Swisscom Ag · SIX:SCMN
Swisscom — Q1 2014 Earnings Presentation
44 slides from Swisscom's earnings presentation, May 7, 2014
Slide 1: Q1: Swisscom Smileys
Q1: “Swisscom Smileys” Q1 2014 analyst and investor presentation Conference call 7 May2014
Slide 2: Agenda “Swisscom Smileys”
Agenda “Swisscom Smileys” 2 Ch. Topic Speaker Welcome & Introduction Bart Morselt, IR 1 Smileys Urs Schaeppi, CEO • Highlights Q1 ‘14 over Q1 ’13 • Volume trends • ARPU trends • Revenue trends (=Volume x ARPU) • Gross margin trends 2 Group results Mario Rossi, CFO P&L Refinancing Outlook 3 Q&A All 4
Slide 3: Agenda “Swisscom Smileys”
Agenda “Swisscom Smileys” 3 Ch. Topic Speaker Welcome & Introduction Bart Morselt, IR 1 Smileys Urs Schaeppi, CEO • Highlights Q1 ‘14 over Q1 ’13 • Volume trends • ARPU trends • Revenue trends (=Volume x ARPU) • Gross margin trends 2 Group results Mario Rossi, CFO P&L Refinancing Outlook 3 Q&A All 4
Slide 4: Smiley 1 – Highlights: Revenue Q1
Smiley 1 – Highlights: Revenue Q1 4 Revenue growth of % growth Q1 2014 over Q1 2013 3.2% (+CHF 87mm) driven 50/50 by 7.0% 3.5% 3.3% 3.2% organic and non- 6.5% organic growth. 6.0% 3.0% Total RGUs 5.0% including Fastweb 2.5% up 3.3% (SCS +2.7%, 4.0% FWB +6.6%) 2.0% 1.7% 3.0% 1.5% 1.5% 2.7% Key driver
Slide 5: Smiley 2 – Highlights: Gross profitability Q1
Smiley 2 – Highlights: Gross profitability Q1 5 % growth Q1 2014 Absolute contribution over Q1 2013 in Q1 (CHF mm) Gross profitability (Revenues minus 12.0% 1'800 Costs of Goods 10.0% Sold) up in all key 1'600 segments 10.0% 1'400 8.0% 1'200 6.6% 1'000 6.0% 800 4.0% 600 2.6% 400 2.0% 200 0.0% ‐ FWB
Slide 6: Smiley 3 – Highlights: Launch Swisscom TV 2.0
Smiley 3 – Highlights: Launch Swisscom TV 2.0 6 TV 2.0 is a major 2006 Growth and margin potential 2017+ step to rejuvenate long term growth – Launch TV 1.0 both for TV and for bundles that 2014 • Microsoft platform Phasing out TV 1.0 include internet (Mediaroom) Launch TV 2.0 access • Functionality
Slide 7: Highlights: Swiss market events after Q1 (April)
Highlights: Swiss market events after Q1 (April) 7 • Sunrise launched new mobile tariff plans in April 2014. Core is the Both Sunrise and possibility for customers to subscribe “sim-only”, i.e. without handset Cablecom have recently launched • The total cost of ownership (TCO) for Sunrise customers
Slide 8: Agenda “Swisscom Smileys”
Agenda “Swisscom Smileys” 8 Ch. Topic Speaker Welcome & Introduction Bart Morselt, IR 1 Smileys Urs Schaeppi, CEO • Highlights Q1 ‘14 over Q1 ’13 • Volume trends • ARPU trends • Revenue trends (=Volume x ARPU) • Gross margin trends 2 Group results Mario Rossi, CFO P&L Refinancing Outlook 3 Q&A All 4
Slide 9: Smiley 4 – Volume: Revenue Generating Units (RGU)
Smiley 4 – Volume: Revenue Generating Units (RGU) 9 All quarters recorded growth ΔRGU YoY (000), SCS compared to the 380 same prior year’s quarter. Swisscom 370 Switzerland now nearly has 12.2 360 million RGUs (up from 11.5mm in Q1 350 2012), growing by just under 3% 340 annualised 329 Q1 2014 somew
