Swisscom Ag · SIX:SCMN
Swisscom — 9M 2011 Earnings Presentation
29 slides from Swisscom's earnings presentation, Nov 9, 2011
Slide 1: “all about SAC’s” 9 months results Swisscom
“all about SAC’s” 9 months results Swisscom Investor & Analyst Presentation 9 November 2011
Slide 2: Agenda “all about SAC’s” (Subscriber Acquisition Costs)
Agenda “all about SAC’s” (Subscriber Acquisition Costs) 2 1. All about SAC’s Carsten Schloter, CEO – Introduction, why focus on SAC’s? – SAC’s, an overview – SAC’s = expensive – SAC’s, the drivers – Switzerland, a SAC’s market – SAC’s, ultimately a profitable business 2. Revenue dynamics – Swisscom
Slide 3: Introduction – why focus on SAC’s?
Introduction – why focus on SAC’s? Because it explains “all” of the EBITDA decline 3 EBITDA Change YoY (9m 2011 versus 9m 2010) in CHF mm, total Swisscom Group Swisscom Switzerland -34 All other: +8 +48 +102 -54 -66 -38 +4 VAT FX +Settlement Operational provision appreciation in Q3 2011 underlying -
Slide 4: SAC’s, an overview
1. SAC’s, an overview Revenues and cost of devices/hardware 4 (CHF mm) Q1 2010 Q2 Q3 Q4 Q1 2011 Q2 Q3 150 Revenues mobile devices +0% YoY 100 50 COGS mobile devices +0% YoY 0 -50 SAC' s/SRC's mobile, TV & DSL, Other +7% YoY -100 -150 advertising & promotion +23% YoY -200 -250 Net initial Cash Outflo
Slide 5: SAC’s = expensive
1. SAC’s = expensive cost per category sold devices/TV/DSL 5 (CHF mm) (thousands) Cost categories and YoY change for 9 months 200 600 +38 mm CHF Advertising & Promotion cost +23% 180 500 Other SAC's (Local.ch) & provisions, YoY 160 +11% 140 400 SAC's (CBU/SME), YoY +0% 120 SAC's TV/DSL, YoY -27% 100
Slide 6: SAC’s, the drivers
1. SAC’s, the drivers 6 600 • # sold devices (in thousands) • SAC’s/SRC’s (per unit in CHF) # TV/DSL gross adds, YoY +10% 500 # ordinary devices, YoY -22% 400 300 # iPhones, YoY +25% 200 # other smartphones, YoY +60% 100 SAC's/SRC's per unit, blended 0 TV/DSL/Mobile, YoY +1% Q1 2010 Q2 Q3 Q4 Q1 2011
Slide 7: Switzerland, a SAC’s market
1. Switzerland, a SAC’s market In Euro/ 7 gross add SAC‘s paid in different markets (mobile only, no wireline products) 250 200 150 100 50 0 SAC's @ France Netherlands Spain avg EU/US UK Austria Germany USA Swisscom, excl CH Euro per gross add Source: broker research for Q2 2011 Exchange rate used:
Slide 8: SAC’s, ultimately a profitable business
1. SAC’s, ultimately a profitable business 8 In CHF/ customer 500 Cash in of around 160 CHF / 6 months: DCF (@ 5% discount 400 ARPU of 48 CHF x gross margin (90%) rate per 6 months) of minus 17 CHF for allocated Capex & over CHF 400 per 300 indirect cost = customer 6 x (48 x 90% - 17) = ~ 160 200 10
Slide 9: Revenue dynamics, Swisscom Group
2. Revenue dynamics, Swisscom Group Change YoY (9m 2011 versus 9m 2010) in CHF mm, total Swisscom Group 9 Fastweb -352 Swisscom w/o Fastweb: -86 Price induced pressure Volume related 8,976 -200 on revenues -438 revenue growth +343 -152 -70 • Tightened -86 product -33 +9 portfolio Price down -15 8,53
Slide 10: Revenue dynamics Switzerland – single play versus bundles
2. Revenue dynamics Switzerland – volumes single play versus bundles Access Lines/Subs/Products 10 (000) Change in Q3 Change YoY (12 month) Subs/Products 30.9.2011 # of products Fixed Voice Fixed Voice Fixed Voice Broadband Broadband Broadband & Access & Access & Access in Bundle Mobile Mobile Mobil
Slide 11: Δ revenues YoY Switzerland, single play decline compensated by bundles
2. Δ revenues YoY Switzerland, single play decline compensated by bundles -CHF 70mm MTR Δ 1P subs Single play +CHF 40mm Mobile Data Bundles Δ bundles YoY (ooo) +CHF 8mm Other YoY (ooo) 11 - CHF 22mm +166 +170 +157 CHF -22 mm lower revenues ytd 2011: 9 months of ARPU of CHF 47.6/month for 166,000 ext
Slide 12: Revenue dynamics, Fastweb (1/3)
2. Revenue dynamics, Fastweb (1/3) 12 3Q 2011 revenues decreased by €50.8 Mln/11% YoY However, the main drivers of the performance were managerial decisions and regulatory effects, with market dynamics accounting for less than 50% of the decrease -€50.8 Mln (-11% YoY) Market Consensus (24.8) (4.5) ~
Slide 13: Revenue dynamics, Fastweb (2/3)
2. Revenue dynamics, Fastweb (2/3) 13 Market Dynamics (Consumer and Corporate) 1 -€24.8 Mln Consumer ARPU Effect Consumer Customer Effect Corporate Business Effect -€14.3 Mln +€2.7 Mln -€13.2 Mln • Impact of lower usage • Positive effect of the • Lower revenues due to one off (average activation of
Slide 14: Revenue dynamics, Fastweb (3/3)
2. Revenue dynamics, Fastweb (3/3) Development FBNP & SBNP (First and Second Bill Not Paid) 14 Overall FBNP and SBNP FBNP e SBNP 40.000 40% 35.000 30.000 30% 25.000 20.000 20% 15.000 10.000 10% 5.000 0 0% gen-10 feb-10 mar-10 apr-10 mag-10 giu-10 lug-10 ago-10 set-10 ott-10 nov-10 dic-10 gen-11 feb-
