Good morning, ladies and gentlemen. Welcome to the First Quarter Results 2018 presented by Luchepi, Mario Rossi and Louis Schmid. Louis, the story is yours.
Good morning, ladies and gentlemen, and welcome to Swisscom's Q1 results for inflation 2018. Name is Louis Schmidt, Head of Investor Relations, and with me are our CEO, Ful Cheffe 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.
1st, a quick overview of the highlights, operational performance and financial results for
the 1st 3 months 2nd, an update on our suite priorities, operational and financial performance in Switzerland and third, some explanations on our fastest first quarter results 2018. In the second part of today's presentation, Mario runs you through the financial and the unchanged financial 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 some highlights of Q1. So our financials are as expected, solid figures. On the quality side, we also delivered we won several tests on the network side, but also on the customer service side. Fastweb had a strong performance.
And also in Switzerland, with our bundle to offer IN1, we are well on track, and the penetration is strongly increasing on InOne. On the cost side, we are on track. We are able to reduce our costs, and we have a good revenue generating momentum in the broadband or in the TV area. So overall, we confirm our guidance 2018. If you go to Slide 5, you can see our operational performance.
So we have satisfying revenue generating unit trends in Switzerland and a growing dynamic in Italy. On broadband in Switzerland, you see that we were able to grow by 11,000, on TV by 25,000, on mobile on the value area, good, solid. So we think that we keep our market shares in mobile. And in the fixed voice area, you see the structural trends as in previous quarters, but this trend will certainly go down a bit in the future because the whole all IP migration is mainly done. On Fastweb, good momentum on broadband and 120,000 net adds on mobile.
If you go on Slide 6, you see that the financials, the key financials. So the net revenue increased by €54,000,000 So in Switzerland, the trend is slightly negative with €39,000,000 and Fastrip with a growing business of 45 €1,000,000 Then we have some foreign exchange effects under the exceptionals. But overall, plus €45,000,000 On the EBITDA, we have minus €15,000,000 compared to the previous year. And also the same dynamic as on the revenue side, Switzerland minus 27% and Fastweb plus 10%. Interesting is to see the dynamic in Switzerland, so the main decline year on year changes on this EBITDA are coming from fixed voice lines, which is minus 18.
And from a converged discount, we have minus 21. We were able to compensate a part of this with better indirect costs, so plus 23 to cost reduction, which is effect in this minus 27. So the dynamics are as anticipated, and so no special remarks to the financial figures. If you go on Slide 8, you see that we are able to perform in the market. I think it's important to show once more this slide.
And you can see that over the last years, Swisscom was able to compete in the market and to maintain the market share on a high and stable level. So we have stable market shares in mobile or broadband and increasing market shares in TV. So our credit score is clear to go to a customer base management with a clear value focus in a saturated and quality oriented market like Switzerland. That's the strategy for Swisscom. On Page 9, you see our operational priorities in Switzerland for 2018.
It's important to perform on the network side. That's why we're also investing in our networks heavily. Increasing the penetration of VIN1 is important. This will give us a better market performance, I will come related to it. Driving innovation to differentiate ourselves in the market is an important priority.
And then thirdly, also to use the opportunities in the B2B market where with the digitalization, we get new opportunities. And that's the 5th priority. That's our cost ambition. We have to deliver on our cost side. On Page 10, some remarks to our network upgrades.
On the wireline network, you see our ambition. We want to have in 2021 a coverage with in the ultra broadband network with speeds above 200 megabits per second of 75 percent and on above 80 megabits per second, the coverage will be above 90%. Today, we are at 57% for 18 megabit for 80 megabits and for 200 megabits at 29%. So the investments are going in the area of building fast the coverage of ultra broadband networks. On mobile, we are also investing, you see our leading position in 4 gs, but also 4.5 gs, And you see our good results in different tests, but that's not the whole world.
I think the main message here is the net promoter score on the network is actually the guiding KPIs for our network strategy. And there we are in a very strong position. If you go on Slide 11, you see that 5 gs and you see the potential for 5 gs. 5 gs has several opportunities or really increased capabilities, which will bring us new opportunities in the connectivity area. That's why Swisscom wants to invest early in this field.
We start to do activities at the end of this year, and we expect the first 5 gs phones in the beginning of 2019. On Page 12, some remarks to our bank offer InOne. So you can see that we have actually at the end of Q1, 3,270,000 RGUs in our in one off. And the penetration is increasingly strongly, so we have a penetration in mobile of 37% and on broadband, 42%. So these figures are increasing and that's important because we can push the share of wallet and we can reduce the churn.
And also, as you see on the bottom of this slide, the dynamic, the ARPU dynamic, You see that we have on wireless positive ARPU effect if you migrate customers 2 in-one. You see that the impact which we had in the beginning on wireline, which was negative on the ARPU, is actually decreasing. So we are coming in a region of 0 on the ARPU impact on wireline, and then we have the converged discount. But overall, a very positive dynamic with IN1. On Page 13, some remarks to our wireless performance.
