Swisscom Ag · SIX:SCMN
Swisscom — Q2 2018 Earnings Presentation
54 slides from Swisscom's earnings presentation, Aug 16, 2018
Slide 1: Q2 2018 results presentation
Q2 2018 results presentation Conference Call - 16 August 2018
Slide 2: Agenda
Agenda 2 Introduction Louis Schmid, IR In a nutshell Urs Schaeppi, CEO Swisscom Switzerland Fastweb Financials Mario Rossi, CFO Q&A All Backup
Slide 3: Agenda
Agenda 3 Introduction In a nutshell Urs Schaeppi, CEO Swisscom Switzerland Fastweb Financials Q&A Backup
Slide 4: H1 highlights
Highlights Operations Financials H1 highlights Financially and operationally half-year results solid, confirming 2018 guidance 4 H1 financials as expected. inOne success continues. >1.5mn TV subs and Revenue CHF 5.81bn, 1.89mn customers steady RGU momentum. EBITDA CHF 2.14bn, (+550k in H1) with Net
Slide 5: H1 operational performance
Highlights Operations Financials H1 operational performance Swisscom Switzerland with robust RGU base and Fastweb with ongoing subs growth 5 Swisscom Switzerland (RGUs in k) Fastweb (RGUs in k) Broadband TV Broadband 2'028 11 14 11 25 45 2'500 3 20 1'501 1 30 32 14 9 9 17 6 11 10 -4 Q1 Q2 Q3 Q4 Q1 Q
Slide 6: H1 key financials
Highlights Operations Financials H1 key financials Revenues slightly ahead of expectations, EBITDA in line and Fastweb solid 6 Net revenue (in CHF mn) EBITDA (in CHF mn) 2'831 2'859 2'885 2'920 1'073 1'187 1'058 1'085 +45 +51 +43 +45 +5 +12 +10 +7 +9 +12 Q1 Q2 Q1 Q2 Q1 Q2 -7 Q1 Q2 2017 -39 -47 2018
Slide 7: Agenda
Agenda 7 Introduction In a nutshell Swisscom Switzerland Urs Schaeppi, CEO Fastweb Financials Q&A Backup
Slide 8: Switzerland market segments with full penetration
2018 focus Network Retail Customers Enterprise Customers Operational excellence Switzerland market segments with full penetration Mature market situation limits growth potential by nature 8 Mobile Broadband TV 8'000 4'500 160% 3'000 140% 160% 7'000 136% 4'000 140% 140% 133% 130% 120% 2'500 102% 122%
Slide 9: Swisscom Switzerland's management priorities
2018 focus Network Retail Customers Enterprise Customers Operational excellence Swisscom Switzerland's management priorities Effective execution key to keep leadership in Switzerland across all market segments 9 Realise cost ambitions Upgrade network performance Shape B2B business opportunities Incr
Slide 10: Network upgrades for technology leadership in the long term
2018 focus Network Retail Customers Enterprise Customers Operational excellence Network upgrades for technology leadership in the long term The network for Switzerland's digital future 10 W+ network update W- network update > Technology mix key in bandwidth expansion UBB coverage 90% > 4G+ with spee
Slide 11: Frequency auction for 5G rollout ahead
2018 focus Network Retail Customers Enterprise Customers Operational excellence Frequency auction for 5G rollout ahead OFCOM disclosed information on auction format and conditions 11 Current spectrum allocation Additional spectrum in 2019 2600 45 1 x 45 3500 300 1 x 100; 1 x 200 TDD TDD 2600 40 50 4
Slide 12: Increased activities to stimulate market success
2018 focus Network Retail Customers Enterprise Customers Operational excellence Increased activities to stimulate market success Swisscom follows a value approach and works with its multi-brands 12 Multi brand portfolio inOne Mobile > Core value brand > Core brand further strengthened > Defensive as
