Swisscom Ag · SIX:SCMN
Swisscom — UBS Best of Switzerland 2012
20 slides from Swisscom's conference presentation, Sep 20, 2012
Slide 1: Investing for sustainable returns
Investing for sustainable returns Swisscom Presentation Ueli Dietiker CFO UBS Best of Switzerland 2012 Wolfsberg Conference Centre, Ermatingen 20 September 2012
Slide 2: 1. Big Picture – investing for sustainable returns
1. Big Picture – investing for sustainable returns 2 A. Telecoms is a fixed cost business • Capital intensive (Capex) • Low COGS, high fixed Opex E. D. To sustain is about B. Making money in fixed FCF generation • Willingness and financial supported by cost business is about ability to (continue to)
Slide 3: 1A. Telco, a fixed cost business - Capital intensive (Capex)
1A. Telco, a fixed cost business - Capital intensive (Capex) 3 Networks by definition constructed to cover an entire country and all inhabitants (pop) 297 16.5% CAPEX to Sales 13.9% CAPEX CHF/year 194 to Sales 121 61 CAPEX per Pop CAPEX per Customer Swisscom European Average Based on 2011 figures Do
Slide 4: 1A. Telco, a fixed cost business - Capex & Opex at Swisscom
1A. Telco, a fixed cost business - Capex & Opex at Swisscom 4 Operating a network involves mainly fixed, and only limited variable, cash out CHF mm Swisscom Switzerland 3'500 Percentage of total cost in 2011 3'000 23% 30% 2'500 2'000 OPEX variable 1'500 OPEX fixed CAPEX 1'000 500 0 47% OPEX variable
Slide 5: 1B. Making money in a fixed cost business is about scale
1B. Making money in a fixed cost business is about scale 5 Critical mass is crucial with minimum amount of customers to breakeven (on basis EBITDA – Capex) in Switzerland probably at around 1 million # customers 14'000 2'800 FCF in CHF mm (subs for fixed, TV and mobile access incl. 12'000 2'400 prep
Slide 6: 1B. Market share is crucial to generate significant FCF
1B. Market share is crucial to generate significant FCF 6 Correlation FCF and Market share in the Swiss market % market 80% share 70% 60% 50% 40% 30% 20% 10% 0% Swisscom Sunrise UPC Orange Cablecom Switzerland Based on 2011 figures fixed voice broadband mobile digital TV FCF Proxy % source: Swisscom
Slide 7: 1B. Market share and FCF are correlated, also internationally
1B. Market share and FCF are correlated, also internationally 7 Blended market share in domestic operations versus FCF per pop and per customer FCF per customer FCF per POP blended market share FCF p.a. in CHF 600 65% weigthed avg Capex/pop 63% & Market share in % 500 53% 54% 51% 48% 48% 48% 45% 45%
Slide 8: 1B. Investing for market share pays off – also longer term
1B. Investing for market share pays off – also longer term 8 Swisscom market shares “more than” stable, with gap towards avg. incumbent increasing Market share 70% 65% Blended weighted market share 60% Swisscom 55% 50% Blended weighted market share of average 45% incumbent 40% 2006 2007 2008 2009 20
Slide 9: 1C. Customers desire more predictable pricing (less variable)
1C. Customers desire more predictable pricing (less variable) 9 Do not fight customers’ desire to move away from metered revenues, but create bundles which compensate this Swisscom Switzerland without 2008 2011 In around 3 years wholesale CHF 5.5 bln CHF 5.6 bln ~ CHF 5.6 bln and roaming revenue 11%
Slide 10: 1C. Scale and share require best pricing strategy & best network