So we were able to grow on a year on year basis by 75,000 postpaid customers. 75% of the postpaid customers are on flat products or on Infinity or in 1. And 31% of the postpaid customer base is in bundle. So you see also the dynamic to flat tariffs and to more converged offers. ARPU, the blended ARPU is stable.
And then you see also that we have a good solid ARPU in Infinity and in 1. Overall, the service revenue in mobile is slightly decreasing by 18,000,000 dollars and this mainly because of the converged benefit. If you go to Slide 14, the wireline performance, actually same dynamic as in previous quarter, growing business on TV plus 45,000 TV customers, broadband net adds plus 38,000 and then the structural effects in our voice business. Important to say to mention in the middle of this chart is that you can see that the penetration, the household penetration of the revenue generating units is increasing. We are today at 2 point 2 revenue generating units per household, and the ARPU is stable.
On Page 15, the converged performance, so the revenue is growing with $91,000,000 We have increasing penetration. Onethree of our households and postpaid customers are in bundles. So that shows that that the successful migration in this bundle business. And we see also that the revenue generating units are nicely growing for our churn converged offers. On Page 16, some examples of innovation, which we introduced in the market.
So we improved our price competitive online only offer Winbon. We adjusted the price, quadruple play price is at CHF99. So there we have a competitive offer also in the low end price segment. And also on our TV offer, we have several nice innovations, which will further push us the sales of TV. On Page 17, some remarks to our enterprise business.
Important to mention that the service revenue is slightly with $19,000,000 on the pressure, that's price mainly price dynamic in the mobile and some, let's say, migration effects driven by all IP in the voice area, but overall, a slightly pressure on the service revenue and an increase in solution revenue. And the solution revenue in the B2B business today is higher than the service revenue that drove actually also the transformation in the B2B business. On Page 18, only one example that digitalization is an opportunity for the B2B business. One of it is the IoT business, where our ambition is to be the IoT ecosystem player in Switzerland. And there we are on a good path to attain this ambition.
Page 19 gives you some flavor to our cost focus. So we are on track to achieve our target of $100,000,000 cost savings through a bundled initiative of simplicity, digitalization, project efficiency. And you see on the left side of the chart some figures some detailed figures to it. On Fastweb, Page 21, so the wireline performance of Fastweb is good, solid. We have an increased customer base of 3% on broadband, 2 point 48,000,000 subscribers.
Important is to say that we have an over proportional growth on ultra broadband and the growth there is 26%. That's important to mention because on Ultrabroadband, we have a higher ARPU and a lower churn. And you see also that 56 percent of the new customers in Q1 are on an NGN network. Business is also running well. The business performance is well increased order book 65% on corporate and 25% on wholesale.
So we have a strong enterprise performance in Italy. On Page 22, the mobile performance of Fast Red, so we are on the right track to build a more converged customer base. We increased our customer base by 55%, and penetration of mobile and wireline offers in faster of bundled offers is today at 25%. Also, this is important to mention because in such converged offers, we have 5% lower churn. On Page 23, some remarks to our commercial proposition.
We launched Viente Com Hema, that's all in, all inclusive offer with a very transparent pricing. There, we have a good performance and get a lot of trust from our customers. We also are on a good track with our partnership with ENI for joint energy and telco bundles. Then on Page 24, our financial performance so a growing revenue of 9%. EBITDA on a competitive base is growing by 5%.
So we are on track with Fastweb to reach our target 2018. Now I would like to hand over to Mario for some financials. Mario? Thank you, Urs, and also good morning from my side. I can give you some additional information on the financials, and I'll start on Slide 26 with revenue.
So we reported higher revenues of 1.9% year over year. We have 2 exceptional items on the top line. One is the currency effect, positive of €47,000,000 and the negative impact that coming from the accounting of IFRS 16 of €4,000,000 So on a comparable basis, we have, let's say, a flattish top line development. Few remarks on the different segments. In the Swiss business, the retail customers, the service revenue went down by €55,000,000 or 4.1 percent, with the following main effects, decrease of voice access line €18,000,000 conversion discount in €21,000,000 rolling €4,000,000 the low effect because of lower seasonality in Q1.
And then we have a $9,000,000 onetime customer fidelity effect that's due to an operational interruption of the platform. On the Enterprise segment, we have a decrease of or a flattish development, revenues of €611,000,000 On service revenue, we have the expected decline, €7,000,000 on wireless because of an ongoing price pressure, €9,000,000 from the wireline business. There are some structural changes due to all IP migrations that the customers take this opportunity to optimize their telecommunication installations and also €2,000,000 from this customer fidelity effect. On the other side, we are able to grow solution business by €17,000,000 There we have in all the vertical and also in the cloud business, a very good performance in Q1. On Fastweb, we have an increase of CHF45 1,000,000 and Sterile can grow revenues in all segments, consumer segment by 10%, enterprise segment by 7% and also slight increase on wholesale.