Slide 10: Smiley 5 – Volume: Market strength in mobile postpaid
Smiley 5 – Volume: Market strength in mobile postpaid 10 Net adds share postpaid mobile Share of net adds 70% postpaid mobile moving in right direction 65% 62.7% 60% 55% 50% Q4 Q1 Q2 Q3 Q4 2012 2013
Slide 11: Smiley 6 – Volume: Market strength in TV and broadband
Smiley 6 – Volume: Market strength in TV and broadband 11 Net adds marketshare digital TV Marketshare broadband retail TV net adds share 160% 54.6% again over 100% Broadband retail 150% market share back 54.4% to growth 140% 54.2% 130% 120% 54.0% 110% 53.8% 100% 90% 53.6% Q1 Q2 Q3 Q4 Q4 Q1 Q2 Q3 Q4
Slide 12: Smiley 7 – ARPU
Smiley 7 – ARPU 12 Δ ARPU YoY SCS (CHF/month) Blended ARPU *) Blended ARPU 1P+Bundle SCS YoY Mobile ARPU 1P YoY clearly recovering. 0.0 ‐ Absolute value now ‐0.6 stands at just under ‐0.3 45 CHF/month per RGU ‐0.5 ‐1.0 Key driver of the improvement is the ‐1.0 ‐2.0 better mobile 1P performance (larg
Slide 13: Smiley 8 – ARPU: Infinity migration effect
Smiley 8 – ARPU: Infinity migration effect 13 Δ ARPU Non‐Infinity to Infinity Subs & penetration Extra ARPU of 10 9 2'000 55% 60% migrators to Infinity tariff plans 8 1'800 50% continues to tick 1'600 up, in Q1 stood at 6 1'400 1'777 CHF 9/month 40% 4 1'200 1'000 30% With nearly 1.8mm 2 800 customer
Slide 14: Smiley 9 – (Service) revenues (RGUxARPU)
Smiley 9 – (Service) revenues (RGUxARPU) 14 Core revenues SCS Δ Revenues YoY (CHF mm) up due to continued 1P revenues SCS YoY bundles growth and o/w 1P mobile revenues SCS YoY 1P+Bundle revenues SCS YoY less decline in 1P 20 shrinkage. 40 31 Q1 YoY: 30 ‐ Bundles +90 20 ‐20 1P*) -59 Net: +31 10 ‐40 ‐
Slide 15: Smiley 10 – Gross profitability (CM1) trending up
Smiley 10 – Gross profitability (CM1) trending up 15 (CHF mm) 60 In a fixed cost SCS CM1 YoY business, higher (service) revenues 40 contribute to higher 42 Contribution Margin 20 Contribution Margin equals Revenues minus direct cost ‐ (Cost of Goods Sold) ‐20 ‐40 ‐60 Q1 12 Q2 Q3 Q4 Q1 13 Q2 Q3 Q4 Q1
Slide 16: Smiley 11 – Fastweb with reassuring results
Smiley 11 – Fastweb with reassuring results 16 (000) Net adds share (%) CHF mm Gross margin 38% (Revenues – COGS) Market growth 120 112 40% 50 Broadband Italy improving to 100 40 112,000 (compared 30% to 80,000 in Q1 last 80 30 year). Share of Fastweb at 38% in 60 20% Q1 (42,000 net 42 20 22 adds) w
Slide 17: Agenda “Swisscom Smileys”
Agenda “Swisscom Smileys” 17 Ch. Topic Speaker Welcome & Introduction Bart Morselt, IR 1 Smileys Urs Schaeppi, CEO • Highlights Q1 ‘14 over Q1 ’13 • Volume trends • ARPU trends • Revenue trends (=Volume x ARPU) • Gross margin trends 2 Group results Mario Rossi, CFO P&L Refinancing Outlook 3 Q&A All
Slide 18: Group results: Revenue breakdown
