And the second question is regarding Fastweb. During the Q2 call, you provided some guidance for the Swiss domestic business. But I was wondering, could you also provide some KPBS guidance for Fastweb? Because if I look at the cash conversion for the Italian business, it's still quite limited.
So could you give some more color on that one?
Okay. I'll take the question on competition in Switzerland and the Moira Basel. The competition in Q4 in Switzerland will be will stay approximately to say. There will be the Christmas business, so a competition will certainly do some nice promotions. But I think that Swisscom has the right strategy to be resilient against it.
We will also do certainly some promotions to get a good positioning in the also in the low end market. We have to compete in the low end market, we have also our second and third brand product portfolio, and they are actually performing well. But it's the fact that in Switzerland, the competition is trying to run against net tax on the lower end market just on the whole side. I think it's important in the future to compare not the subscription market share, it's more important to compare the revenue market share to judge the dynamic in the whole market. And on faster, Mario?
You're right. This is a cash conversion of faster. This is still quite low, But we expect for full year CapEx sales was €600,000,000 and still growing material part of the CapEx still comes from the next generation network rollout, where we still have rollout in specific cities and this business case works. So we have less out payment to what Tericomedia, that means we have a higher margin And let's say, on a full year basis in 2018, this is NGN CapEx close to $100,000,000 I would say. And that is the main year, which another part of the CapEx is driven by success of the B2B business.
So you have some CapEx, if you acquire if you have some new customers, you have some customer specific CapEx on your books. But I think we say that's let's raise them as so called good CapEx because that generates future revenues and margin.
So in my model, I should assume that CapEx for faster should increase, right? It would definitely not
I would say, of course, I would keep complex
And the next question is coming from Ulrich Ratte from Jefferies.
Yes, thank you. My first question is you're mentioning that in passing 5 gs in 2020. Could you talk about what form of 5 gs sort of would come first for Cisco? I mean is it more on the mobile broadband side or is it industry vertical or is it IoT or do you have anything to sort of indicate on that already? The second question is, is that more on clarification in this other item that Mario sort of discussed already.
What is notable is that the EBITDA contribution from other is actually increasing quarter by quarter by quarter. So it's a bit difficult to sort of see the how they sort of proceed because you're highlighting here, in particular, this contract from contract work for the railways. I'm just wondering, could you give me more color how this unfolds from here? Is this a multiyear contract? And is it currently ramping?
Or is it now at the run rate? Or whatever you could say about this? And then related to this, I wasn't entirely sure when you discussed the IFRS fifteen effect and other, The exception of the item the footnote of the exception of the item says that the IFRS fifteen adjustments are actually in the exception. But you seem to say that the IFRS fifteen adjustments are actually in other tools. So could you clarify that as well in this context?
Thank you very much.
I'll take the question on 5 gs and Mario then the more information about it. On 5 gs, the use case of 5 gs are actually mobile broadband business that will be the biggest market on 5 gs. Then some industrial verticals, as you mentioned it, this will be a business which will come, which will be an important one, but it will also take time. And then IoT, it's certainly also a part of it, but the value creation for an operator that might be on IoT will be slow. So there will be IoT, there are opportunities for an operator, but the major impacts are coming from mobile broadband and verticals.
So therefore, it is important to have a strong positioning in the B2B market to have solution capabilities to do verticals in the industry segment. And the second topic is how skillful our industry will be to monetize the speed on 5 gs. And I think our industry should really be careful on non exciting speaker on 5 gs. So I'm not alone if I am talking about this because it's also competition will lose the price there, but that could be an opportunity to get better ARPUs. And on the segment level, maybe on the IFRS, maybe I didn't explain it well enough.
So it's this reconciliation item belongs to IFRS 19, that's the pension liabilities that is recurring that comes each quarter. And IFRS 15, the incentive subsidies and revenue recognition that is shown in the exceptionals. Again, to the pension, to the IFRS 19, there we have a quarterly impact of about CHF 15,000,000 that's more or less at month 15, month 14, but that's more or less €15,000,000 per quarter. And on the other small items like these are small numbers. And there you have some seasonality.
