Good morning, ladies and gentlemen. Welcome to the first quarter results of 2018 presented by Urs Schaeppi, Mario Rossi and Louis Schmid. Louis, the floor is yours.
Good morning, ladies and gentlemen, welcome to Swisscom's first quarter results presentation 2018. My name is Louis Schmid, Head of Investor Relations, and with me are our CEO Urs Schaeppi, and Mario Rossi, our Chief Financial Officer. The first part of today's analyst and investor presentation hosted by our CEO consists of three chapters. First, a quick overview of the highlights, operational performance, and financial results for the first three months. Second, an update on our Swiss priorities, operational and financial performance in Switzerland. Third, some explanations on our Fastweb first quarter results 2018. In the second part of today's presentation, Mario runs you through the financials 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. 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. Also, in Switzerland with our bundled offer inOne, 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, we have a good revenue-generating momentum in the broadband or in the TV area. Overall, we confirm our guidance 2018. If you go to slide five, you can see our operational performance. 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. We think that we keep our market shares in mobile. In the fixed voice area, you see the structural trends as in previous quarters. This trend will certainly go down a bit in the future because the whole IP migration is mainly done. On Fastweb, good momentum on broadband and 120,000 net adds on mobile. If you go on slide six, you see the key financials. The net revenue increased by CHF 54 million. In Switzerland, the trend is slightly negative with CHF 39 million, and Fastweb with a growing business of CHF 45 million. We have some foreign exchange effects under the exceptionals. Overall, plus CHF 45 million.
On the EBITDA, we have minus CHF 15 million compared to the previous year. Also the same dynamic as on the revenue side, Switzerland, minus CHF 27 and Fastweb plus CHF 10. Interesting is to see the dynamic in Switzerland. The main decline year-on-year changes on this EBITDA are coming from fixed voice lines, which is minus CHF 18, and from converged discounts, we have minus CHF 21. We were able to compensate a part of this with better indirect costs. Plus CHF 23 to cost reduction, which effects in this minus CHF 27. The dynamics are as anticipated, no special remarks to the financial figures. If you go on slide eight, you see that we are able to perform in the market. I think it's important to show this slide once more.
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. We have stable market shares in mobile or broadband and increasing market shares in TV. Our trade-off is clear to go to a customer-based management with a clear value focus in a saturated and quality-oriented market like Switzerland. That's the strategy for Swisscom. On page nine, you see our operational priorities in Switzerland for 2018. Important is to perform on the network side. That's why we're also investing in our networks heavily. Increasing the penetration of inOne is important. This will give us a better market performance; I will come later to it. Driving innovation to differentiate ourselves in the market is an important priority.
Thirdly, also to use the opportunities in the B2B market, where with the digitalization we get new opportunities. As the fifth 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 in the ultra-broadband network with speeds above 200 megabits per second of 75%, and above 80 megabits per second, the coverage will be above 90%. Today, we are at 57% for 80 megabits, and for 200 megabits at 29%. 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 4G, but also 4.5G, and you see our good results in different tests. That's not the whole world.
I think the main message here is the Net Promoter Score on the network is actually the guiding KPI for our network strategy, and there we are in a very strong position. If you go on slide 11, you see the potentials of 5G. 5G 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 5G phones in the beginning of 2019. On page 12, some remarks to our bundled offer inOne. You can see that we have actually at the end of Q1, CHF 3.27 million ARPUs in our inOne offer. The penetration is increasingly strongly. We have a penetration in mobile of 37% and on broadband, 42%.
These figures are increasing. That's important because we can push the share of wallet, and we can reduce the churn. You see on the bottom of the slide, the ARPU dynamic. You see that we have on wireless a positive ARPU effect if you migrate customers to inOne. You see that the impact which we had in the beginning on wireline, which was negative on the ARPU, is actually decreasing. We are coming in a region of zero on the ARPU impact on wireline, and then we have the converged discount. Overall, a very positive dynamic with inOne. On page 13, some remarks to our wireless performance. We were able to grow on a year-on-year base by 75,000 postpaid customers.