On the next slide, a few words on the cost side. First on acquisition and retention costs, they went down by $16,000,000 There we have $5,000,000 less subsidized Internet routers and €10,000,000 impact of less subsidized TV boxes. That's due to less all IP migration. So all IP migration is more or less done in the residential market. So we have less costs for subsidized purpose.
And the higher costs for goods and services, point number 3, that's directly driven by revenue. There is no margin impact. And then as was mentioned before on the indirect costs, we are on track to deliver the €100,000,000 We realized SEK 23,000,000 in the Q1 coming from personal costs, SEK 17,000,000 savings external raw costs, euros 3,000,000 and some other cost savings of additional €3,000,000 EBITDA by segments on Page 21. Also here we have exceptionals. Forex exceptional is €13,000,000 positive.
And on IFRS, we have a negative impact on IFRS 15 of €20,000,000. €9,000,000 come from Swisscom Switzerland and the net €11,000,000 from Fastweb. This effect will flatten out over the year. And for the full year, we expect around €50,000,000 as guided in February. There, we expect 50% for the Swiss business and 50% for the Italian business.
In Switzerland, on a comparable basis, the EBITDA decreased by 27,000,000 dollars In the retail segment, EBITDA went down by $4,700,000 So we discussed before the decline of service revenue by $52,000,000 $55,000,000 and we were able to partly compensate that the decline mainly with reduced cost in the call centers and in field services, we had a material lower amount of service requests in Q1 in our call centers. Enterprise customers, we lost €5,000,000 was more or less flattish development. We saw the price pressure in the telco segment and the online impact, and we were able to partly compensate that by higher contribution from the solution business. In Fastweb, increase of €10,000,000 The increase is primarily revenue driven, more revenue generating units than we have in Q1 still the impact of the 4 weeks billing, €16,000,000 Then we have to mention the prior year, we had a positive impact of €9,000,000 from regulatory benefits. Then in Q1 2018, we had higher subscriber acquisition costs, mainly because of some performance in the mobile business.
Around 90 years. On the next slide, below EBITDA, only two remarks. On depreciation, they are higher compared to the prior year. 50% of the increase is exchange rate driven and the other 50% are coming from higher depreciation in Swiss business. The second remark is related to the tax expense.
If you might remember, in Q1 2017, we had some high extraordinary tax charges. The tax rate was at 25%. This year, we have a normal tax rate of 20 around 20%. That brings us to a slight increase of the net income. On CapEx on the next slide, CapEx were 13% lower in Switzerland with $311,000,000 There are 2 comments in our 5 or in our rollout program invested in Q1 $100,000,000 As expected, that's also in line with prior year and expect for the full year, again around $500,000,000 That's in the same magnitude as in 2017.
And then we have in Q1 some less customer driven CapEx, less project cost, but less season driven and we speak to our unchanged time in Corpus Christi of SEK1.6 billion, of course, without any potential CapEx or spectrum. In fact, that in local currency of €159,000,000 we are on prior year level. Savings in the IT area were compensated by customer driven CapEx, as was mentioned. Good performance in the B2B segment and that brings some additional CapEx. On the next slide, nothing special on operating free cash flow.
It's lower than last year because of changes in net working capital. We had a very strong development in Q4 2017 and now we have to have this part in Q1, but nothing special that is also flattened out over the year. And on the financing side, so we have to refinance this for us quite large bond of €1,385,000,000 which is due in September. We started this debt in Q1. We did a Swiss bond at the beginning of the year, around €150,000,000 as very favorable conditions.
And in April, we concluded an euro bond for €500,000,000 with an attractive component and the maturity in 2026. The average cost of that stands at 1.5%. The duration is 4.6 years and we are in 6 years, and we are well protected about any potential interest rate increase, 86% of our debt portfolio is fixed. Coming to the last two slides. On Page 31, you see the main effects of the Swiss business, which we also guided for.
And you see in the left hand side the year over year change in Q1 and the expected full year change. And we can confirm that more or less, it's as we expected. And we think that fixed line loss for the full year will lower €60,000,000 outbound growing €20,000,000 dollars discounts on conversions $80,000,000 and in the B2B segment overall $40,000,000 50% of that will compensate this to confirm indirect cost savings. And that brings me to the guidance. As Urs mentioned at the very beginning, we can confirm the guidance for the Swisscom Group revenue at €11,600,000,000 EBITDA €4,200,000,000 and CapEx, €2,400,000,000 And of course, we can confirm the dividend of CHF 22, which we'll propose to the AGM next year.