There's project business from our subsidiary CapEx. There is a few millions per quarter. We had a positive impact this year because we had last year a loss making entity, small entities from the takeover of Fugeco, which we saw in the meanwhile. So it's very small numbers. 50% of the impact is coming from this IFRS stuff that $15,000,000 per quarter.
I would model it like that.
That's great. That's helpful. Thank you very much.
And the next question is coming up from Luigi Minerva from HSBC.
Yes, good morning. Thanks for taking my questions. I have 2. The first one is on Switzerland. You mentioned achieving fiber coverage by end of 2021 in every Swiss municipality.
I was wondering if you can translate that as a percentage of households or maybe more useful as a percentage of premises. And then give us a bit more details about the your hybrid approach, so the mix between FTTH, FTTHC and other technologies? And then lastly, if all this could happen within the same CapEx level that we are seeing this year? And secondly, on Italy, I was wondering how do you see the entrance of Sky as a fixed line broadband provider next year? And what is the impact it can have on Fastweb's market position and commercial activity?
Thank you.
Good on the on our network strategy in Switzerland. So our strategy is as showed on Page 10 is to increase the footprint for households with ultra broadband to 90% in 'twenty one. That means 90% of the households will have speed above 80 megabits. The majority of them will have a speed strongly above 100 megabits and up to 1 gigahertz. And then this is a mix of different technologies.
We have approximately a footprint of 30% fiber to the home coverage already today. So it will stay approximately stable or slightly, slightly increasing, but in the region, about 30%. And then the rest is mainly fiber to the street coverage. And then we have speeds up to 500 megabits per second. And then the last 10%, so 90% we will have on slide to the street and slide to the home.
And then the last 10%, they are mainly on price to the curb. And then you have speed in the region of, let's say, 30 to 80 megabits, but the majority are certainly also above 50 megabits. So that's the strategy. The CapEx will be will stay in the whole CapEx of Swisscom Switzerland will stay in the region where they are today. So we will have some more investment in the next year in 5 gs investment are going a bit up and then 5 gs investments, the wireline network comes, so they will stay approximately stable in the next year.
And then on Sky, the engines of Sky can also be an opportunity for us. So we are also in cooperation with SKYY. We have some bundles with SKYY. And if they now go in the retail market, they need a wholesale partner and the wholesale partner can't only be fiber No open fibers or in Telecom Italia, I think Vaztech is a very agile and competitive wholesale provider. So this can also be an opportunity for Vazquez.
Yes. It's difficult to judge, but I think the main element of for the performance of Farfetch in the wireline market is not driven by Sky. It's more driven by the mobile operators. If they try to push with aggressive promotions fixed to mobile bundles, this will have a bigger impact on the growth in Italy. But I think 2018 was a hard year for Italy, if you look at the price competition in Italy.
I think there could also be opportunities that the market is becoming more rational also on in the wireline market because if you have so much pressure on mobile, you should keep you should be also prudent on the wireline market to keep the margin. So I think there could be some, let's say, some less promotion activities, but that's speculation. Speculation. Overall, I would say, if you look to Farfetch, it's important to see that we are doing 50% of the business in the B2B market, that we have 30% market share that there is potential to grow, that the Italian broadband market is still demonstrated. I think if you look to the broadband business in Italy, that's a market with this potential.
Can I have the next question from Ghashi Usman from Berenberg Bank?
Hello, thanks for taking my question. I've got 2 questions, please. If I look at the Slide 29, which is the underlying EBITDA trend broken up between fixed voice, outbound roaming, etcetera. If I look at if I compare this slide to what was being shown
in Q2,
I guess, most in most areas, you're on track, but except for in B2B, where the full year impact, I think, in B2B, you were estimating at around $60,000,000 and already for 9 months, you're at minus $56,000,000 So is that to suggest that this headwind that we're seeing in B2B on EBITDA will not come through in Q4? Or is it that something changed from Q2, which has been below your expectations in B2B? So that was the first question. I hope that's clear. And then the second question was just on mobile broadband as an opportunity for 5 gs.
I guess that really needs millimeter wave spectrum to be made available. And in that respect, are you I mean, is there a road map to release that spectrum over the next few years in Switzerland? Thank you.