Group results 18 Revenue breakdown in CHF mm Without FX, w/o exceptionals: +45 (+1.7%) hubbing and M&A effects, revenue went up CHF 45mm +59 YOY (1.7%). +16 -68 +1 +6 +87 +90 -3 Mobile - Consumer -17 Handsets and +4 Other Wholesale Underlying top-line Traffic, increase lower roaming - Enterprise of
Slide 19: Group results: Revenue breakdown by segments
Group results 19 Revenue breakdown by segments in CHF mm Underlying Revenue of Swisscom Swisscom Switzerland Switzerland up +23 CHF 23mm driven by increase in +16 +21 +7 +1 +4 +6 service revenue. +45 -10 - 3 Hardware Fastweb underlying Service revenue w/o +7 Other 2,762 revenue up 2,717 Acquisitions
Slide 20: Group results: EBITDA breakdown
Group results 20 EBITDA breakdown in CHF mm EBITDA w/o Contribution Margin exceptionals up +21 CHF 27mm YOY. +19 +2 +13 EBITDA of Swisscom Switzerland w/o -2 -5 +27 exceptionals up CHF 19mm. 1,023 1‘050 Swisscom Switzerland (+2.6%) w/o exceptionals +19 (a) (b) EBITDA EBITDA Other segments Headquarte
Slide 21: Group results: EBITDA breakdown by segments
Group results 21 EBITDA breakdown by segments in CHF mm EBITDA of Swisscom Switzerland w/o exceptionals up CHF 19mm. +2 +6 +13 +14 -3 -5 +27 EBITDA of Fastweb up CHF 13mm. 1,023 1,050 Swisscom Switzerland w/o exceptionals (+2.6%) +19 EBITDA (a) EBITDA (b) Small & Medium Other Segments w/o w/o Reside
Slide 22: Group results: Net Result
Group results 22 Net Result in CHF mm In Q1 2014, net income of the group amounts to CHF 373mm. tax rate 20.6% EPS 7.12 Earnings per share equals to CHF 7.12. 1,061 -510 551 -61 -23 +3 -97 373 -4 369 Reported Net Net Other financial EBIT Depreciation Tax expenses Net interest EBITDA income income Mi
Slide 23: Group results: CAPEX
Group results 23 CAPEX in CHF mm Increase YoY (CHF +45mm) driven by expansion of fibre networks Ongoing FTTx (in CHF mm) rollout leads to higher CAPEX at Swisscom Q1 2014 299 173 47 = 519 Switzerland. CAPEX increase at Fastweb is 284 155 35 Q1 2013 = 474 mainly due to the expansion of the fibre- 8,4
Slide 24: Group results: OpFCF
Group results 24 OpFCF in CHF mm Increase in NWC of 192 CHF mm (more tied up capital) Positive contribution in 31.03.2014 1,061 -519 change of NWC +46 and higher -58 -15 -73 EBITDA led to -92 -16 334 higher OpFCF of CHF +89 mm. ∆ +30 -45 +65 -16 +42 +14 +18 -19 +89 Lower increase Increase in NWC of
Slide 25: Successful EURO bond issuance in April 2014
Successful EURO bond issuance in April 2014 25 Debt maturity profile Bond Details: Amount: EUR 500 Mio. Tenor: 7.5 Y (8 April 2014 – 8 September 2021) Coupon: 1.875% Spread: EUR M/S +58 bps Rating: A/A2 Issuer: Swisscom AG issuing via Lunar Funding V PLC Use of proceeds: Partial refinancing of CHF 1
Slide 26: Outlook 2014 – confirmed
Outlook 2014 – confirmed 26 CHF bln 2013 2014 E*) Splits into: Revenues 11.434 ~11.5 ~ CHF 9.45 bln for Swisscom w/o Fastweb + ~ € 1.65 bln for Fastweb EBITDA 4.302 ~4.35 > CHF 3.7 bln for Swisscom w/o Fastweb + > € 0.5 bln for Fastweb CAPEX 2.396 2.4 ~ CHF 1.75 bln for Swisscom w/o Fastweb + ~ € 0.