And with that, I hand over to the operator for the Q and A session.
Thank you. We already have a few questions. I will open up the first line. Just a second. It's from Julio Arciniegas.
Yes, good morning. Thank you for taking my question. I know that it's early, but can you give us some color of the first impact of Sal's fixed launch services? Have you seen more, for instance, more discounts being asked by customers? And what do you think that will be the impact from basically this launch from South?
And my other question is regarding InOne and Infinity. I see that mobile net adds have grown less than previous quarter. Can you give us some color on why this trend is a company pushing less fixed mobile convergence bundle? What should we expect from basically the net adds from convergence going forward? Thank you.
Good. I'm taking the first part of the question on salt and then Mario will give some information on this Infinity City question. Salt, it's actually the offer of salt, that's an aggressive one. But the offer of salt, if you look to this offer, it's in the fiber footprint and it's also, let's say, an attractive offer, but also an offer which will not hit the whole TV market in value. So from our side, we are confident that we can compete with InOne because InOne has a lot of flexibility in it to tell the different customer needs.
There we have an attractive offer with a strong TV product. And on the really very price sensitive segments, we have the 2nd and third brands where we can be competitive. Up to now, we don't see actually an impact on our market dynamics of broadband. So our net adds, our bunch of doctors are running very well. So after the launch of salt, we don't see an increased churn.
So it's maybe too early to evaluate in detail, but we will continue our strategy and we will not action on the pricing side. And on the mobile postpaid performance, first of all, you see on Page 5, you see that the Q1 was in 'sixteen, 'seventeen relatively weak, That's kind of the seasonality. And then on the performance of IM1, on Page 12, you see that performance in the Q1 of the ARPUs in 1 on 6, 1 by 1 was percent defined. So we were able to increase the base of 243,000 RGUs. And the important thing is in line and the postpaid customers need about protecting value.
And you can see that on Page 13, Q1 'eighteen, infinity in non ARPU compared to Q4, ARPU is stable. And then on Page 15, you see a stable development of the average revenue per bundle. So it's more important about protecting the value of the customer base in the saturated market than running after each and every low priced income. That's our strategy. I think maybe to give some more remarks to what Mario said.
The performance in mobile is actually a good one. If you see our churn figures, if you look to our ARPU development, we are in a solid situation. If I also look to the KPI of importing, out porting, I would say we are in a good shape in Q1. And then for the future, it's much more important to look on revenue market shares than on subscriber market shares because we have so different kinds of SIM cards in this market. We have SIM cards with an ARPU of 90 and then SIM cards with CHF 2 or CHF 3, and we shouldn't compare such SIM cards.
Okay. If I'm in my follow-up, so you said that, for example, E1 is a product that actually is very competitive, so you feel more confident even launch has launched, okay? But for example, if I see the Slide number 12, I see that in 1 wireless ARPU is positive, the fix is negative to barely flat. But actually, the convergence beat of the in one is the one that basically brings erosion. Do you believe that maybe you will have to push further the convergence side of IN1 considering more competition in the market?
No, no, we don't see. Actually, it's always the same the beginning, you have a lot of optimize and then if the penetration is increasing, we are able to decrease the ARPA impact. And so the converge rebate be claimed in the future. Okay. Thank you for answering the question.
Okay. There are more questions. The next one is from Jero Jakun Chotchos. I will open up the line.
Yes. Good morning. Thank you for taking the questions. I've got 2. The first one is around Fastweb and migration back to monthly billing.
I believe you probably started the process in the last couple of weeks. I just wanted to know whether with the migration to monthly, you fully offset around 8.5% benefit from the 28 day migration? Or is it just part of it? And also linked to that, I believe, AsiaCom is also trying to take the operators to court in order for you to reimburse for the months. You are on 28 days.
If you would give us an indication of what you expect when should we hear about this and what you expect the outcome to be? And then my second question is around spectrum and 5 gs. If you could give us an update of where we are in the spectrum auction process, whether your demands or requests are being satisfied by the regulator and perhaps a comment as to how quickly we should expect 5 gs to be relevant for you? Thanks.
Good. I will take the question on 5 gs spectrum and Mario the question to 4 week billing of Fastweb to the spectrum. So we think that we will have an auction at the end of this year for the spectrum. We are still in a consultation phase. The operators give feedbacks to the format.
But I think at the end, we will have, let's say, a fair auction in the Swiss market where everybody can get his amount of spectrum. For SwedeCom, it is important that we can gain a spectrum amount, which is in the area of our market share, and we will certainly lobbying for this that we could get a decent amount of this spectrum. And then our 5 gs plan, so we our ambition is to enter early with 5 gs in the market. The first handsets, our ARPU will be in the market in 2019. We have certainly some challenges in the Swiss market with our radiation loss.