Well, good. I'll take the question 5 gs Mario on Page 29. And I will start with mobile broadband 5 gs. So we will have this auction in January 2019. And we are now in a process and I can't talk about actually this spectrum auction.
But you saw what are the conditions of this spectrum auction. And I think the industry, and now I'm talking about the whole industry with the spectrum auction, we have the ability to build a good 5 gs network. The main hurdle or the main challenge for Switzerland on 5 gs is the are the limits for radiation. It is non unifying radiation limits in Switzerland. That's the main bottleneck.
It will be difficult to ramp up the 5 gs network because we have so small limits. That means if we don't get a relief on this regulation, we have to build more sites And to build more sites in Switzerland, it is a very challenging topic. But from the spectrum side, I think whole industry will be in a situation to make good 5 gs networks.
Can I just follow-up on that? So you don't think that for mobile broadband 5 gs, you don't necessarily need the high very high frequency bands, so the 20 to 30 gigahertz, the millimeter wavebands. You don't need that specifically to launch mobile broadband 5 gs?
No, it's excellent. There will be a lot of 3.5 gigabaud spectrum available. So there are 300 megabits 3.5 gigabhertz spectrum available. So that's a big part of much higher than in other countries. But I think with the spectrum which is coming through the auction, Switzerland should be in a good position.
Okay. And on Slide 29, and then your question regarding the B2B performance. First of all, on B2B, it's a bit difficult to compare quarter by quarter because we have a lot of project business in the Solutions business and the Solutions business makes 50% of the overall revenues of the B2B segment. And if you look at the core play evolution and let's say, where we stand out for 9 months compared to the 12 year expectation, Yes, the decline of margins is a bit higher than expected, will be a bit higher than expected on a full year basis. But we implemented a lot of cost actions in the B2B business only at the end of Q2, beginning of Q3.
So we saw already in Q3 that we were able to compensate part of the margin decline. And on Q4, I would expect, thanks to these cost measures, a similar EBITDA contribution as in Q3.
Thank you.
Okay. Then I have a question from Georgios from the Citibank.
Hi. Actually, most of my questions have been answered, but I wanted to get clarification on 2 things. Firstly, and there was a question around the net neutrality changes. And I was just wasn't sure whether it has a material change in a specific product or service that you provide now or it's something that could change
more
future evolution of the industry? And then second element is around Italy. You do own some spectrum and I want to understand whether there are any restrictions as to what you can do with the spectrum that you own in terms of selling it to someone or leasing it or using it in their networks or any arrangements you may want to do? Thanks.
Sorry, the first question, I didn't get. What's exactly the first question?
I think earlier there was a question about the telecommunications law, and you said there were 2 elements. 1 was the neutrality. And you made some comments around what could change there, but I didn't exactly understand whether it has an effect on the services you have now, the changes that may come about to this proposal or whether it's something that you are monitoring because of future services and how it will impact those?
Okay. So I take the question on net neutrality first. It's not actually the proposal, the proposal of the regulator was actually a very liberal one. So they didn't make a proposal to have a strong regulation metric tariff as of this proposal from the regulator. And then in the discussion of the parliament, they came from new IDs.
And but now they are discussing about this net neutrality in the Parliament. So everything is open. But I would be relaxed on this net neutrality topic because our industry in Switzerland at the COBEX and this where we actually say that we behave in a natural neutral way. And we don't have violation of natural charity in Switzerland. So I don't think that there will be that there will have problems to on our portfolio side and all this because we don't have valuation on net neutrality.
So I think we could be quite relaxed on this discussion. But we know it in December. And then the second thing on APP, we have some obligation of using spectrum in typically, which we will acquire on typically And on your question around can you sell it, transfer it. So we are currently in the process of closing this transaction, and we cannot give any details because we are also in discussions with the Ministry around disclosing. Sorry for
that. Okay.
And then we have one question from Cheyne Brackser from New Street Research.
Hi, good morning. This is David actually. Thank you for taking my questions. I've got a follow-up on the competition on pricing, please. Just looking at your net adds on the broadband side, they are a bit weak this quarter.
