Sunrise Communications A

Thank you, operator, and good afternoon, ladies and gentlemen, and thank you for joining us today. I'd like to welcome you to our full year 2024 financial results call, our first results presentation as a standalone company. With me in the room are Audrey Krause, our CEO, as well as Yanni Fortier, our CFO. In terms of agenda for the call today, as you can see on page three of the presentation, Andre will kick off with a summary of the 2024 highlights. This will then be followed by diving deeper into the commercial performance of our consumer and B2B businesses, as well as a summary of our positioning on the mobile and fixed infrastructure and an update on the progress on the sustainability front. Janne will then take over to walk you through our financial performance for the full year, as well as the final quarter of last year. and also share our outlook for 2025. Before we then move to the Q&A session, Andre will conclude the presentation with some final remarks. I'd now like to hand over to Andre. Please go ahead.

Thanks, Alex, and a warm welcome and good afternoon to our first results presentation as a standalone company. 2024 was a very packed year with a number of highlights and successes for our business. And I would like to flesh out a few before we jump into the details of the presentation. Now, throughout the year, we had a number of new commercial product launches and new partnerships that we could form and bring to market successfully. On the back of that, we have been able to sustain good customer growth momentum throughout the quarters. We have launched also successfully our upgrade to two and a half gig on our HFC network and also have achieved a strong result in the network test on the mobile side. We spun off the company in the fourth quarter and listed successfully on the six exchange. And we are also talking today about us achieving all of our guidance and providing a dividend of 3.33 Swiss francs for the Class A shares for 2024. Also, we are fully confirming our outlook that we have already given on the Capital Markets Day back in September. And on the basis of that, we are also expecting a dividend of 3.42, i.e. dividend growth of 2.7% upon delivery of those results. Now, with that overview, let me jump into the commercial performance that we have seen throughout the year and particularly in Q4. As I said, we were always focused on delivering new innovations to the market that give us an edge over our competitors and give customers a reason why to join us. Now, in the fourth quarter, a few examples that I would like to flesh out. is number one on the left hand side for now more than two years we are successfully introducing and further developing our device as a service offering and we launched our flex upgrade program which gives customers the opportunity to buy a headset on a monthly pay by basis and provides a lot of flexibility around that which has proven to be a very attractive offering in the market The results have been that while the market for handsets in the fourth quarter year on year was slightly down, we have been able against those industry trends to grow by 7%. And it was on the back of really the flex upgrade program and smart upgrade program having an attach rate of more than 65% with all of the new customers that have joined Sunrise. We also got very good feedbacks from the large handset manufacturers telling us that we are a clear exception and an example of how to do device as a service on a global scale, which is something that we are, of course, very happy about and would like to take forward. The second thing that we also did in the fourth quarter was strengthening our content proposition. We have launched a Sunrise TV shop, which gives our customers the opportunity to flexibly manage all of their OTT streaming services, and that gives us also the opportunity to double down on our partnerships that we have with the Netflixes, Disneys, and also OnePluses in our market. On the back of that, we have also increased our market presence around content offerings and have launched larger marketing campaigns with Disney and also Netflix. And we are also pushing forward on the one plus proposition that since February now includes also Paramount Plus for the Swiss market. Q4 is always a quarter with a lot of liquidity in the market, and that is mainly driven by the fact that November carries Black Friday. which in our market is extensively used by all operators, not only as a few days, but throughout the course of November. What we have seen this year in Black Friday is we have been very successful in terms of executing our Black Friday offerings, even though we have not seen a further degradation, if you want, of the promotional aggressiveness. In fact, All of our promotions of last November were exactly in line with the promotional prices that we had a year ago during Black Friday. So no further increase of aggressiveness from our end. However, execution was very well planned and executed. And as such, we have been able to drive significant inflow volume. And with that, we're very happy to see what amount of liquidity we could actually capture. However, we also, after the exercise, we're looking at all of the moving parts, not only just the inflow element. And we have to clearly say that if we are looking at the amount of churners that we are giving to market and the amount of retention discounts that we have to grant to keep customers that are appealed by lower price offerings of the competition, have in total driven a negative impact of the Black Friday period. Now that for us is a turning point and means that we have to rethink our use of Black Friday and other promotional periods going forward and as a result of that we have also started to reduce our aggressiveness in Q1 and we will further do so and also review our activities to the high intensity and promotional periods like for example in Black Friday. Now, not only