It will be not so easy to build 5 gs, but nevertheless, we want to enter early in the 5 gs market. Mario, on Fastweb? On the monthly billing, we started to revert to monthly billing in April. And we also stated prices, coupled with higher value for customers that reflects the product new, and we think that we can compensate this price increase. On the argicon issue, I think that's an ongoing process now, which you should not comment in detail.
But from our point of view, I think we were there that there is no legal ground that the operators can be forced to reimburse these, let's say, benefits to the customer base. But that's an ongoing procedure now.
Thank you very much. Could I ask a follow-up on the 5 gs answer earlier? With the emission limitations that you have, is it fair to assume that for 5 gs, you will need new sites? Or are there any ways to circumvent other new existing sites, but maybe differently in order to get around the problem? Thanks.
No, we need additional sites. That's for sure. But also without this issue, we would need additional sites long term. The main impact of this emission issue is that it will take longer to build out the network and that the full potential will be difficult to gain in Switzerland. But there is a discussion in the parliament now.
I think the last word is not fair. So there will be a dynamic, and I hope that we will get a better framework for building out 5 gs in the future.
That's clear. Thank you.
Okay. There is a next question from Frederic Boulan.
Hi, good morning everyone. So it's Frederic Boulan from Bank of America Merrill Lynch. A couple of questions. First of all, on the all IP side, so you're saying you're getting towards the end of that process. If you could comment a little bit on the benefits you're seeing from a cost perspective, but also on in terms of service delivery, what it brings to you?
Secondly, on IoT, you mentioned offerings. Can you talk a bit more about the value chain, where you think you can position yourself beyond connectivity and where you see the business opportunity in the medium to long term? And then thirdly, a question on the Fastweb. If you can come back a little bit on expectations here, we saw slowdown in top line from H2 levels. EBITDA as well was up around 5% versus 8% sorry, 9% to 10% levels in H2.
So where can we see that business going forward in 2018? Thank you.
So I will take the question on IoT and Mario then the question on the ARPU. All I can IoT is a very fragmented business. Our strategy is to have different networks or let's say, low power network for specific applications and then the normal 4 gs or 5 gs network for other IoT applications. And let's say the main value for the IoT business for an operator like Swisscom is on the connectivity side. So more SIM cards.
And then there you have very different applications. If you have a smart car, as an example, on IoT, they have a higher ARPU, much higher ARPU. If you take a Tesla, the consumption of the Tesla is quite high. And if you take Smart Meats, the ARPU is quite low. So that's a very fragmented business, and the value is coming out of the connectivity business and easily said more SIM cards.
So it will be not IoT will be not really the biggest business of 5 gs, but it will be a part of 5 gs. And then on all IP, so the main benefits on all IP are actually on the customer service side because we can serve the customers with lower costs and then we can shut down the network, the OTN network and the financial impact is actually what we said that will be a long term is SEK100 1,000,000,000. It is part of our major program in 'eighteen, 'nineteen, 'twenty. I think it was, as I mentioned, that's encouraging in Q1 where we saw that these numbers of calls, service requests are coming down in the residential segment and we see that we have less more impact and it's clear than we will adjust our target but I think there is a bit too early, but right now it's at exactly. And on Valspep, I'd say on the top line, we see a revenue increase in 2018 of 7% to 8% And EBITDA, as we guided, we expect an EBITDA of around €700,000,000 that we can confirm after Q1.
Okay. Thank you very much.
Okay. There is another question from James Ratza.
Yes. Good morning. Thanks very much. I had two questions, please. The first one was just regarding your overall service revenue trends that you're seeing in Switzerland, which are currently running down around 4% year on year.
I mean, that trend has been gradually deteriorating over the last year or 2. We've now got salt coming into the market. I'm going to hear what you said that it hasn't had much impact so far. But what do you think needs to happen over the next, say, 12 to 24 months for that trend to get better? I mean, do you think it can get better from here?
And what would be the key drivers for that? And then the second question, just going back to the questions we've had on Fastweb and the EUR 700,000,000 EBITDA guidance. I mean, on the run rate you've just delivered in Q1, we'd be looking at a run rate nearly or kind of near €600,000,000 or below. So could you just run through specifically what you think is going to get better in the next three quarters? Is this more cost reduction?
Or do you actually think revenues from here will reaccelerate? And if so, what's going to be the key driver of that? It seems to me this billing change back to monthly could actually have a further drag on revenue growth. Thank you.
Okay. I will take service revenue question of Switzerland and then Mario's EBITDA of faster. The service revenue actually in Switzerland, so 20 18 is certainly dynamic year because we have still this erosion of the fixed voice business, and we have which is also a bit driven by all IP. And then also the converged discount, but as the penetration is actually going up, this effect of the converge discount is actually declining. And important for us is to perform on quality and on the customer experience side.
