Swisscom Ag · SIX:SCMN
Swisscom — Q1 2017 Earnings Presentation
50 slides from Swisscom's earnings presentation, May 3, 2017
Slide 1: Q1 2017 results presentation
Q1 2017 results presentation Conference call - 03 May 2017
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: Highlights
Highlights Solid start into the year 4 'Best' strategy pays off: Unchanged leading market Revenue evolution as Swisscom awarded position within Retail market expected - with ups most trusted Telco and same dynamics: (bundles, Fastweb) brand and won CHIP solid postpaid subs base, and downs (MTR, test
Slide 5: Market performance
Market performance Swisscom Switzerland with 12.3 million RGUs - Fastweb with growing subs base in BB and mobile 5 Swisscom Switzerland Fastweb +45 +87 +20 +10 Q1 net adds in k -4 -11 -70 6'601 (-0.2%) 4'562 2'400 2'297 (+1.6%) (+7.1%) 1'988 763 1'438 (-11.0%) (+1.0%) (+31.1%) RGUs in k (+8.7%) (YOY
Slide 6: Financial performance
Financial performance Underlying YoY changes in line with expectations – cost savings 2017 of CHF 75mn on track 6 Net revenue EBITDA YoY changes YoY changes in CHF mn in CHF mn Service Revenue -37 Roaming -11 Hardware -10 Fixed voice lines -19 2'885 1'081 Group Q1 2016 Solutions Enterprise -7 Other
Slide 7: Agenda
Agenda 7 Introduction In a nutshell Swisscom Switzerland Urs Schaeppi, CEO Fastweb Financials Q&A Backup
Slide 8: Swisscom Switzerland with leading market shares
Swisscom Switzerland with leading market shares … A result of our proven strategy of sustainably investing 8 Mobile by YE 16 Broadband by YE 16 TV by YE 16 in % in % in % Cable 28% 17% 33% 32% 60% 22% 26% 67% other (o/w 13% wholesale) Cable 1% 10% 4% digital Satellite & Antenna We will continue to d
Slide 9: Driven by continuously investing into networks
… driven by continuously investing into networks and … UBB expansion pays off – especially in a value-conscious market 9 Wireline 1 Implications 3'500 3'600 2'900 > Swisscom winner of the CHIP test 2 2'000 2'100 1'200 91.9% 50 Mbps 93.3% 100 Mbps in k 91.3% 92.2% Q1 16 Q4 16 Q1 17 84.0% > As per Q1:
Slide 10: Value differentiation and service innovation
… value differentiation and service innovation Keep market leadership by smoothly managing customer base 10 Innovation map 2012-2017 March April June Launch infinity 2.0 Launch inOne – one Launch infinity 1.0 April April FM offering – and unlimited mobile offering in Switzerland Launch Swi
Slide 11: Retail Customers - Wireless performance
Retail Customers - Wireless performance Solid postpaid momentum - RGUs up, churn stable - with continued bundle migration 11 Subscriptions (in k) ARPU (in CHF) Service revenue (in CHF mn) 6'000 YoY 240% 50.0 41.7 43.1 42.1 130% YoY 5'387 5'365 5'345 -42 40.0 84% 86% 700 689 673 +3 670 5'000 30.0 83%
Slide 12: Retail Customers - Wireline performance
Retail Customers - Wireline performance Unchanged voice line cancellations and bundle migration - 80% of all fixed RGUs bundled (YoY +11pp) 12 Subscriptions (in k) ARPU and ARPH (in CHF) Service revenue (in CHF mn) YoY 60.0 801 100% 6'000 42.2 40.9 40.995% YoY 5'572 712 100% 5'506 5'451 -121 40.0 86
Slide 13: Retail Customers - Convergence performance
Retail Customers - Convergence performance Bundles with volume (+18% YoY) and top-line (CHF +72mn) growth - convergence gains momentum 13 Subscriptions and Bundles (in k) ARPU (in CHF) and Service revenue (in CHF mn) YoY FM penetration (in %) 6'000 30% YoY 5'138 674 +72 4'948 +776 500 28% 31% 654 5'
Slide 14: inOne - the new price plan (1/3)