consumer, but also if we are looking at our B2B momentum, then we have been able to throw along three dimensions to drive meaningful progress in 24. So we have been able to, again, win a number of new logos, new companies that have joined out throughout the year. And for example, in Q4, we joined Ringier. Earlier in the year, we joined Migros. And as I said, these are only examples. The list is a lot longer. So we are continuing to win new relationships in the marketplace. Secondly, it's important for us not only to win new customers, but also to renew existing relationships, which we also have successfully done throughout the year. You see a number of examples here. In Q4, we were able to prolong our relationship and partnership with SBB, the Swiss Railway, and also the contract that we have with Swiss Post we have successfully prolonged in the third quarter already. Thirdly, very important dimension of future growth is also selling new services. And here are three examples given. EOC is the largest hospital in the Ticino area, and we have been selling an MPN solution on 5G for the entire hospital, which is a very big project, but it also testifies our ability to drive MPN solutions to the market. The second example is smaller, but it's also testifying our ability to drive innovative IoT solutions to B2B customers as we are doing with antibiotics. And the third one is also important as cybersecurity from our perspective yields a lot of future potential. And the business that we are doing with LimeCo is actually helping us not only to sell an MPN campus, but also to ensure secure connectivity on top of that. Now, in summary, I would say we had a very strong commercial momentum in Q4, and this is also resulting in the numbers on the customer side. So you see that for the fourth quarter, we had 59,000 net additions on mobile postpaid and 10,000 net additions on the fixed internet side. For the full year, this was something up to 159,000 customers on mobile and 31,000 customers on internet. This is a strong inflow momentum across all of our growth engines, how we call them, meaning our consumer main brand, Sunrise, our flanker brand, Yellow, and also B2B. Important to note is that the fixed internet growth has been stable above zero for the entire year, so we have been really turning around towards a robust internet growth. While the year of 23 had only just one quarter of positive net additions, we have now been every quarter in positive numbers. Also important for us is the fixed mobile convergence that has increased throughout the year, now standing at 57.1%, which is 1.4 percentage points up compared to the Q4 in last year. And this has also helped to drive our churn reduction throughout the year, which was around 10% of our churn that we were able to reduce during the course of this year. And this, of course, has also helped to sustain the good net addition level as less cross-eds are required to drive the same outcome at a lower churn number. Challenging, of course, is the APU development. And if you look at the APU on mobile and fixed site, both have been declining by 5.9%. And the constitution of that decline is quite different. One thing I would like to flesh out before I go into the individual dynamics is that we are not perceiving that the market pricing is deteriorating. In fact, what we are seeing is while there is promotional activities, the net prices resulting out of those promotional activities have been remarkably stable on mobile as well as on fixed. Nevertheless, the two categories of mobile and fixed do show a significant output decline. And if we start off with mobile, then this is to a certain extent, to the largest extent, driven by mix changes. Those mix changes are driven by the mix that comes in through our different growth engines. The ARPU of Sunrise is different than the ARPU of Yellow is different than the ARPU of B2B. And as this is changing the total composition of the business, there's an impact that is coming from that mix change. There's a second mix change which is related to products. like for example additional incremental zim services that we are selling are not necessarily carrying the same apple than the first step so think about watches think about family propositions think about connected tablets all of those are of course also driving volume but not necessarily carrying the same amount of revenue per month on those products now In mobile, of course, the opportunity is while we see significant growth, we are able to stabilize and see a stable-ish APU, sorry, revenue development of the mobile business. And this is something that we are also expecting to see in 2025 and continuing on the positive trend. The fixed business APU has a very different APU composition. and here the main challenge is really sitting in the fact that we have been migrating our historic upc customer base onto the sunrise product portfolio which is on average sitting on lower price points now as you know we have hinted to that development during the capital markets day back in september at that point in time we mentioned that we had 200 000 customers remaining on old upc tariffs by the year end this number had reduced to 60 000 and while we are speaking today the number has further come down to 20 000. we were expecting also to reduce the number to around zero by mid of this year the last 20 000 we are not becoming lazy but the reality is that the complexity of migrations is increasing as we are now tackling the long tail of our customers which partially have historically complex setups and therefore need more individual caretaking than the previous bulk of migrations that has happened now with that let me also touch on our infrastructure and sustainability developments that we have seen throughout the year As I alluded to, we are very happy with the results that we have been able to achieve throughout the year. And I'm starting off on the mobile side. We, for the ninth time in a row, were