And then we are able to keep our ARPUs. And you can see that the ARPUs actually in our business are in a solid situation. And also the market shares are in a solid situation. So I think the impact on service revenue in 2018 is certainly a bigger one than when we can expect in the future. And then it's important for us to work on the cost side because in a saturated market with promotion activities, we have to work on our cost side and there we are on track.
Mario to farmstead. And on the farmstead development for the remaining three quarters. So overall, I would say if you look at different segments, consumer consumer revenue will develop more assets in Q1. Then on enterprise, you have traditionally in Q1, you have relatively low revenues. You can also look at prior year numbers that were low in Q1.
So you'll have stronger performance in the remaining 9 months. And as was mentioned, we have very good order book there. And also on the wholesale business, the second half will be stronger than the sales part in 20 18. And the cost side may be more or less the same evolution as in Q1. And the previous view overall with a better seasonality on revenue to this expected 700,000,000
EBITDA. And what please, thank you. What should drive that better wholesale performance specifically in the whole quarter?
The wholesale business is part of it. It's a seasonal business. Depends on contract to conclude. And we know from the funnel more or less when these will realize in revenues. Part of it is ongoing on O7, part of it is this project range.
Great. Thank you very much.
Okay. There is another question from Simon Cowles.
Morning. Thanks for taking the questions. First one is
on cost cutting. Clearly, you've been doing a great job over the years and you upgraded your cost cutting at your full year 2017 results. I was just wondering what lessons have been learned from say digitalization, all IP migration and how that's going? Is there potentially further scope for upside in the future? Secondly, on Fastweb, a solid development again.
You said just over 50% of your ads are on ultra broadband. What's the ARPU uplift that you're seeing from these sorts of customers? And how many of those customers are on your own network versus, say, the JV with PI? Thank you.
Okay. On the cost side, actually, if you if we work on the cost side, this is a book of a lot of different actions. So it's a simplification of the product portfolio, the processes with digitalization and artificial intelligence, we are able to automate more processes. So I think that's the thing you have to do constantly and then we are able to increase our efficiency. And then you have certainly also projects like whole IP, where we can phase out all the infrastructures, but also where you have a low cost to serve because the processes are getting much more efficient.
And we have to continually work on this cost side, and the main learning is actually you need a clear program and you need also a culture of the organization has to become has to have a culture which also works on efficiency. Now to Fastweb and then the ARPU, because the consumer are that fast, that is around €30 and in Q1, it was €1 lower than in Q1 2017. That's something to do with promotions we had in 2017, more or less stable ARPU. That's also because of migrating more and more customers to our infrastructure that brings them more and more stable ARPU in these areas.
Okay. Thank you very much.
Okay. There is another question from Joshua Mills.
Hi, there. It's Joshua Mills from Goldman Sachs. Just a couple of questions from me, please. In the past, you have given us some disclosure on what percentage of your net adds are coming from the Swisscom brand versus the Wingo brand. I wonder if you could give us an update on that and or even just give us directionally an indication as to whether or not the shift of where your net adds are coming from has changed.
Plus, what percentage of your current broadband base is on Wingo rather than Swisscom? And then secondly, in the context of recent headlines around the potential joint venture between Libtay Global and Sunrise. I'd be interested in your views of market consolidation more broadly, where you see the opportunities and the downside risks. And specific to that, just within your wholesale revenue line, can you give an indication as to how much of that line roughly it's coming from your wholesale business with Sunrise at the moment? Thank you.
Okay. On the net add mix, actually, let's say, the net adds on Wingo, they are still on a low level. And actually, that shows also that we have a stable business on our Swisscom performance and also the churn figures on our Swisscom mobile customer base is solid. So Wingo is still on a low level. And then the second and third brands, which we have also Ambuksha is performing well.
This brand is performing well. And on Swisscom, we are, let's say, overall a slight, slight increase on Swisscom. But the main dynamic is coming out of the second and third brands and not Winkle. And on the whole subscription base, the second and third brands, is more or less unchanged, still below 10% and more than 90% is on our fixed comp brands. But it's still important we have the 2nd and third plans to defend the low end.
And I think it's also important on this topic to see what the interblended ARPU. I think this gives you also a good indication how the price dynamic in our whole portfolio is and this blended ARPU is stable. On the JV or on possible consolidation in Switzerland, What could be the impact of Swisscom? There could be a lot of different consolidation. Switzerland, it's important at the end what will be the strategy of this new consolidated company.
And if this company has a rational quality oriented strategy, I think this will have a positive impact on the Swiss market overall. It will even stabilize the Swiss market. For Swisscom, we are big enough to and have the capabilities to compete also in a consolidated situation. And the wholesale revenues of Faster, we don't disclose with Sunrise, we don't disclose them.