Slide 27: Agenda “Swisscom Smileys”
Agenda “Swisscom Smileys” 27 Ch. Topic Speaker Welcome & Introduction Bart Morselt, IR 1 Smileys Urs Schaeppi, CEO • Highlights Q1 ‘14 over Q1 ’13 • Volume trends • ARPU trends • Revenue trends (=Volume x ARPU) • Gross margin trends 2 Group results Mario Rossi, CFO P&L Refinancing Outlook 3 Q&A All
Slide 28: 4. Attachments
4. Attachments 3 swisscom
Slide 29: Bundles replacing 1P
Bundles replacing 1P 29 Business model for local telco can no longer rely on usage based charging CHF mm per quarter, Swisscom Switzerland traffic & access revenues Relative share 1'650 1'682 1'648 1'614 1'653 1'682 1'642 1'627 1'648 1'664 1'635 1'670 1'656 1'600 1'596 1'628 1'627 Relative share 1P
Slide 30: RGU’s
RGU’s 30 Swisscom Switzerland Access Lines/Subs/Products (000) YTD, (Change to 31.03.2013 in brackets) Number of Fixed Voice products TV & Access Broadband Mobile in Bundle Sum Δ 1P Single Play 271 (-20) 2,007 (-265) 773 (-136) 5,985 (+48) 1 9,036 (-373) (-4.0%) 2Play 287 (+30) 2 574 (+60) (+11.7%)
Slide 31: ARPU
ARPU 31 YTD, (Change to 31.03.2013 in brackets) 1,2) Number Weighted of average per Fixed Voice products underlying 1) 2) 3) in Bundle TV & Access Broadband Mobile product 1P Single Play 16 (+0) 52 (-0) 36 (-1) 38 (-1) 1 40 (-1) 2Play 111 (-2) 2 55 (-1) Bundles 3Play 135 (+1) 3 45 (+0) 4Play 212 (-4
Slide 32: Revenues (RGU x ARPU)
Revenues (RGU x ARPU) 32 Net revenues (CHF mm) YTD, (Change to prior year in brackets) Fixed Voice TV & Access Broadband Mobile Sum Δ 1P Single Play 23 (+4) 1) 314 (-45) 178 (-18) 2) 673 (+0) 1,188 (-59) (-4.7%) 2Play 94 (+8) 94 (+90) (+25.8%) Bundles 3Play 214 (+46) 214 4Play 131 (+36) 131 Net Reve
Slide 33: TV market Switzerland
TV market Switzerland 33 Market volumes (000) digital TV Market digital + analogue Market 4‘242 4‘287 share: Market Digital TV * 4‘159 4‘060 3‘992 3‘755 715 17 % Satellite/Terrestrial * 720 730 81 2% 74 Sunrise * 38 Analogue TV 24 % CATV / Net Integrators * 1) 1'031 1'025 1'052 2‘401 1) 1‘920 742 76
Slide 34: Handsets & SACs
Handsets & SACs 34 sold handsets postpaid 87% 88% 85% active user postpaid Smartphone share 70% 65% 58% Handsets (in ‘000) 557 470 328 358 366 407 352 332 312 SAC/SRC in CHF mm (mobile and wireline products together) 20 Corporate 15 20 Segments 17 14 15 16 14 17 108 128 113 Residential 85 87 94 93 9
Slide 35: Group results: Revenues, exceptionals
Group results 35 Revenues, exceptionals in CHF mm w/o exceptionals Without M&A, +45 hubbing and FX effects, revenue +59 went up CHF 45 +16 +23 +6 +87 mm YOY (+1.7%). -17 -21 Underlying top-line 2,734 2,717 2,762 2,821 of Fastweb (w/o (+1.7%) (+3.2%) hubbing and FX) went up by CHF 6 mm YOY. Consumer
Slide 36: Group results: EBITDA, exceptionals