inOne - the new price plan (1/3) One subscription covering everything – Where do we stand? 14 Market situation Swisscom's position > Fixed and mobile markets in > Keeping value focus Switzerland are mature > Maintaining price levels > Switzerland is moving > 2.4mn or >70% of our Retail towards an "e
Slide 15: inOne - the new price plan (2/3)
inOne - the new price plan (2/3) One subscription covering everything – How does the product look like? 15 > Launch: 19 April 2017 > Market: Retail Customers > Main features: 1. fully tailorable to individual needs on service combinations, speed and other values 2. extendable up to 5 mobile subs per
Slide 16: inOne - the new price plan (3/3)
inOne - the new price plan (3/3) One subscription covering everything – What are our ambitions? 16 > The offerings flexibility > New value proposition helps in cementing to "fence" customers outstanding NPS level and defend leading > Maintain churn at current position in the low level broadband and
Slide 17: Enterprise Customers - B2B with heterogeneous revenue sources
Enterprise Customers - B2B with heterogeneous revenue sources Swisscom uniquely positioned to benefit from digital revolution 17 Our B2B value position Our B2B offerings with CHF ~2.4bn revenues in 2016 Telco businesses [~45% of revenues] Operating a fully integrated network Wireless Wireline Offeri
Slide 18: Enterprise Customers - Telco and Solutions performance
Enterprise Customers - Telco and Solutions performance RGU volume stable (w- up, voice down) - Service Revenue with increasing access share (+5.2pp YoY) 18 Subscriptions (in k) Service Revenue (in CHF mn) Solutions Revenue (in CHF mn) YoY 72.8% 80.0% 71.4% 1'529 1'518 1'528 -1 67.6% 70.0% YoY 263 23
Slide 19: Operational excellence - with accelerating momentum
Operational excellence - with accelerating momentum Stabilise profitability by improving all layers 19 Quality Efficiency Costs * > Focus on service level > Restructure organisation > Swisscom Switzerland with > NPS consciousness > Boosting simplicity and 15'719 FTEs by Q1 2017 > Increase reliabilit
Slide 20: Agenda
Agenda 20 Introduction In a nutshell Swisscom Switzerland Fastweb Urs Schaeppi, CEO Financial performance Q&A Backup
Slide 21: Fastweb - UBB footprint evolution
Fastweb - UBB footprint evolution Extending and upgrading the best wireline infrastructure in Italy 21 > FlashFiber building in all 29 FTTH cities FTTH > Covering approx. 100k HHs/month > -0.1mn being the net balance of FTTS Coverage FTTS areas extended into FTTH (-0.3mn) and LLU areas converted int
Slide 22: Fastweb - broadband performance
Fastweb - broadband performance #1 OLO also for BB connections since YE 2016 22 BB market shares by connections 1 1Q customers performance Total 14.2mn 14.8mn OTHERS 5.7% 5.4% Net adds (k) -0.3 pp +100% 13.4% 14.4% +13% +0.9 pp > Fastweb #1 Italian 15.9% 15.6% -0.3 pp 14.4% OLO by number of 76 > UBB
Slide 23: Fastweb - wireless performance
Fastweb - wireless performance Successful launch of 4G services in line with expectations 23 Launch of 4G New offering +136% > 85% of sales on wireline customer base, taking penetration Gross adds 1Q 2017 vs. 1Q 2016 to over 20%... with still untapped potential > Competitive mobile offers support al
Slide 24: Fastweb - corporate performance
Fastweb - corporate performance Strengthening of leadership in Enterprise market 24 Corporate market Fastest growing wireline service provider of Italian PA 2 share by revenues 1 TOTAL € ~ 2bn Data services Voice services OTHERS 8.9% 8.8% -0.1 p.p. > Ranked #1 in tender for PA 11.2% 10.8% -0.4 p.p.