75% of the postpaid customers are on flat products or on Infinity or inOne, and 31% of the postpaid customer base is in bundle. You see also the dynamic to flat tariffs and to more converged offers. ARPU. The blended ARPU is stable. You see also that we have a good solid ARPU in Infinity and inOne. Overall, the service revenue in mobile is slightly decreasing by CHF 18 million, and this mainly because of the converged benefit. If you go on slide 14, the wireline performance, actually same dynamic as in previous quarter. Growing business on TV, plus 55,000 TV customers. Broadband net adds plus 38,000, and then the structural effects in our voice business. Important to mention in the middle of this chart is that you can see that the household penetration of the revenue-generating units is increasing.
We are today at 2.2 revenue-generating units per household. The ARPU is stable. On page 15, the converged performance. The revenue is growing with CHF 91 million. We have increasing penetration. One-third of our households and postpaid customers are in bundles. That shows the successful migration in this bundle business. 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. We improved our price-competitive online-only offer Wingo. We adjusted the price. Quadruple play price is at CHF 99. There we have a competitive offer also in the low-end price segment. 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 CHF 19 million under pressure. That's mainly price dynamic in the mobile and some, let's say, migration effects driven by All IP in the voice area. Overall, a slight pressure on the service revenue and an increasing solution revenue. The solution revenue in the B2B business today is higher than the service revenue. That shows 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. There we are on a good path to attain this ambition. Page 19 gives you some flavor to our cost focus.
We are on track to achieve our target of CHF 100 million cost savings through a bundled initiative of simplicity, digitalization, project efficiency. You see on the left side of the chart some detailed figures to it. On Fastweb, page 21. The wireline performance of Fastweb is good, solid. We have an increased customer base of 3% on broadband, 2.48 million 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 ultra-broadband we have a higher ARPU and a lower churn. You see also that 56% 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. We have a strong enterprise performance in Italy.
On page 22, the mobile performance of Fastweb. 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 Fastweb of bundled offers is today at 25%. Also, this is important to mention because in the such converged offers, we have 5% lower churn. On page 23, some remarks to our commercial proposition. We launched "Niente Come Prima." 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. On page 24, our financials of Fastweb. A growing revenue of 9%, EBITDA on a comparable basis is growing by 5%.
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, I start on slide 26 with revenue. We reported higher revenues of 1.9% year-over-year. There we have two exceptional items on the top line. One is the currency effect, positive of CHF 47 million, and the negative impact coming from the accounting of IFRS 15 of CHF 4 million. 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 for service revenue went down by CHF 55 million or 4.1%. With the following main effects: decrease of voice access line CHF 18 million, converged discount inOne CHF 21 million, roaming CHF 4 million, a low effect because of low seasonality in Q1.
We have a CHF 9 million one-time customer fidelity effect that is due to an operational interruption of the platform. On the enterprise segment, we have a decrease of, or a flattish development, revenues of CHF 611 million. On service revenue, we have the expected decline, CHF 7 million via less because of an ongoing price pressure. CHF 9 million from the via line business. There are some structural changes due to All IP migration that the customers take this opportunity to optimize their telecommunication installation, and also CHF 2 million from this customer fidelity effect. On the other side, we were able to grow the solution business by CHF 17 million. There we have in all vertical and also in the cloud business, a very good performance in Q1. On Fastweb, we have an increase of CHF 45 million, and there we can grow in revenues in all segments.
Consumer segment by 10%, enterprise segment by 7%, and also slight increase on wholesale. The next slide, a few words on the cost side. First on acquisition and retention costs. They went down by CHF 16 million. We have CHF 5 million less subsidized internet routers and CHF 10 million impact of less subsidized TV boxes. That is due to less All IP migration. All IP migration is more or less done in the residential market, so we have less costs for subsidized routers. The higher cost for goods and services, point number 3, is directly driven by revenue. There is no margin impact. As was mentioned before on the indirect costs, we are on track to deliver the CHF 100 million.
We realized CHF 23 million in the first quarter, coming from personal costs, CHF 17 million savings, external workforce costs CHF 3 million, and some other cost savings of additional CHF 3 million. The EBITDA by segments on page 21. Also here we have exceptionals. Forex exceptional is at CHF 13 million positive. On IFRS, we have a negative impact on IFRS 15 of CHF 20 million. CHF 9 million come from Swisscom Switzerland, and CHF 11 million from Fastweb. This effect will flatten out over the year. For the full year, we expect around CHF 50 million as guided in February. We expect 50% for the Swiss business and 50% for the Italian business. In Switzerland, on a comparable basis, the EBITDA decreased by CHF 27 million. In the retail segment, EBITDA went down by CHF 4.7 million.