1C. Scale and share require best pricing strategy & best network 10 Pricing differentiation can only be maintained through transparency and superior quality • Intuitive pricing should be on “speed” as experienced by customers, not on “data consumed”: the average customer has no idea how much data wa
Slide 11: 1D. To sustain is about ... capacity to invest
1D. To sustain is about ... capacity to invest Financial strength compared 11 Debt/interest ratios in 2011 Net debt and avg. cost of debt in 2011 Bubble size = OpFCF proxy in bn CHF* Net debt ** Net interest/ [bn CHF*] avg. net debt 8% Liberty Global** 35 7% 8.0% Net interest / OpFCF proxy 80% 5.3x/
Slide 12: 1D. Finding the right mix of technologies to invest into
1D. To sustain is about ... Finding the right mix of technologies to invest into – at the right time Potential 12 Area Competition Current deployment technologies 0% VDSL 8-30 Mbps Top 20 Utilities FTTC/VDSL cities as partner 20-50 Mbps FTTH 100-1000 Mbps 30% Vectoring 50-100 Mbps Smaller VDSL FTTDP
Slide 13: 1E. Superior FCF generation from higher Capex and market share
1E. Superior FCF generation from higher Capex and market share Investments (Capex) done by definition to cover entire country, therefore should be 13 compared with other incumbents on a per pop basis CHF/pop EBITDA p. pop Capex p. pop FCF p. pop 600 498 400 194 304 315 CHF 182 extra FCF/pop esp. fro
Slide 14: 1E. Conclusion – investing for sustainable returns
1E. Conclusion – investing for sustainable returns 14 A. Telecoms is a fixed cost business E. D. To sustain is about FCF generation investing in right supported by B. Making money in fixed technology mix at the Capex, cost business is about right time – to drive Market share & scale and share Pricin
Slide 15: 2. Half-year 2012 results – same history
2. Half-year 2012 results – same history 15 Change in CHF mm, total Swisscom Group, comparable * Q1/Q1 Q2/Q2 H1/H1 Δ% Net revenue -8 -10 -18 -0.3% EBITDA +10 +11 +21 +0.9% * w/o FX, hubbing (Fastweb), extra termination & pension fund cost Comparable key results fully in line with last year
Slide 16: 2A. Group revenues
2A. Group revenues Change YoY (1st HY 2011 versus 1st HY 2012) in CHF mm, total Swisscom Group 16 Fastweb: -82 Swisscom w/o Fastweb: -19 ∑ Q1: -36 -16 +0 +92 -17 -62 -15 -7 +1 -60 Q2: -17 -14 +1 +86 -33 -58 -10 +3 +1 -41 Sum of Bundles+1P revenue +8 -101 +1 +178 -50 -120 +2 -53 -30 -25 -4 5,722 - Co
Slide 17: 2B. Group EBITDA
2B. Group EBITDA Change YoY (1st HY 2011 versus 1st HY 2012) in CHF mm, total Swisscom Group 17 Fastweb: -11 Swisscom w/o Fastweb: -23 ∑ Q1: -9 +1 - 23 +16 - 7 +0 - 22 Q2: -6 +3 - 17 - 6 +14 +0 - 12 Swisscom Switzerland, comparable - 34 +10 +7 +0 - 15 +4 2,270 -40 overall 2,236 Termination Revenue d
Slide 18: 2C. Group results: P&L breakdown
2C. Group results: P&L breakdown 18 2‘236 -963 in CHF mm tax rate 19.3% EPS CHF 1‘273 -124 -13 17.78 +14 -222 928 -7 921 (prior (2‘270) (-944) (1‘326) (-109) (-27) (+9) (-237) (962) (-8) (954) (EPS CHF year) tax rate 18.42) 19.8% SCM net Other fin. EBITDA Minorities Net interest EBIT Net income inco
Slide 19: 2D. Swisscom payouts
2D. Swisscom payouts 19 22 21 20 of which CHF 9.0 Dividend per share (in CHF) 19 from paid-in capital (being 18 + the maximum available), which 17 cancellation is tax free of all income to Swiss private holders. 16 CHF + 2.0 remaining treasury extra- For institutions shares (3.1% the initial ordinar
Slide 20: Cautionary statement regarding forward-looking statements
Cautionary statement regarding forward-looking statements 20 ”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 operations