Slide 13: 1.89 million customers with 3.75 million inOne subscriptions
2018 focus Network Retail Customers Enterprise Customers Operational excellence 1.89 million customers with 3.75 million inOne subscriptions Successful market performance with improving ARPU trends and low FM churn of 5% 13 RGU base as of 30 June 2018 (in k) Penetration as per 30 June 2018 1'449 1'2
Slide 14: Retail Customers - Service Revenue performance
2018 focus Network Retail Customers Enterprise Customers Operational excellence Retail Customers - Service Revenue performance Solid blended ARPU (CHF 41) and higher ARPB (+4% YoY) despite lower service revenue (-3% YoY) 14 6'000 100% Wireless Wireline 5'000 Fixed and FM Bundles 95% 90% 85% RGU, ARP
Slide 15: Enterprise Customers - Telco and Solutions performance
2018 focus Network Retail Customers Enterprise Customers Operational excellence Enterprise Customers - Telco and Solutions performance Service revenue QoQ up (CHF +7mn) despite voice line cancellations and pricing pressure in wireless 15 Subscriptions (in k) Service Revenue (in CHF mn) Solutions Rev
Slide 16: Volatility drivers in the solution business
2018 focus Network Retail Customers Enterprise Customers Operational excellence Volatility drivers in the solution business Positive long-term perspectives unchanged 16 Solutions revenues (in CHF mn) Volatility drivers > Project and volume driven business with high 1'072 1'084 Cloud and 1'048 dynami
Slide 17: Sustained cost reduction efforts
2018 focus Network Retail Customers Enterprise Customers Operational excellence Sustained cost reduction efforts Further milestones reached to increase efficiency 17 CHF -56mn -570 FTEs Increased application decrease of of Swisscom adoption indirect cost base Switzerland since YE 17 Faster time to m
Slide 18: Agenda
Agenda 18 Introduction In a nutshell Swisscom Switzerland Fastweb Urs Schaeppi, CEO Financial performance Q&A Backup
Slide 19: Setting the scene - Towards an highly convergent market
Market Strategy Network Consumer Corporate Financials Setting the scene - Towards an highly convergent market … Fixed Mobile Convergence (FMC) is rapidly penetrating the Italian market 19 Trend towards convergence Non-FMC customers willing to move FMC penetration over BB lines1 to a FMC bundle for n
Slide 20: … and Fastweb response
Market Strategy Network Consumer Corporate Financials … and Fastweb response Fastweb’s priority is leveraging existing asset base to become a convergent player based on 5G… 20 Strategic roadmap 2018 2018/2019 2019/2021 Largest alternative Trials Convergent player wireline UBB footprint based on 5G
Slide 21: Tiscali transaction enables to accelerate the execution of Fastweb's strategy
Market Strategy Network Consumer Corporate Financials Tiscali transaction enables to accelerate the execution of Fastweb’s strategy Anticipating the market on 5G 21 Gaining full ownership of 5G spectrum and FWA assets Full ownership and control of 40 MHz in 3.5 GHz > A scarce resource and a fundamen
Slide 22: Fastweb - Consumer performance
Market Strategy Network Consumer Corporate Financials Fastweb - Consumer performance Resilient performance in a tough market 22 Broadband Mobile Convergence BB customer base (k) Mobile active CB Penetration on Wireline CB +4% +45% 2,500 1,280 2,411 880k 21% Mobile+Wireline 27% 1H 2017 1H 2018 1H 201