Just wanted to know if you can comment a bit more on competition. Is it getting more traction now that they have been they have launched our product for 6 months on the fixed side? Or is it Sunrise continuing taking share or UPC maybe improving their situation? And similar question on Italy, the open net adds were a bit we compared to last year, it's the EAD impact, which you can comment a bit more on that. And on the pricing, I've noticed that on your low in the 15 megabits on the triple play product, You increased the price by CHF5.6 last month, whereas competition Sunrise has reduced the price and you can see that we have more promotion.
I was wondering if this gives you more confidence in the fixed outlook or is it just a way of trying to push people up in the models? And lastly, just a follow-up on the previous question. I was just wondering if you can comment on your plans in Italy about the 3.5 gigahertz gs of spectrum, please?
On the competition in Switzerland in the broadband market. As I already mentioned, the market is saturated, fully penetrated. And from out of the perspective of Swisscom, we are happy with our performance in the broadband. We have a low churn. And if I look to our net adds in the 5 to the home turf where the most promotional activities are today, I would say, we are quite happy.
And I don't know the figures of our competitors. They're up to now. We will see later what has been the shift in the market share in broadband. But overall, from the New York Swift might think we are we can be quite satisfied with the performance in broadband. On this price slightly price increase in the lower end of the broadband market, what we have done is an approach more for more.
So that was the main idea. And actually, we were able to do it in a good way. So we were able to do it. That means to increase the price on the lower end because also the price positioning in the lower end was realized also by our competitors. So there was a dynamic of increasing prices in the lower end of the market.
But that drove the better dynamic in Swiss business. Actually, the business is driven also not only by the leased prices, it's also driven by promotion on a below the line area. And on Fastweb, the use of this 3.5 gigahertz is actually if you go to the presentation of Fast Track 18, you'll see what will be the idea of using this 3.5 gigahertz. So we will use it in hotspots, in very dense areas where we can leverage our infrastructure of the fiber to the mid cabinet. So that means mainly in this system, not spots to offload MVNO volume.
Volume. So that's the main idea behind it. And on the net cash performance of Fastweb, as Mario explained it, it was not the strongest one, but if you compare it to the whole market share in Italy, I think we can be satisfied. We don't see it from out of perspective. Video, video effect was on the mobile market.
And I think that is the main dynamic of video. And in my view, it's too early to judge how performing they will be in the mobile market. We have the best momentum as I already explained before in October mobile. Our strategy is to push convergent to have more fixed mobile convergent projects on our broadband customer base.
Thank you.
Okay. Operator, Brett, a very last question.
I guess only one. Okay. It's from Julio from RBC.
Yes. Hi. Thank you for taking my question. You mentioned that the take up of Inwang should decline over time given that there is 50% penetration. However, InOne fixed mobile convergence penetration still below the 30% mark.
Can you give us some color on how the penetration of fixed mobile in 1 should evolve? And my second question is regarding some of the comments about the radiation limits in Switzerland. You mentioned that if these limits are not changed, basically, there would be a requirement of having more sites. Can you give us some color on how should we think about the extra CapEx needed for these exercise? Thank you.
I'll take the one question, though. The overall fixed mobile penetration is 35%, and that consists majority is in 1 subscription, and then you have a part of the old so called 2Q subscription. Then the field here will have 2 developments. So the old Tutor will go to the in1 and the overall penetration, the fixed model the overall fixed model penetration, we would say it will reach around 50%. Okay.
Okay.
And on this radiation limit, so the limit in Switzerland threshold is 10x more, let's say, severe than in countries around there. And what is now actually discussed is that we can get some relief on the method how you measure this emission. Because if you go to 5 gs, there is beam forming in it and beam forming is actually in the actual measurement method, it's actually even increasing the problem. So I think we can get some relief on this measurement method. And this will give us some time to have a discussion then on the bigger picture of this threshold.
And the impact to CapEx if we need more size, even it's independent from this topic of radiation. We will need more sites on 5 gs because the network will become more dense. And overall, we will manage the business in a way that our CapEx will stay in the region where they are today.
Okay? Okay. Thank you very much.
Thank you, Julio, and thank you to everyone. And with that, I would like to conclude today's conference call. If you should have any further questions, please don't hesitate to contact us from the IR team. Speak to you soon, and have a great day. Thank you.
The conference recording has been stopped. Dear participants, your conference call has come to an end.