Slide 15: Fastweb, operational improvements defined to defend profitability
2. Fastweb, operational improvements defined to defend profitability • Distribution improvement through Sky Partnership, offering a Broadband/TV bundle: 15 +18 ∑ 37k +16 +3 1Q 2Q 3Q # net adds in 000 • Key cost reductions to be realised near term: target 2013 vs 2011: 1. Bad debt reduction € 30 mm •
Slide 16: Agenda “all about SAC’s”
Agenda “all about SAC’s” 16 1. All about SAC’s Carsten Schloter, CEO 2. Revenue dynamics 3. Segmental results Ueli Dietiker, CFO 4. Group results 5. Outlook 2011
Slide 17: Segmental results: residential customers
3. Segmental results: residential customers 17 Financials and operational data 9m 2011 30.09.2011 YOY • Net revenue slightly down by -1.3%. New data, Bundles and Subscriber growth compensate almost Net revenue in MCHF 1) 3'825 -1.3% for price erosion and lower termination rates Direct costs in MCHF
Slide 18: Segmental results: SME
3. Segmental results: SME (Small & Medium Enterprises) 18 Financials and operational data 9m 2011 30.09.2011 YOY • Net revenue stable -0.1% (price erosion nearly Net revenue in MCHF 1) 881 -0.1% compensated by ongoing subscriber, bundles Direct costs in MCHF -113 -11.7% and new data growth) 2) Indir
Slide 19: Segmental results: corporate business
3. Segmental results: corporate business 19 Financials and operational data 9m 2011 30.09.2011 YOY • Revenue up by 0.7%, partially by acquisition of Net revenue in MCHF 1) 1'384 0.7% Axept. Decline of wireline revenue (price erosion) overcompensated by rising projects/outsourcing Direct costs in MCH
Slide 20: Segmental results: wholesale
3. Segmental results: wholesale 20 Financials and operational data 9m 2011 30.09.2011 YOY • Net revenue decreased by 214 MCHF Revenue from external customers in MCHF 465 -20.2% - lower mobile termination rates Intersegment revenue in MCHF 297 -24.4% - lower roaming rates Net revenue in MCHF 762 -21.
Slide 21: Segmental results: network and support functions
3. Segmental results: network and support functions 21 Financials and operational data 9m 2011 30.09.2011 YOY • Indirect costs down by 66 MCHF mostly driven by Personnel expenses in MCHF -471 -3.9% cost savings due to efficiency improvements and lower termination benefits Rent in MCHF -132 -5.0% Mai
Slide 22: Segmental results: Fastweb
3. Segmental results: Fastweb 22 Financials and operational data 9m 2011 30.09.2011 YOY • Revenues decreased by 7.8% YoY – Strategically tightened product portfolio: Consumer revenue in MEUR 571 -13.2% reduced hardware sales SME revenue in MEUR 166 -6.7% – Consumer and SME affected by stronger marke
Slide 23: Segmental results: Other
3. Segmental results: Other 23 Financials and operational data 9m 2011 30.09.2011 YOY • External revenue up by 9 MCHF (+1.3%): Swisscom IT Services in MCHF 400 3.4% – IT Services up by 13 MCHF, mainly due to the Swisscom Participations in MCHF 237 0.9% acquisition of a new company in 2010 Hospitalit
Slide 24: Group results: capex breakdown
4. Group results: capex breakdown 24 Consolidated CAPEX increase YoY (+189) due to Fiber and wireless rollout SCS (in CHF mm) Sept. 2011 981 390 94 1‘465 Increase especially in FTTC and FTTH, as well as mobile capacity Sept. 2010 784 421 71 1‘276 Swisscom Switzerland Fastweb Others CAPEX of Swisscom
Slide 25: Group results: P&L breakdown
4. Group results: P&L breakdown 25 3‘520 -1‘310 in CHF mm tax rate 20.0% -103 2‘107 -198 EPS CHF -17 +18 -382 29.30 1‘528 -10 1‘518 (prior (3‘546) (-1‘368) (-110) (2‘068) (-194) (-83) (+18) (-400) (1‘409) (+15) (1‘424) year) tax rate EPS CHF 22.1% 27.49 SCM net Other fin. EBITDA PPA amort. Minoritie
Slide 26: Group results: operating free cash flow breakdown
4. Group results: operating free cash flow breakdown in MCHF -1'465 26 3'520 YTD Sept 2011 Increase in NWC of 416 MCHF (more tied up capital) -272 0 -80 +7 -71 -106 0 0 0 0 0 1'533 o/w Δ pension obligations: -73 EBITDA CAPEX Receivables Payables Inventory Other NWC Others OpFCF ∆ -128 -189 -70 -71 +
Slide 27: Outlook 2011 after the third Quarter
5. Outlook 2011 after the third Quarter 27 CHF bln 2010 Actual 2011 Expected Exchange rate CHF/€ 1.37 1.20 Swisscom Revenues 12.0 ∼11.5 Group (including EBITDA 4.6 ∼ 4.6 Fastweb) CAPEX 1.9 ∼ 2.0 Dividend/share 21 at least 21 (payable the year after) (approved by General (upon achieving the financial
Slide 28: Q&A
28 Q&A
Slide 29: Cautionary statement regarding forward-looking statements
Cautionary statement regarding forward-looking statements 29 ”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