Slide 23: Fastweb - Corporate performance
Market Strategy Network Consumer Corporate Financials Fastweb - Corporate performance Focus on service quality and customer satisfaction driving further growth 23 #1 in Public Administration, #2 in Corporates B2B KPIs ~40% market share Order book +30% (TLC services, excluding ICT) 1H 2018 vs. 1H 201
Slide 24: Fastweb - Financial summary
Market Strategy Network Consumer Corporate Financials Fastweb - Financial summary Growing revenues drive +5% EBITDA growth (net of one-offs) 24 in EUR mn Net revenues1 EBITDA CAPEX Operating FCF3 +10% +5% organic 1,012 1,011 +2% 923 122 122 Wholesale 112 403 323 106 522 521 One-off2 95 310 302 308 4
Slide 25: Agenda
Agenda 25 Introduction In a nutshell Swisscom Switzerland Fastweb Financials Mario Rossi, CFO Q&A Backup
Slide 26: Revenue breakdown by segments
P+L Cash flow Outlook 2018 Revenue breakdown by segments Divergent top-line evolutions with Switzerland down and Italy up - in line with expectations 26 in CHF mn Q1 Q2 +17 +45 +51 +54 +61 -55 -40 -19 -10 -13 +88 +96 +17 +115 +22 +4 +12 (+2.0%) -95 -29 Swisscom Switzerland -86 8,624 5'690 5'805 1 2
Slide 27: OPEX of Swisscom Switzerland
P+L Cash flow Outlook 2018 OPEX of Swisscom Switzerland Operational excellence initiatives with expected impacts to lower OPEX on a recurring basis 27 in CHF mn Q1 Q2 -16 -12 -8 -4 +35 +26 -20 -17 -3 -16 +61 -21 +14 (-0.8%) -28 -37 -19 -12 2'635 +21 direct costs -56 indirect costs 2'614 1 2 3 4 H1 2
Slide 28: EBITDA breakdown by segments
P+L Cash flow Outlook 2018 EBITDA breakdown by segments Cost saving initiatives partly compensate top-line erosion in Switzerland – Fastweb up YOY 28 in CHF mn Q1 Q2 +30 +12 +10 +7 -15 -5 -20 -102 -34 -34 +21 -117 +42 +17 (-5.2%) -68 -104 -25 2'260 Swisscom Switzerland -51 2'143 1 2 3 4 5 H1 2017 En
Slide 29: Net income
P+L Cash flow Outlook 2018 Net income Bottom-line down (-6.2% YOY) driven by lower EBITDA (which includes negative one-offs) 29 in CHF mn tax rate 20.8% EPS 15.25 H1 2018 2,143 -1,080 1,063 -70 0 0 -206 787 +3 790 EBITDA EBIT Net Net Other financial Depreciation Tax expenses reported income income N
Slide 30: Capital expenditures
P+L Cash flow Outlook B/S 2018 Capital expenditures YOY increase primarily driven by higher Euro exchange rate 30 CAPEX H1 2018 CAPEX split – Swisscom Switzerland H1 2018 +1.1% 1,057 Other* 682 1,069 IT systems, All-IP & other, 13% 326 Fastweb** 347 Wireless network, 18% CP equipment, 5% in CHF mn 7
Slide 31: Operating free cash flow
P+L Cash flow Outlook 2018 Operating free cash flow OpFCF down by 26% due to lower EBITDA and higher net working capital compared to YE 2017 31 in CHF mn 2,143 -1,069 -358 H1 2018 +6 +30 -1 1,074 751 Δ -117 -12 -129 -197 +4 +54 +7 -261 2,260 -1,057 -161 +2 -24 H1 2017 -8 1,203 1,012 EBITDA CAPEX OpF
Slide 32: Underlying EBITDA trends 2018 of Swisscom w/o Fastweb
P+L Cash flow Outlook 2018 Underlying EBITDA trends 2018 of Swisscom w/o Fastweb YOY tendencies unchanged but with different quarterly contributions 32 YOY change Quarterly evolution Expected FY change in CHF mn indicative approx. in CHF mn Q1 Q2 Q3 Q4 Fixed voice lines -60 -18 -17 Outbound Q1 Q2 Q3
Slide 33: Guidance confirmed