Slide 25: Fastweb – financial summary
Fastweb – financial summary Solid commercial performance coupled by growth in revenues and EBITDA 25 Net revenues EBITDA1 CAPEX FCF in EUR mn +3% +11% +1% +9mn 440 453 Wholesale 46 53 154 155 145 12 223 232 Consumer 131 3 171 168 Enterprise 1Q 2016 1Q 2017 1Q 2016 1Q 2017 1Q 2016 1Q 2017 1Q 2016 1Q
Slide 26: Agenda
Agenda 26 Introduction In a nutshell Swisscom Switzerland Fastweb Financials Mario Rossi, CFO Q&A Backup
Slide 27: Revenue breakdown by segments
Revenue breakdown by segments Swisscom Switzerland under pressure with Service Revenue and Solutions, Fastweb up 27 in CHF mn -6 -7 -42 -16 -1 +14 +3 (-1.5%) -29 2'885 Swisscom Switzerland -59 8,624 2'843 1 2 3 4 5 Service Hardware Service Solutions Revenue & other Revenue & other Q1 2016 Retail Ent
Slide 28: OPEX of Swisscom Switzerland
OPEX of Swisscom Switzerland Operational excellence initiatives with expected impacts to lower OPEX 28 in CHF mn +11 -3 (-0.1%) -43 -16 +2 (-3,2%) -22 -18 1'361 -27 direct costs -16 indirect costs 1'318 1 2 3 4 Q1 2016 Goods purch. Other Q1 2017 SAC/SRC Outpayments Personnel adjusted *) & Other repo
Slide 29: EBITDA breakdown by segments
EBITDA breakdown by segments Cost saving initiatives partly compensate top-line erosion 29 in CHF mn +15 +7 -16 +20 +6 (-1.7%) -20 (+0.6%) 1'071 Swisscom Switzerland -16 3,044 1'077 1 2 3 4 Q1 2016 Retail Enterprise Wholesale, Fastweb Other Q1 2017 adjusted *) Customers Customers IT & Network adjust
Slide 30: Net income
Net income Bottom-line up by 2.5% mainly driven by higher EBIT 30 in CHF mn tax rate EPS 25.4% 7.20 Q1 2017 1,073 -523 550 -36 -13 -1 -127 373 0 373 EBITDA EBIT Net Net Other financial Depreciation Tax expenses reported income income Net interest companies Minorities SC Share- Affiliated holders res
Slide 31: Capital expenditures
Capital expenditures CAPEX lower YoY primarily due to seasonal effects - FY outlook unchanged 31 in CHF mn -11% 596 CAPEX split – Swisscom Switzerland Q1 2017 Other** 682 529 581 169 Wireless network, Fastweb* 17% 165 13% 11% IT systems, All-IP & 25% Fixed 26%network & other, 17% copper access, Swis
Slide 32: Operating free cash flow
Operating free cash flow OpFCF up primarily due to prepayment of the FeAC sanction in Q1 2016 32 in CHF mn 1,073 -529 -100 +2 0 Q1 2017 +17 544 463 Δ -8 +67 +59 +227 -9 +2 0 +279 1,081 -596 -327 Q1 2016 +11 +15 0 485 184 EBITDA CAPEX OpFCF Change in Proceeds from Change in pension Dividends to OpFCF
Slide 33: Outlook
Outlook FY 2017 guidance unchanged 33 Change 2017 Change 2016 2016 Swisscom 2017 in CHF mn Adjustments 2017 reported pro forma w/o outlook Fastweb Fastweb Revenue 11'643 <0 >0 ~ 11'600 EBITDA 4'293 -20 * 4'273 ~ -100 >0 ~ 4'200 CAPEX 2'416 0 0 ~ 2'400 Upon meeting its 2017 guidance, Swisscom plans t
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: Reported vs. comparable revenue and EBITDA
Reported vs. comparable revenue and EBITDA 36 in CHF mn 2016 2017 Change Q/Q Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Revenue, reported 2’885 2’884 2’874 3’000 2’831 -54 o/w currency effect -12 -12 Revenue, comparable change -42 EBITDA, reported 1’081 1’146 1'080 986 1’073 -8 o/w provision for other risk
Slide 37: New segment reporting as from Q1 2017
New segment reporting as from Q1 2017 37 New structure Swisscom Schweiz IT, Network Other Mass Retail Enterprise and Infra- operating Group Head- Customers Market Customers Wholesale structure segments quarters Fastweb Residential Customers Small & Medium-Sized Swisscom Schweiz Enterprises Cake slic
Slide 38: Segment 'Retail Customers'
Segment ‘Retail Customers’ 38 Net revenue decreased 31.03.2017 YoY driven by a lower service Net revenue in MCHF 1) 1'517 -3.1% revenue and lower hardware sales. Direct costs in MCHF -308 -4.0% Service revenue decreased Indirect costs in MCHF 2) -278 -5.1% (-2.1%) due to lower access lines, lower ro