We discussed before the decline of service revenue by CHF 55 million, and we were able to partly compensate that 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 CHF 5 million. It was more or less a flattish development. We saw the price pressure in the telco segment and the All IP impact, and we were able to partly compensate that by higher contribution from the solution business. In Fastweb, increase of CHF 10 million. The increase is primarily revenue-driven, more revenue-generating units. We have in Q1 still the impact of the four weeks billing, CHF 16 million. We have to mention the prior year, we had a positive impact of CHF 9 million from regulatory benefits.
In Q1 2018, we had higher subscriber acquisition costs, mainly because of the strong performance in the mobile business, around CHF 9 million. On the next slide below EBITDA, only two remarks. On depreciation, they are higher compared to the prior year. 60% 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 around 20%. That brings us to a slight increase of the net income. On CapEx, on the next slide. The CapEx were 13% lower in Switzerland, with CHF 311 million. There are two comments. In our fiber, in our rollout program, we invested in Q1, CHF 100 million.
As expected, that's also in line with prior year. Expect for the full year, again, around CHF 500 million. That's in the same magnitude as in 2017. We have in Q1 some less customer-driven CapEx, less project cost, but that's seasonal-driven. We stick to our unchanged timing for the Swiss CapEx of CHF 1.6 billion, of course, without any potential CapEx of spectrum. In Fastweb, in local currency of EUR 159 million, we are on prior year level. Savings in the IT area were compensated by customer-driven CapEx. As Urs 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 networking capital. We had a very strong development in Q4 2017, and now we have to have this part in Q1, but nothing special.
That will also flatten out over the year. On the financing side, where we have to refinance this, for us, quite large bond of CHF 1.385 billion, which is due in September. We started with that in Q1. We did a Swiss bond at the beginning of the year of CHF 150 million at very favorable conditions. In April, we concluded an Euro bond for EUR 500 million with an attractive coupon and a maturity in 2026. The average cost of debt stands at 1.5%. The duration is 4.6 years. 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. You see the left-hand side, the year-over-year change in Q1 and the expected full-year change.
We can confirm that more or less it's as we expected. We think that fixed line loss for the full year will be lower CHF 60 million, outbound roaming CHF 20 million, discount on conversions CHF 80 million, and in the B2B segment overall CHF 40 million. 50% of that we compensate with the confirmed indirect cost savings. That brings me to the guidance. As Urs mentioned at the very beginning, we can confirm the guidance for the Swisscom group revenue at CHF 11.6 billion, EBITDA CHF 4.2 billion, and CapEx CHF 2.4 billion. Of course, we can confirm the dividend of CHF 22.6, which we'll propose to the AGM next year. With that, I hand over to the operator for the Q&A session.
Thank you. Ladies and gentlemen, if you would like to ask a question, please dial now star 14 on your telephone keypad. Dial star 14 for questions. 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 Salt's fixed-line services? Have you seen, for instance, more discounts being asked by customers? What do you think that will be the impact there from basically this launch from Salt? My other question is regarding inOne and Infinity. I see the mobile net adds have grown less than previous quarter. Can you give us some color on why this trend? Is the 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, Mario will give some information on this Infinity question. Salt. The offer of Salt, that's an aggressive one. The offer of Salt, if you look to this offer, it's in the fiber footprint, it's also, let's say, an attractive offer, but also an offer which will not hit the whole TV market in value. From our side, we are confident that we can compete with inOne because inOne has a lot of flexibility in it to tailor the different customer needs. There we have an attractive offer with a strong TV product. On the really very price-sensitive segments, we have the second and third brands where we can be competitive. Up to now, we don't see actually an impact on our market dynamics of broadband.
Our NetAdd, our bundle offers are running very well. Also after the launch of Salt, we don't see an increased churn. It may be too early to value it in detail, we will continue our strategy, we will not action now on the pricing side.