Group results 36 EBITDA, exceptionals in CHF mm EBITDA w/o exceptionals up CHF 27mm YOY. w/o exceptionals +27 -8 +11 +30 1,031 1,023 4,398 1,050 1,061 (+2.6%) (+2.9%) EBITDA w/o EBITDA Reported (b) (a) Reported Operational exceptionals w/o EBITDA Exceptionals Exceptionals EBITDA Changes 31.03.2013 3
Slide 37: Segment ‘Residential’
Segment ‘Residential’ 37 Top line impacted by one off effect 31.03.2014 YoY (acquisition). 1) Net revenue in MCHF 1'274 3.5% Adjusted, top line is +1.5% above prior Direct costs in MCHF -306 0.7% 2) year driven by higher Indirect costs in MCHF -238 9.7% service revenue. Contribution margin 2 in MCHF
Slide 38: Segment ‘Small & Medium Enterprises’
Segment ‘Small & Medium Enterprises’ 38 The decrease of single play 31.03.2014 YoY revenues 1) Net revenue in MCHF 287 2.5% (especially wireline tele- Direct costs in MCHF -37 2.8% phony) was over- Indirect costs in MCHF 2) -35 12.9% compensated by higher bundle Contribution margin 2 in MCHF 215 0.9
Slide 39: Segment ‘Corporate’
Segment ‘Corporate’ 39 31.03.2014 YoY 1) Net revenue in MCHF 436 -0.7% Ongoing price erosion leads to Direct costs in MCHF -98 1.0% lower top line of Indirect costs in MCHF 2) -121 -0.8% 0.7% YOY). Contribution margin 2 in MCHF 217 -1.4% Contribution margin 2 in % 49.8% # of wireless CAPEX in MCHF 1
Slide 40: Segment ‘Wholesale’
Segment ‘Wholesale’ 40 31.03.2014 YoY Revenue from external customers in MCHF 145 -2.7% Intersegment revenue in MCHF 84 -4.5% Revenue from external Net revenue in MCHF 229 -3.4% customers down Direct costs in MCHF -128 -5.2% 2.7% driven by 1) Indirect costs in MCHF -6 0.0% lower termination and Cont
Slide 41: Segment ‘Networks and support functions’
Segment ‘Networks and support functions’ 41 Higher personnel 31.03.2014 YoY expenses (CHF 4mm Personnel expenses in MCHF -181 2.3% YOY) driven by release of a Rent in MCHF -46 0.0% restructuring Maintenance in MCHF -44 4.8% provision a year ago. IT expenses in MCHF -75 1.4% Other OPEX in MCHF -65 -4
Slide 42: Segment ‘Fastweb’
Segment ‘Fastweb’ 42 W/o low margin 31.03.2014 YoY wholesale hubbing net Consumer revenue in MEUR 188 1.1% revenues increased 1.3% YOY. Enterprise revenue in MEUR 177 -0.6% 1) Wholesale revenue in MEUR 31 -8.8% 1) That revenue increase Net revenue in MEUR 396 -0.5% was driven be of which net revenue
Slide 43: Segment ‘Other’
Segment ‘Other’ 43 31.03.2014 YoY Swisscom IT Services Swisscom IT Services in MCHF 164 27.1% external revenue up due to one off Group Related Business in MCHF 76 2.7% (acquisition). Hospitality Services in MCHF 16 45.5% Other in MCHF 8 -11.1% OPEX up by 12.7% External revenue in MCHF 264 18.4% main
Slide 44: Cautionary statement regarding forward-looking statements
Cautionary statement regarding forward-looking statements 44 ”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