able to achieve an outstanding mark. And additionally, we have been also able to reduce the distance to Swisscom and to increase the distance to SALT. so from that perspective we really have seen a strong performance of our mobile network and we have been able to win two categories in the test which are the voice category and the data category hence the most important categories in the test lastly what i would also like to mention because the connect test is carried out by a company that is running tests in the same range in 120 countries and is testing more than 200 operators. Sunrise has been testified as being in the top five of the global networks, in particular also if we're looking at 5G networks. So from that perspective, we are feeling very strong about our mobile infrastructure, but we will not rest on this. We will also continue to drive new innovations that drive quality improvements and also new services to our customers in the future. now the other half of our infrastructure is of course also what we are doing on the fixed side and in particular what we are doing on our own cable network that covers 65 percent of the population in switzerland as you know we have talked about that in the past we have done a technology driven speed upgrade that allows us now to cover almost the entire footprint 97 percent of the total footprint that we have is now capable of delivering two and a half gig of downstream speed which is actually used by more than 200 000 customers while we are speaking and not only the ones that are using the two and a half gig speed are benefiting from that speed increase but also all other customers are benefiting from the fact that we have more capacity in the network hence the congestions or degradations of service have come down to a minimum and hence the service quality has significantly improved. On the back of this strength, as we are selling our fixed connectivity on a technology agnostic basis, meaning that customers actually are buying a speed and then the technology comes with second priorities, we continue to see a very strong inflow share of our own networks which is HFC predominantly, but also fixed wireless access, we have seen an increase in areas where we are not offering HFC and not offering FTTH. So in total, we are currently in December 24, we have seen an inflow of 58% of new joiners sorry, of 58% of our total subscribers being on our HFC and our fixed wireless access network. So you see the number is remarkably stable despite the fact that of course more FTTH is coming to the market and also customers are choosing the FTTH networks. So we feel in total very strong about our network infrastructures. But I would also not only like to talk about the performance of our infrastructures, but also our drive towards delivering that in a sustainable way. And this leads me to our sustainability and ESG overview. We have made substantial progress in 2024 across our agenda of people, planet progress. And if I flesh out a few of the topics that are worthwhile mentioning here, then we have achieved in our employee engagement survey a top result bringing us into the first quarter versus our peers. We have pushed all of our electric personal car fleet, all of our personal car fleet to electric, which was a big achievement during the year. we have achieved a number of iso certifications that give testament to our abilities in in the regard of process quality and sustainability and on the back of that we have been able to winning an ecovirus platino medal which certifies only the very best sustainable companies in the swiss environment lastly important to note that the entire management team is incentivized not only to deliver the targets of last year, but also to drive forward our targets in the future. And we're very much committed to further continue to drive ahead. Now, with that, I hand over to Janni to talk about the financial results.

Thank you, André. So before we dive into the actual results, let me quickly recap what has happened since we last spoke. And André mentioned it already, the listing on the 6th. We now have one share class trading on the sixth and the second share class did not trade on the sixth. We have introduced our new board of directors with a strong mix of Swiss nationals and a number of international leaders from the telco and media industry. And I think since the trading, we have been very pleased with the development of the stock. I think you see on the right top a graph that explains the share movement. And given that this was a spin-off where I think if you look at legacy spin-offs, volatility can in certain instances be very big. What we have observed so far is actually the trading happening within a very narrow range of the share price. around that 8% dividend yield. And I think furthermore, as we see some of the initial exchange of shareholders tempering down, we see a constructive development of the share price. By now, and that was as of last Friday, 75% of the class A ADSs have been converted and approximately 98% of the class B. I think lastly, important to note that we see the volumes on the Swiss exchange growing on a relative basis, which again is encouraging to see as that was part of the initial hypothesis around having a local Swiss listing. then one side remark to make is that we still intend to delist the class a ads's from the nasdaq nine months after spin which is effectively somewhere around q3 with exact timing still to be confirmed so with that if we go to the next page um i think andre mentioned it already but something that i'm proud of as well is that we were able to manage um to deliver all of the guidance metrics that we set out with a broadly stable revenue a stable to low single digit ebitda growth translating into approximately 363 million of free cash flow that gives us now the ability to propose a dividend of 333 for class A shares and 33 cents for class B shares, which then in total equates to