Understood. So just to come back on that first question around the sub brands. So just for this to come together, so you're saying that currently less than 10% of your broadband base are on a sub brands via M Budget or Wingo, But the majority of your net adds are coming from those
I think there was a misunderstanding on postpaid, on mobile postpaid less than 10%. On broadband, it's close to 100%. It's on the fixed comp range. But the net
adds going forward, you're saying that you're asking some small increases in Swisscom main brand, but the majority of the net adds we see on Slide 5 are coming from Ringo and Budget.
Yes, you are talking from mobile or broadband? Tent? Both. Okay. On mobile, we can play the main part of the net adds are coming from 2nd and the 3rd brands in Ringo and Budget in Q1.
On broadband, it's close to 100% the part of Swiss combustion. And that's why we are also not so nervous about the salt offer. We have a competitive offer in the market, which is actually on a level of the salt down, and we don't see too much dynamic. And I don't see a dynamic of salt up to now in the market. But it's too early to say.
We have to watch to it. And we don't underestimate it, so we will protect our customer base.
Thank you.
Okay. There is another question from Usman Jadzi.
Good morning, gentlemen. Thanks for taking the question. I've got two questions, please. First one is on mobile postpaid churn. I see that you're now disclosing the numbers.
And specifically on the mobile postpaid value churn, it seems like the residential churn is quite stable, 7.7% versus 7.4% last year, so very low. But the overall blended churn across retail and enterprise has gone up. It's low, but it's gone up to 8.5% in Q1 versus 7.2% in Q1 last year. So it's suggesting that enterprise churn has picked up. Has there been a contract that you lost in Q1 or something?
Or if you could just give us an idea of what is driving that? The second question was just on the spectrum auction again. I mean, if you do not get the concession from the regulator, would this impact your kind of 5 gs planning? Or do you have kind of some kind of a backstop on meeting 5 gs needs even if you don't get spectrum in accordance with your market share?
Thank you.
Good. On the churn of mobile post paid, so we have good and low churn figures on overall on mobile. And also if I look to our net porting, the porting balance, importing, outporting, I don't see actually a change in the market compared to previous years. So there is a stable situation. What you mentioned is that's right.
We had a loss of 1 enterprise customer in Q1 in the enterprise unit, And that's a one off, but overall, the performance of win and losses in the enterprise market is a good one for Swisscom. So we are losing customers. We are gaining customers. Sunrise is acting very, very aggressive in only on price. In this enterprise market, I don't know if this will be a sustainable strategy, but that's not my choice.
But that's what we have that's actually what the case is impacting what you mentioned. I said the loss the one loss of a customer in the enterprise market. Spectrum. On Spectrum, yes, if the auction will not take place this year, the rollout of 5 gs will be a very difficult one because we need frequencies for it. That's great.
You can't do a good 5 gs rollout without spectrum in the environment which we have in Switzerland. So that's why we are asking for an auction for this year. Otherwise, Swisscom will be a laggedy or Switzerland will be a laggedy in this 5 gs technology. And I think that will be not the intention of the regulator.
Sorry, I meant that, I mean, you're asking for a spectrum, the opportunity to compete in the auction and buy enough spectrum such that it matches your subscriber share. I mean, if the regulator doesn't meet that request, I'm just wondering how it would impact I mean, would it impact the 5 gs deployment plan or do you have sufficient capacity?
It would make it much more complicated to roll out the 5 gs. If you don't have frequency, you can't do a good rollout of 5 gs. But it's too early to speculate. It's too early to speculate. I think the regulator must make a fair auction for all our competitors where they can get for a reasonable price some spectrum to roll out it.
And it's too early to speculate, but for everybody if you don't have spectrum, 5 gs will be difficult.
Can I maybe sneak in another question? Are they as the consultation stands today, I mean, are there any coverage obligations on the spectrum or not?
Yes, it's not defined. Really, the condition of the auctions are not defined. They are now in the last consultation phase and then we know it. Too early to speculate about this package. Okay.
Thank you very much.
Okay. There is another question from Luigi Minerval.
Yes. Good morning. Thanks for taking my questions. The first one is looking at Fast Web, this new energy telco bundle. I was wondering if you can tell us a bit the rationale behind it and whether it can be seen as a pilot for Switzerland, for example.
And more generally, I mean, still on this point, I was wondering whether bundling telco with the services which increase prices by inflation every year effectively would leave the burden of the discount increasingly always on the telco side. So more generally, the risk from that approach commercially. And then moving on to Switzerland, on the Eletroba and Negvik emissions legislation, can you remind us what is the outlook for a change in terms of timing and procedures? And maybe if you have an indication of how a change in the legislation may affect the CapEx profile in the next few years? Thank you.