On the mobile postpaid performance, first of all, you see on page five, you see that the Q1, both in 2016, 2017, relatively weak. That's kind of a seasonality. On the performance of inOne on page 12, you see that the performance in the first quarter, the RGUs inOne on six mobile bundles was satisfying. We were able to increase the base of 243,000 RGUs. The important thing with inOne and the postpaid customers is about protecting value. You can see that on page 13. Q1 2018 Infinity inOne ARPU compared to Q4 ARPU is stable. On page 15, you see a stable development of the average revenue per bundle. It's more important about protecting the value of the customer base in the separated market than running after each and every low-priced SIM card. 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 KPIs of net porting, I would say we are in a good shape in Q1. For the future, it's much more important to look on revenue market shares than on subscriber market shares. You have so different kind of SIM cards in this market. You have SIM cards with an ARPU of CHF 90, and then SIM cards with two or three Swiss francs, and we shouldn't compare such SIM cards.
Okay. If I might follow up. You said that, for example, inOne is a product that actually is very competitive, you feel more confident even has launched, okay? For example, if I see the slide number 12, I see that inOne wireless ARPU is positive, the fixed is negative to barely flat. Actually, the convergence bit of the inOne is the one that basically brings erosion. Do you believe that maybe you will have to push further the convergence side of inOne, considering more competition in the market?
No, we don't see. Actually, it's always the same. In the beginning, you have a lot of optimize, and then if the penetration is increasing, we are able to decrease the ARPU impact. The converged discount will decline in the future.
Okay. Thank you for answering the question.
Okay, there are more questions. The next one is from Georgios Ierodiakonou. I will open up the line.
Yes, good morning. Thank you for taking the questions. I have got two. 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 the around 8.5% benefit from the 28-day migration, or is it just part of it? Also linked to that, I believe AGCOM 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 when should we hear about this and what you expect the outcome to be. My second question is around spectrum and 5G.
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 5G to be relevant for you. Thanks.
Good. I will take the question on 5G spectrum, and Mario, the question to four-week billing of Fastweb. To the spectrum. 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. 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 Swisscom, it is important that we can gain a spectrum amount which is in the area of our market share. We will certainly lobbying for this, that we could get a decent amount of this spectrum. Our 5G plan. Our ambition is to enter early with 5G in the market. The first handsets are out for you will be in the market in 2019.
We have certainly some challenges in the Swiss market with our radiation laws. It will be not so easy to build 5G. Nevertheless, we want to enter early in the 5G market. Mario, on Fastweb, on the monthly billing, we started to revert to monthly billing in April. We offer stable prices coupled with higher value for customers, so we structured the product new. We think that we can compensate this price decrease. On the AGCOM issue, I think that's an ongoing process now, which we should not comment in detail. From our point of view, I think that there is no legal ground that the operators can be forced to reimburse these, let's say, benefits to the customer base. That's an ongoing procedure now.
Thank you very much. Could I ask a follow-up on the 5G answer earlier? With the emission limitations that you have, is it fair to assume that for 5G you will need new sites? Are there any ways to circumvent that and use existing sites, but maybe differently in order to get around the problem? Thanks.
We need additional sites. That's for sure. Also, without this emission 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. There is a discussion in the parliament now. I think the last word is not said. There will be a dynamic, and I hope that we will get a better framework for building out 5G in the future.
Very clear. Thank you.
There is the next question from Frederic Boulan.
Hi. Good morning, everyone. It's Frederic Boulan from the Bank of America, Merrill Lynch. A couple of questions. First of all, on the All IP side. You're saying you're getting towards the end of that process. If you could comment a little bit on the benefit you're seeing from a cost perspective, but also 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 and where you think you can position yourself beyond connectivity, and where you see the business opportunity in the medium to long-term? Thirdly, a question on Fastweb. If you can come back a little bit on expectations here. We saw a slowdown in top line from H2 levels. EBITDA as well was up around 5% versus 9%-10% levels in H2.
Where can we see that business going forward in 2018? Thank you.
I will take the question on IoT and Mario, then the question on the ARPU. On All-IP. Fastweb. On IoT. IoT is a very fragmented business. Our strategy is to have different networks, let's say, a Low Power Network for specific application and then the normal 4G or 5G network for other IoT applications. Let's say the main value for the IoT business for an operator like Swisscom is on the connectivity side. More SIM cards. 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 a Tesla is quite high. If you take smart meters, the ARPU is quite low.