Slide 39: Segment 'Enterprise Customers'
Segment ‘Enterprise Customers’ 39 31.03.2017 YoY Net revenue down -4.7%, Net revenue in MCHF 1) 612 -4.7% decrease in service revenue due to price erosion, solutions Direct costs in MCHF -180 -6.7% revenue and hardware revenue Indirect costs in MCHF 2) -231 -0.4% also report a decrease. Contribution
Slide 40: Segment 'Wholesale'
Segment ‘Wholesale’ 40 31.03.2017 YoY Revenue from external customers in MCHF 138 -0.7% Intersegment revenue in MCHF 68 -12.8% Net revenue in MCHF 206 -5.1% Revenue from external Direct costs in MCHF -97 -20.5% customers down 0.7%. Lower revenue from lower Indirect costs in MCHF 1) -5 n.m. mobile te
Slide 41: Segment 'IT, Network and Infrastructure'
Segment ‘IT, Network and Infrastructure’ 41 31.03.2017 YoY Net revenue in MCHF 42 2.4% Direct costs in MCHF -4 - Indirect cost below prior Personnel expenses in MCHF -218 -0.9% year level (-1.9%) driven by lower cost for personnel and Rent in MCHF -51 10.9% external employees. Maintenance in MCHF -4
Slide 42: Segment 'Fastweb'
Segment ‘Fastweb’ 42 31.03.2017 YoY Consumer revenue up by Consumer revenue in MEUR 232 4.0% 4.0%. ARPU decrease of -5% Enterprise revenue in MEUR 168 -1.8% overcompensated by an Wholesale revenue in MEUR 1) 53 15.2% increase in customer base. 1) Net revenue in MEUR 453 3.0% Strong position in the 2
Slide 43: Segment 'Other'
Segment ‘Other’ 43 31.03.2017 YoY External revenue in MCHF 122 1.7% Net revenue in MCHF 1) 187 10.0% OPEX in MCHF 2) -147 8.1% Net revenue up by 10% YoY EBITDA in MCHF 40 17.6% due higher revenue for construction services at EBITDA margin in % 21.4% Cablex. CAPEX in MCHF 11 57.1% FTE's 2'575 2.7% EB
Slide 44: Swisscom's smooth maturity profile
Swisscom's smooth maturity profile Actively managed with a duration of 4.7 years 44 Maturity profile after bond settlements as per 31.03.2017 * > S&P (Single A) and Moody's (A2, stable outlook) rating confirmed in CHF mn > 1.9% average interest rate 1'521 of portfolio (incl. derivatives) 1'261 > Ref
Slide 45: RGUs – Single Play and Bundles
RGUs – Single Play and Bundles 45 Retail Customers Access Lines/Subs/Products (in k) YTD, (Change to 31.03.2016 in brackets) Number of Fixed Voice products TV & Access Broadband Mobile in Bundle Sum 1) Δ 1P Single Play 55 (-66) 808 (-429) 217 (-248) 4'578 (-196) 1 5'658 (-939) (-14.2%) 2 2Play 268 (
Slide 46: ARPU – Single Play and Bundles
ARPU – Single Play and Bundles 46 Retail Customers ARPU (in CHF) YTD, (Change to 31.03.2016 in brackets) Fixed Voice 1) 3) TV & Access Broadband 2) Mobile 1P Single Play 16 (+3) 49 (+2) 31 (-4) 36 (+0) 2Play 92 (-6) Bundles 3Play 121 (-10) 4Play 172 (-22) n-Play n/m Total weighted average 43 (-0) 1)
Slide 47: Revenues (RGU x ARPU) – Single Play and Bundles
Revenues (RGU x ARPU ) – Single Play and Bundles 47 Retail Customers Net revenues (in CHF mn) YTD, (Change to 31.03.2016 in brackets) Fixed Voice TV & Access Broadband Mobile Sum Δ 1P Single Play 10 (-3) 128 (-51) 40 (-28) 1) 501 (-19) 679 (-101) (-12.9%) 2Play 76 (-6) 674 (+72) (+12.0%) Bundles 3Pl
Slide 48: Handsets and SAC/SRC
Handsets and SAC/SRC 48 Smartphone share active user postpaid 80% 74% 76% Handsets (in k) 484 337 283 303 356 285 301 365 268 SAC/SRC in CHF mn * Swisscom (mobile and wireline products together) Switzerland 165 145 Enterprise 109 107 106 112 121 117 103 Customers 138 157 Retail 102 96 102 100 105 11
Slide 49: TV market in Switzerland
TV market in Switzerland 49 Market volumes (in k) Market Market 4’489 share: share: 4’324 4’455 4’410 4’421 4’161 512 384 11 % Satellite/Terrestrial 1) 540 397 14 % 557 163 174 4% Sunrise 582 107 134 74 1% 38 26 % CATV / Net Integrators 1) 1'256 1'210 1'180 1'168 31 % 1'276 1'301 577 572 13 % UPC 69
Slide 50: Cautionary statement
Cautionary statement Regarding forward-looking statements 50 > “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