So on this bundle, energy telco bundle in Italy with DNI, but actually that's a distribution partnership. So you can it's a smaller distribution channel. So we don't see their effects on ARPU and so on. It's a selling it's a distribution channel. And in Switzerland, such a thing wouldn't work because the market conditions are totally different in Switzerland.
On this emission topic, So there is now a process in Switzerland that they try to improve the measurement method for this emission. And this would give us relief to build the network. It's too early to say when this will be happen, but this will be not in the next 2 months, although this will take time. So I think it's too early to give a forecast on this. And on the CapEx actually, our more CapEx we would need to do a 5 gs network if we don't get this relief on the emission, it depends on the take up of the data growth in the 5 gs network.
And it's too early to say, but we are confident that we can build that we can make a rollout of 5 gs in an overall CapEx envelope in the region of today.
So just to clarify on the first question. So on Slide 23, when you indicate the discount, so isn't that like a discount to the ARPU basically?
Yes. But these are also, at the end, new customers. So you are able to grow and it depends on your bundle. And it's always if you have a discount, the selling machine actually has the ambition to have the same output to make and not selling. So you can sell higher products.
But that's not you
can't give it one to one to the whole ARPU because there are different elements in it.
Okay. Thank you then.
Okay. There is one last question from Luis Prota.
Yes. Thank you. Chris Potta from Morgan Stanley. The question is on the discount in your convergent package in 1. Your in 1 mobile subscribers are currently like 27% of your postpaid days, but at the current run rate, you are going to be well above 50% by year end 2018.
So the question is, out of these new mobile lines getting into InOne, how many or what's the percentage of those which are second and third lines and therefore getting a CHF 20 discount? And from what level we should expect what level of penetration of mobile within in 1 we should expect the discount to start trending towards the
CHF 40 CHF? Thank you. I think you have to look on Page 12. You know, there are a lot of different factors in it. So what you can see is that we are able to upsell a customer which is going in a bundle in the region of CHF 6, but we have an upsell on mobile.
But then we have a converged discount and it depends now how skillful we are overall. And then if we migrate, we can even get an upsell on it. There are different elements. You can just take the converged rebate and say that this will reflect in the whole from large discount. There are a lot of different dynamics.
That's why charter 12 is actually the one where we're showing the dynamic.
Right. Am I right thinking that when you're moving when a number 3 or number 4 mobile line is getting into the bundle, it's going to be more difficult to upsell. I guess that those are low end lines probably
That's not be the case because a lot of second and third SIM cards are normally the SIM cards of children. And in this, they give if you can make their nutshell for more speed, more data volume, mobile offer. And then there is another effect also on it. The churn figures are also lower. So I think you can't just take the ARPU at the end.
You have also to take the net NAV dynamic and the churn dynamic.
Sure. Okay. Thank you very much.
Okay. There is another question from Usman Gazzi.
Hello. Thank you for taking the follow-up. I just wanted to ask just on this point of upselling. Is it possible for you to share what kind of average speed the customer base is on today just for us to get an understanding for what the upsell opportunity is in the N1infinity base just because the ARPUs seem fairly high, so it would be good to get a bit more detail on how you see the upselling opportunity from here. And the second is a much it is a bit more broader question.
Given Swisscom is one of the few incumbents that are that have said that they're actively going to deploy 5 gs, what do you see as in the residential market? I mean, do you see 5 gs as an opportunity to differentiate yourself? And if so, with what kind of applications do you think this would be facilitated? Thank you.
Good. On upselling, to upsell a customer, there is not only speed important or relevant. So if you look to our product offers, you see that it's not only speed differentiate to OXXET. It's a kind of bundle of speed, then some content maybe in the TV area or some roaming volume. So that's a mix of bundle, which is more attractive for the customer.
And that's why I think we have a lot of argument to upsell it. And then the second question was on 5 gs. 5 gs. 5 gs, what is the advantage for the customers? On 5 gs, you can differentiate yourself on the network side.
That's one advantage for an established operator. The second thing is that you can make ultra broadband offers on mobile. I think this will be the major application. But in the B2B market, you can do a lot of nice application because with you can do slice networks. So you can do Industry 4.0 applications for companies.
So I think 5 gs has also a potential in the B2B market in more vertical solutions. So that's the main also that's one of the advantage of 5 gs. And then as always, if you have more speed, lower latency, there will be a lot more application in the market. A smartphone wouldn't be in the market without 3 gs. It wouldn't have been the innovation of smartphones and applications.
So we will have the same dynamic and then the penetration of the SIM card will go up. The main question is how rational and skillful is our business to monetize this 5 gs investment. I think that should be the opportunity for our investors to monetize these investments. Okay. And with that, question number 10, I would like
to conclude today's conference call. Thank you for your participation.
If you should have any further questions, please do not hesitate to contact us from the IR team. And speak to you soon and have a great day. Thank you.