approximately 240 million. And lastly, as part of the net deleveraging that we did in the cash injection from Liberty Global, we ended at a net leverage ratio of around 4.4 times, which is inside of our 4.5, 3.5 to 4.5 guidance range that we have given. Now, let's zoom into some of the details that constituted to these results. And I'll start with focusing on the full year results and then elaborating a bit more onto the Q4 specificities. So all in all, revenue brought this table slightly down, which was driven by the residential decline, as you see on the right. The majority of that decline comes from the fixed side of the business, and it's in relation to the customer repricings and harmonizations that André spoke about earlier. Good to note, as we did, that the actual commercial activities are tailing off, which means that also then as we get into 2025, that effect is about to temper. On mobile, you can see for both full year and Q4 a decline as well. Again, as Andre said, we saw good volume growth, but that volume growth was tempered by the mixed changes of the brands, the mixed changes in products that we're selling, and thirdly, and I think also an important element, especially in Q4, was the fact that we are more and more including roaming and other usages into our bundles. B2B for both the quarter and the full year grew nicely, and we expect it to continue. um as such the revenue growth that you're seeing in other is in relation to the build to suit activity that we are doing to build new uh mobile sites which we then sell off to um the swiss towers um owner and as such we're then recognizing those revenues um in our p l So with that, the revenue trickled down for both the full year and Q4 into margin, but was partly offset by the fact that we had lower hardware costs. Again, in residential, you can see both Q4 and full year mostly driven by the fixed decline that we have seen offset by B2B and the bill to suit. Lastly, and that drove the full year EBITDA growth, the 23 million of OPEC saving, which is a nice mix of, on the one hand, lower labor costs, which was in relation to the optimized FTE structure that we implemented at the beginning of 2024. Lower external costs on the back of the safety of an efficiency program that we're continuously running. And thirdly, on the back of lower integration or cost to capture cost as we classify them. Leasing were slightly higher on the back of the growing excess costs that we have as part of the fiber offerings that we have. so then going to capex um rather than speaking just about to full year 2024 we thought it was helpful to show a multi-year perspective i think what you can clearly see is that we are going down and are on our way to meet the midterm target of 15 furthermore what you can see in the red arsenated bars is that the baseline capex has fluctuated but is effectively flattish throughout that period, and that the actual reduction, the majority of the reduction of capex is coming as a result of the cost to capture falling away. I think a couple of important elements that make us confident to go from the 16.9% to the 15% is the fact that on the one hand, we are now tailing off the 5G rollout CapEx that we have done on the one hand. On the second point, the IT transformation that we also spoke about during the Capital Markets Day is now largely behind us. And thirdly, as we are finalizing all of the customer harmonizations and migrations, CPE CapEx is also going down. I think lastly important to note as part of our guidance we are expecting growing revenue and that growing revenue further helps them to reduce the percentage of capex to revenue even though as you can see the absolute capex remaining still slightly improving but then remaining stable through the period. After having spoken about the EBITDA and the capex, let us go back to free cash flow. So on the right side, full year free cash flow of 363 million, which was driven by the operational result, largely capex, and then partly offset, if you will, by on the one hand tax. that if you look at it from an absolute perspective we still paid effectively zero swiss francs of tax but we had a tax good guy in 2023 we did however have a tax settlement in relation to legacy years that i'll speak to about later Lastly, what you can see is that the operational OFCO growth was partially offset by a net negative year over year in terms of working capital. Important to note, though, that the absolute net working capital that we benefited from in 2024 was positive, however. So before we then go to the dividend, let me quickly update you first on what we achieved in 2024, and later I'll speak about what happened further to our debt structure in 2025. So a couple of things to note here. First of all, the net deleveraging you can see going down from gross debt before the spin of 6.1 billion approximately, to approximately 4.6 billion afterwards. That is a net decrease of 1.5, which, as Liberty had communicated, was always the intention. I think how we get from, and furthermore, I think important to note that we actually did a hard delivering of approximately 1.2 billion, which we expect to continue in the coming years. I think last thing to note, and it is important, that the cash and cash equivalents of 352 million that you see here includes a 50 million further contribution of Liberty Global, so i.e. in the total at the end when the spin-off was done, we actually got a 1.55 billion cash instead of 1.5, which again is in relation to a tax settlement that I'll explain to you in more detail as we talk about the guidance. Lastly, and I think that is important to note as well that as we get into 2025, that 4.4 net leverage ratio will fluctuate a bit over the quarters. And therefore, we are only guiding for that 3.5 to 4.5 at the end of the year. That has to do with some of the cost ramping up in relation to becoming a standalone company and further rebasing that we still have to do as we change