That's a very fragmented business and the value is coming out of the connectivity business and easily said more SIM cards. IoT will be not really the biggest business of 5G, but it will be a part of 5G. Then on All-IP. 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 CHF 700 million. It is part of this automation program in 2018, 2019, 2020. I think it was, as I mentioned, encouraging in Q1 where we saw that these numbers of call service requests are coming down in the residential segment. You see that there will have more impact.
It's clear then we need to adjust our target. I think there is a bit too early. Right now it's as expected. On Fastweb, I would say on the top line, we see a revenue increase in 2018 of 7%-8%. EBITDA, as we guided, we expect an EBITDA of around EUR 700 million. That we can confirm after Q1.
Okay. Thank you very much.
Okay, there is another question from James Seratzky.
Yes, good morning. Thank you very much. I have 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-over-year. I mean, that trend has been gradually deteriorating over the last year or two. We've now got Salt coming into the market. I mean, I 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, 12-24 months for that trend to get better? I mean, do you think it can get better from here? What would be the key drivers for that? The second question, just going back to the questions we've had on Fastweb and this EUR 700 million EBITDA guidance.
I mean, on the run rate you've just delivered in Q1, we'd be looking at a run rate near EUR 600 million or below. 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 re-accelerate? 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 the service revenue question of Switzerland and then Mario, EBITDA of Fastweb. The service revenue actually in Switzerland, so 2018 is certainly a dynamic year because we have still this erosion of the fixed voice business. Which is also a bit driven by All IP. Also the converged discount, but as the penetration is actually going up, this effect of the converged discount is actually declining. Important for us is to perform on quality and on the customer experience side. We are able to keep our ARPU. You can see that the ARPU actually in our business are in a solid situation. Also the market shares are in a solid situation.
I think the impact on service revenue in 2018 is certainly a bigger one than we can expect in the future. 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. There we are on track. Mario, to Fastweb.
On the Fastweb development for the remaining three quarters. Overall, I would say, if you look at different segments, consumer revenue will develop more or less as in Q1. On the enterprise, you have traditionally in Q1, you have relatively low revenues. You can also look at prior year numbers that were low in Q1. You have stronger performance in the remaining nine months. As was mentioned, we have very good order books there. Also on the wholesale business, the second half will be stronger than the first half in 2018. The cost side will be more or less the same evolution as in Q1. That brings you overall with a better seasonality on revenue to this expected CHF 700 million EBITDA.
Please, thank you. What should drive that better wholesale performance specifically in the second half.
The wholesale business is, part of it is a seasonal business. Depends on contracts you conclude. We know from the funnel more or less when this will realize in revenues. Part of it is ongoing on wholesale and part of it is project-related.
Great. Thank you very much.
There is another question from Simon Coles.
Morning. Thanks for taking the questions. First one 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 learnt 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 adds are on ultra-broadband. What's the ARPU uplift that you're seeing from these sorts of customers? How many of those customers are on your own network versus, say, the JV with PI? Thank you.
On the cost side. Actually, if we work on the cost side, this is a bouquet of a lot of different actions. It's a simplification of the product portfolio, of the processes. With digitalization and artificial intelligence, we are able to automate more processes. I think that's a thing you have to do constantly, we are able to increase our efficiency. You have certainly also projects like All-IP, where we can phase out old infrastructure, but also where you have a lower cost to serve because the processes are getting much more efficient. We have to continually work on this cost side. The main learning is actually you need a clear program and you need also a culture of the organization. It has to have a culture which also works on efficiency. Now to Fastweb and to the ARPU.
The consumer ARPU of Fastweb is around EUR 30, and in Q1 it was EUR 1 lower than in Q1 2017. That's something to do with promotions we had in 2017. It's more or less stable ARPU. That's also because of migrating more and more customers to our infrastructure. That brings a more stable ARPU in these areas.
Okay. Thank you very much.
Okay. There is another question from Joshua Mills.