P+L Cash flow Outlook 2018 Guidance confirmed Net revenue of CHF ~11.6bn, EBITDA ~4.2bn and CAPEX <2.4bn 33 2017 Expected Expected 2017 Adjust- YOY change IFRS 15 2018 in CHF mn pro YOY change Splits into: reported ments Swisscom impact outlook ** forma w/o Fastweb Fastweb ~ CHF 9.2bn for Swisscom w
Slide 34: Agenda
Agenda 34 Introduction In a nutshell Swisscom Switzerland Fastweb Financials Q&A All Backup
Slide 35: Agenda
Agenda 35 Introduction In a nutshell Swisscom Switzerland Fastweb Financials Q&A Backup
Slide 36: Key financials - reported vs. underlying
Backup Key financials - reported vs. underlying 36 in CHF mn 2017 2018 Change Q/Q Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Revenue, reported 2’831 2’859 2’914 3’058 2’885 2'920 +54 +61 o/w currency effect 47 43 +47 +43 IFRS 15 reconciliation -4 2 -4 +2 Revenue, underlying change +11 +16 EBITDA, reported
Slide 37: IFRS15 - P&L adjustments
Backup IFRS15 - P&L adjustments 37
Slide 38: IFRS15 - wireless ARPU adjustments
Backup IFRS15 - wireless ARPU adjustments 38 Swisscom Switzerland Swisscom Switzerland 56 52 56 53 56 53 55 52 53 50 54 50 40 38 41 38 41 39 40 37 39 36 39 37 in CHF in CHF Q1 17 Q2 Q3 Q4 Q1 18 Q2 Q1 17 Q2 Q3 Q4 Q1 18 Q2 Blended (reported) Blended (IFRS15) Postpaid (reported) Postpaid (IFRS15) Retai
Slide 39: Retail Customers - segment reporting
Backup Retail Customers - segment reporting 39 Net revenue decreased driven by a lower service revenue, increase in hardware sales partly compensate. Service revenue decreased (-3.5%) due to higher discount volumes (inOne), lower access lines and lower roaming revenue. Contribution margin 2 decrease
Slide 40: Retail Customers - wireless performance
Backup Retail Customers - wireless performance 40 Subscriptions (in k) ARPU (in CHF) Service Revenue (in CHF mn) YoY 6'000 50 130% 5'333 5'367 5'345 +12 43 41 88% 41 YoY 140% 40 5'000 85% 87%80% 700 677 -18 120% 30 655 659 75% 71% 76% 20 4'000 100% 30% 600 +64 10 3'315 3'381 3'379 500 80% 0 -20% -64
Slide 41: Retail Customers - wireline performance
Backup Retail Customers - wireline performance 41 Subscriptions (in k) ARPU and ARPH (in CHF) Service Revenue (in CHF mn) 50 41 40 41 130% YoY YoY 40 89% 90% 6'000 110% 87% 5'380 -158 30 80% 701 667 643 5'259 5'222 645 -22 120% 5'000 92% 90% 20 91% 601 30% 153 89 77 1'447 +54 -76 100% 1'492 1501 10
Slide 42: Retail Customers - performance of fixed and FM bundles
Backup Retail Customers - performance of fixed and FM bundles 42 Subscriptions and Bundles (in k) ARPB/U (in CHF) and Service Revenue (in CHF mn) FM penetration (in %) YoY YoY 5'795 5'891 32% 33% 6'000 5'279 30% +612 +100 350 28% 33% 764 791 5'000 25%300 33% 28% 691 31% 19% 250 23% +46 4'000 18% 20%
Slide 43: Retail Customers - RGUs and 1P-4P bundle subscriptions as per 30.6.2018
Backup Retail Customers - RGUs and 1P-4P bundle subscriptions as per 30.6.2018 43 Retail Customers In k, YTD (change to 30.06.2017 in brackets) Sum of RGUs Avg. # of RGUs TV Voice Broadband Postpaid Prepaid per subscriptions per subscriptions 1P subscriptions 0 (-32) 387 (-319) 50 (-122) 2'273 (-232
Slide 44: Retail Customers - H1 2018 ARPUs
Backup Retail Customers - H1 2018 ARPUs 44 Retail Customers In CHF YTD, (Change to 30.06.2017 in brackets) TV Voice Broadband Postpaid Prepaid 1P subscriptions n.m. 49 (0) 36 (+5) 34 (-3) ARPU standalone blended: 35 (-3) 2P bundle subscriptions 90 (-6) 3P bundle ARPB: 134 (+4) subscriptions ARPU per