accounting standards. So therefore, it's important to note that, again, the 4.4 is guided on a full year base. also has to do, by the way, by the cash generation and the seasonality of that that happens throughout the year. So then the dividend. As we have achieved our financial guidance, we have proposed to the board to pay approximately 240 million of dividend, which then equates to a 3.33 Swiss franc dividend per Class A share, and as I said, 0.33 for Class B. um i think that important to note as we have communicated before those dividends will be reappropriated from the foreign capital reserves that we have and as such are swiss withholding tax exempt um i think furthermore to note what you see on the right side is the actual planning of when we're going to be paying dividends so the invitation for the end annual general meeting will shortly be going out But the most important dates are on the one hand, the 15th of May for the Sunrise shares to be as an ex-dividend date and the 16th for the Sunrise ADSs. We will then be paying the actual dividend to the Sunrise shares on the 19th. And because of the translation, the ADS holders will be only receiving them on the 27th. lastly before we go further that 240 million of dividend equates to approximately 66 percent of our adjusted free cash flow which is fully in line with the below 70 percent that we had guided for so then let's go uh to the outlook for 25 and before i talk about guidance uh let me update you on i think a very positive outcome that we were able to achieve um in the quarter so far So we were able to reissue 1.3 billion of a sustainability-linked loan. By doing so, we were able to term out approximately 30% of our debt from 2029 to 2032. And furthermore, we're able to reduce our weighted average cost of debt from 3% to 2.8%. which I think speaks to the testament of how debt investors look at the outlook of the business, and then secondly, of course, the deleveraging that we have done, and also the positive trajectory that the rating agencies are putting upon us at the moment. What lastly to note is that we, as the markets are currently constructive will continue to observe how these markets are evolving and will access those markets to further term out our debt and optimize pricing whenever we see feasible and fit. So then. Let me finalize by giving you the guidance for 2025, which is a reconfirmation of the guidance that we gave during the Capital Markets Day. So first of all, revenue broadly stable. I think important to note that we will still be impacted from the right pricing efforts and the customer harmonizations that we have now nearly finalized as that result annualizes. Secondly, important to note that in this guidance, there is the price increase that we have recently announced. And then thirdly, of course, commercial performance that we have seen so far. That will translate into a stable to low single digit EBITDA growth, where we expect further small cost optimizations to help deliver that result. with then 15% to 16% capex to revenue, as again, the effects that I spoke about earlier are coming through, which will translate then into a free cash flow of the 372.390. What we are furthermore proposing today is that on delivery of those financial targets, we will suggest to the board to pay a 3.42 Swiss franc dividend for Class A shares and 34 cents for Class B, which is a 2.7% growth year over year. Then let me highlight a couple of items that I think are important for clarity. One is the tax settlement that we have reached with the tax authorities. which impacted the cash injection from Liberty Global. There was a tax settlement in relation to the years of 2019 to 2024, and the total settlement is expected to be approximately 60 million. We don't know the exact amount yet as we are going through the refilings of our cash statements. But I think important to note that, again, the vast majority of that settlement was funded by Liberty Global and as such doesn't impact either the cash generation of the business or our ability to pay dividend. How one should be thinking about the timing of those cash outflows is approximately 40 million in 2025 and 20 million in 2026. Given that those tax elements are extraordinary, we are excluding them from our adjusted free cash flow definition. And more importantly, this cash settlement doesn't in any way contradict the previous statements that we have made around us growing into becoming a full taxpayer by 2028. So yes, there is a cash out, if you will, in relation to tax in 25 and 26. That is just in relation to that legacy settlement. Underlaying cash tax of the business is not changing. I think then lastly, what is important to note, and there is further detail on page 36 of this deck, but it's the further rebasing that one has to do to 2024 to get to the stable to low single digit growth for 2025. So the 1030 EBITDA number for the rebase 2024 had two elements in there on the one hand one-off cost in relation to the spin that we are rebasing out and then secondly a set of costs that we on the one hand were in relation to ramping up our internal organization and secondly the transitionary service agreement with liberty global The best way to think about it is that the 1,030 is excluding those one-off costs, but including half of a quarter of those standalone costs, to which you have to add approximately another 30 million incremental, like we guided for during the Capital Markets Day, to have a clean 2024 basis to then compare 2025 against. I think lastly, important to note, is that we expect Q1 2025 to be slightly softer in relation to the guidance. And that is for a number of reasons. On the one hand, the price increases that we have announced will only kick in as of April 1st. And secondly, some of the ramp-up costs in relation to the standalone company are kicking in now as well, whereas then that normalizes out over the rest of the year. So with that, André, back over to you.