Hi there. It's Josh Mills from Goldman Sachs. Just a couple of questions from me, please. In the past, you have given us some disclosure on what % of your net adds are coming from the Swisscom brand versus the Wingo brand. I wondered if you could give us an update on that, 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 % of your current broadband base is on Wingo rather than Swisscom? Then secondly, in the context of recent headlines around the potential joint venture between Liberty Global and Sunrise, I'd be interested in your views of market consolidation more broadly, where you see the opportunities and the downside risks.
Specific to that, just within your wholesale revenue line, can you give an indication as to how much of that line roughly is 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. Actually, that shows also that we have a stable business on our Swisscom performance. Also, the churn figures on our Swisscom mobile customer base is solid. Wingo is still on a low level. The second and third brands which we have, also M-Budget is performing well. This brand is performing well. On Swisscom, we are, let's say, overall a slight increase on Swisscom, but the main dynamic is coming out of the second and third brands, and not Wingo. On the whole subscription base, the second and the third brand is more or less unchanged, still below 10%, and more than 90% is on our Swisscom brand.
It's still important we have the second and third brands to defend the low end. I think it's also important on this topic to see what the blended ARPU. I think this gives you also a good indication how the price dynamic in our whole portfolio is. 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. 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.
The wholesale revenues of Fastweb with Sunrise, we don't disclose them.
Understood. Just to come back on that first question around the sub-brands. Just to pull a few comments together. You're saying that currently, less than 10% of your broadband base are on a sub-brand, be it M-Budget or Wingo. The majority of your net adds are coming from those brands right now?
I think there was a misunderstanding. On mobile postpaid, less than 10%. On broadband, it's close to 100% is on the Swisscom brand.
The net-
From our side.
On the net adds going forward, you're saying that you are seeing some small increases in the Swisscom main brand, but the majority of the net adds we see on slide five are coming from Wingo and M-Budget.
You are talking from broadband? Mobile or broadband?
Both.
Okay. On mobile, we can say that the main part of the net adds are coming from second and the third brands in Wingo and M-Budget in Q1. On broadband, it's close to 100% the part of Swisscom brand. 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 Salt brand, and we don't see too much dynamic. I don't see a dynamic of Salt up to now in the market. It's too early to say. We have to watch to it. We don't underestimate it, so we will protect our customer base.
Thank you.
There is another question from Usman Ghazi.
Good morning, gentlemen. Thank you for taking the question. I've got two questions, please. The first one is on mobile postpaid churn. I see that you're now disclosing the numbers. 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. 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. 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. If you do not get the concession from the regulator, would this impact your 5G planning?
Do you have some kind of a backstop on meeting 5G needs, even if you don't get spectrum in accordance with your market share? Thank you.
Good. On the churn of mobile postpaid. We have good and low churn figures overall on mobile.
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. There is a stable situation. What you mentioned is that, right, we had a loss of one enterprise customer in Q1, in the enterprise unit. That's a one-off, but overall, the performance of win and losses in the enterprise market is a good one for Swisscom. We are losing customers. We are gaining customers. Sunrise is acting very aggressive only on price in this enterprise market. I don't know if this will be a sustainable strategy, but that's not my choice. That's actually what gave this impact, what you mentioned. I said the one loss of a customer in the enterprise market.
Spectrum.
Spectrum. On spectrum, if the auction will not take place this year, the rollout of 5G will be a very difficult one because we need frequencies for it. That's clear. You can't do a good 5G rollout without spectrum in the environment which we have in Switzerland. That's why we are asking for an auction for this year. Otherwise, Swisscom will be lagging, or Switzerland will be lagging in this 5G technology. I think that will be not the intention of the regulation.
Sorry. I meant that you're asking for a spectrum, the opportunity to compete in the auction and buy enough spectrum such that it matches your subscriber share. If the regulator doesn't meet that request, I was just wondering how it would impact. Would it impact the 5G deployment plan, or do you have sufficient capacity?
It would make it much more complicated to roll out the 5G. If you don't have frequency, you can't do a good rollout of 5G. It's too early to speculate. I think the regulator must make a fair auction for all competitors, where they can get, for a reasonable price, some spectrum to roll out it. It's too early to speculate, but for everybody, if you don't have spectrum, 5G will be difficult.