Slide 45: Retail Customers - H1 2018 service revenue
Backup Retail Customers - H1 2018 service revenue 45 Retail Customers In CHF mn YTD, (Change to 30.06.2017 in brackets) TV Voice Broadband Postpaid Prepaid 1P Total standalone: 1'047 (-287) subscriptions 0 (-19) 128 (-110) 38 (-38) 881 (-120) t/o Wireline 166 t/o Wireless 881 2P bundle subscriptions
Slide 46: Enterprise Customers - segment reporting
Backup Enterprise Customers - segment reporting 46 Net revenue down -2.1%, decrease in service revenue (-5.2%) due to price erosion and lower volume. Hardware sales partly compensate. Solutions revenue down 2.3%, change in customer requirements in the banking segment is only partly compensated by ne
Slide 47: Wholesale - segment reporting
Backup Wholesale - segment reporting 47 Revenue from external customers up 4.8% driven by higher volume of wholesale connectivity services. Intersegment revenue down as lower outpayments (lower roaming cost and lower termination fees) are invoiced to the customer units. Increase of Contribution marg
Slide 48: IT, Network and Infrastructure - segment reporting
Backup IT, Network and Infrastructure - segment reporting 48 Indirect costs below prior year level (-2.9%) driven by lower costs for workforce and lower IT expenses. Headcount decreased by 5%.
Slide 49: Swisscom Switzerland - overview of Swiss TV market
Backup Swisscom Switzerland - overview of Swiss TV market 49 Market volumes (in k) Market Market share: 4’455 4’489 4’410 4’396 share: 4’324 4’372 1) 540 512 397 344 331 8% Satellite/Terrestrial 13 % 557 163 214 230 5% Sunrise 1) 107 134 2% 74 1) 1'256 1'210 1'180 1'170 1'148 26 % CATV / Net Integra
Slide 50: Swisscom Switzerland - overview of sold handsets and SAC / SRC
Backup Swisscom Switzerland - overview of sold handsets and SAC / SRC 50 Handsets (in k) 356 365 285 301 268 306 244 261 234 247 SAC/SRC in CHF mn * Swisscom (mobile and wireline products together) Switzerland 165 145 121 117 117 117 Enterprise 106 112 101 105 Customers 157 138 105 114 108 111 111 9
Slide 51: Fastweb - segment reporting
Backup Fastweb - segment reporting 51 Consumer revenue up by 10.9% YOY driven by the increase in customer base. ARPU stabilised on previous year level. EBITDA down by -23.1% YOY including an income from a settlement of a legal dispute (EUR 95 million) in the previous year. On a comparable basis EBIT
Slide 52: Other - segment reporting
Backup Other - segment reporting 52 Net revenue up by 7.1% YoY due to higher revenue at Cablex for construction services, revenue up for external customers as well as for the internal customer Swisscom Switzerland. EBITDA up revenue driven.
Slide 53: B/S – Swisscom's maturity profile
Backup B/S – Swisscom's maturity profile 53 Maturity profile as per 30.06.2018 * in CHF mn Debt portfolio actively 1'492 1'362 managed and with a duration of 4.6 years CHF 1'385mn at 3.25% with maturity in Sept 857 1.5% average interest 779 rate of debt portfolio 674 579 546 550 500 347 . 83% fix 25
Slide 54: Cautionary statement
Cautionary statement Regarding forward-looking statements 54 > "This communication contains statements that constitute "forward-looking statements". In this communication, such forward-looking statements include, without limitation, statements relating to our financial condition, results of operatio