Can I maybe sneak in another question? As the consultation stands today, are there any coverage obligations on the spectrum or not?
Yeah. It's not defined. Really, the condition of the auctions are not defined. They are now in the last consultation phase, then we know it. Too early to speculate about this package.
Okay. Thank you very much.
Okay. There is another question from Luigi Minerva.
Yes. Good morning. Thanks for taking my questions. The first one is looking at Fastweb, 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. More generally, still on this point, I was wondering whether bundling telco with services which increase prices by inflation every year effectively would leave the burden of the discount increasingly always on the telco side. More generally, the risk from that approach commercially. Moving on to Switzerland, on the electromagnetic emissions legislation, can you remind us what is the outlook for a change in terms of timing and procedures? 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.
On this bundle, energy telco bundle in Italy with Eni, actually, that's a distribution partnership. That's more a distribution channel. We don't see their effects on ARPU and so on. It's a distribution channel. In Switzerland, such a thing wouldn't work because the market conditions are totally different in Switzerland. On this emission topic. There is now a process in Switzerland that they try to improve the measurement method for this emission. This would give us a relief to build the network. It's too early to say when this will be happen, but this will be not in the next two months. This will take time. I think it's too early to give a forecast on this. On the CapEx, actually, how more CapEx we would need to do a 5G network if we don't have this relief on the emission.
This depends on the take-up of the data growth in the 5G network. It's too early to say it, but we are confident that we can make a rollout of 5G in an overall CapEx envelope in the region of today.
Okay. Thank you very much. Just to clarify on the first question, on slide 23, when you indicate the discount, isn't that like a discount to the ARPU, basically?
Yeah, these are also, at the end, new customers, so you are able to grow. It depends on your bundle. It's always if you have a discount, if the selling machine actually has the ambition to have the same ARPU to make and not selling. You can sell higher products. That's not.
Okay
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. Luis Prota from Morgan Stanley. The question is on the discount in your converged package inOne. Your inOne mobile subscribers are currently like 27% of your postpaid base, but at the current run rate, you are going to be well above 50% by year-end 2018. 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? From what level of penetration of mobile within inOne we should expect the discount to start trending towards the CHF 40? Thank you.
I think you have to look on page 12. There are a lot of different factors in it. 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. We have an upsell on mobile. We have a converged discount. It depends now how skillful we are overall. If we migrate, we can even get an upsell on it. There are different elements. You can't just take the converged rebate and say that this will reflect in the whole converged discount.
Right.
There are a lot of different dynamics. That's why chart 12 is actually the one which is showing the dynamics.
Right. Am I right thinking that 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-
No. That must not be the case because a lot of second and third SIM cards are normally the SIM cards of children. In this, if you can make their upsell for more speed, more data volume, they have a better mobile offer. There is another effect also on it. The churn figures are also lower. I think you can't just take the ARPU at the end. You have also to take the net porting dynamic and the churn dynamic.
Sure. Okay. Thank you very much.
Okay. There is another question from Usman Ghazi.
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 inOne/Infinity base? Because the ARPUs seem fairly high, it would be good to get a bit more detail on how you see the upselling opportunity from here. The second is a bit more broader question. Given Swisscom is one of the few incumbents that have said that they're actively going to deploy 5G. What do you see in the residential market? Do you see 5G as an opportunity to differentiate yourself? 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. If you look to our product offers, you see that it's not only speed differentiate to upsell. It's a kind of bundle of speed, then some content may be in the TV area or some roaming volume. That's a mix of bundle, which is more attractive for the customer. That's why I think we have a lot of argument to upselling. Then the second question was on-
5G
on 5G.
5G.
5G ready, what is the advantage for the customers? On 5G, 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. In the B2B market, you can do a lot of nice application because you can do network slicing. You can do Industry 4.0 applications for company. I think 5G has also a potential in the B2B market in more vertical solutions. That's one of the advantage of 5G. 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 3G. There wouldn't have been the innovation of smartphones and application.
We will have the same dynamic, then the penetration of the SIM card will go up. The main question is how rational and skillful is our business to monetize this 5G investment then. I think that should be the opportunity for our industry to monetize this investment. Okay. 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. Speak to you soon and have a great day. Thank you.
The conference recording has been stopped.