Swisscom Ag Ittigen R/Shs

Good morning, and welcome to the Swisscom Q3 Results 2023, hosted by Christoph Eschleman, Eugen Sternmetz, and Louis Schmid. Louis, the floor is yours.

Good morning, ladies and gentlemen, and welcome to Swisscom's Q3 Results presentation. My name is Louis Schmid, Head of Investor Relations, and with me are our CEO, Christoph Eschleman, and Eugen Sternmetz, our Chief Financial Officer. Today's presentation consists of three chapters. Our CEO starts with chapter one and a quick overview on the highlights, the operational and financial performances of the Q3 results. In chapter two, Christoph presents the B2C and B2B operational results, an update on our network activities and financial results in Switzerland, before discussing FASF's Q3 results operationally and financially. In the second part of today's results presentation, Eugen runs you through Chapter 3, with the Q3 financials, including the full year guidance. With that, I would like to hand over to Christoph to start his part. Christoph?

Thank you, Louis, and welcome from my side to this investor presentation. It is our 100th quarterly results presentation of Swisscom since the IPO 25 years ago, and I'm very Delighted to have you all on the call and present pleasing results on the way to the full year. I will directly move to page four of chapter one, page four, with the Q3 achievements. So you've seen in the results that we have very pleasing financials with an increased top line of 1.5% and EBITDA growing by 2.1%, presenting the best margin over the past two years. We were also able to win the best or strongest brand award in Switzerland by the Swiss Brand Finance Report, which is a very pleasing result and demonstrates our efforts we're doing in branding and positioning Swisscom as a strong brand in Switzerland. Last week, we also launched the new TV box, TV box number five, and some more details later on how this will help our B2C entertainment business. I'm also happy to report that we achieved a net telco savings of plus 50 million year to date, offsetting roughly our service revenue decline, which is from my point of view, an excellent result that the company has achieved. Then moving to Italy, we have seen continued growth in FastWeb. More details later on in the FastWeb section. leading us overall to an unchanged EBITDA and CAPEX guidance, whereas revenue we slightly adjusted due to lower hardware sales and especially the lower Euro to Swiss franc exchange rate impacting the fast web revenues conversion to Swiss francs. Now moving to slide number five, you can see the Q3 market performance. We have roughly the same operational trends in Q3 as the ones we had in Q1 and Q2. Looking at Swisscom Switzerland, you can see continued post-pay growth with 32,000 new RGUs and a stable market share, which is a very pleasing result, whereas broadband is roughly stable, slightly declining with minus 3,000, a bit improved over Q1 and Q2. And if you look at the wholesale figures, we can say that wholesale and broadband year over year roughly cancel each other out with overall a minus 2000 effect year to date. Whereas TV is slightly declining. So we see that the move from TV, the regular TV box to streaming is continuing in the market, leading to a slight loss in RGUs on the TV side and also the structural decline on fixed voices. is continuing with the same trend as in the previous years with minus 22,000 this quarter. On the Italian side, we have a similar picture with strong growth on mobile, slightly decrease in Q3, but still a strong increase of 85,000 RGUs and bringing up to 5% market share. Whereas on the broadband side, we continue our value strategy and accept a loss on the broadband side. which we overcompensate by the biggest ever increase in wholesale lines of plus 47,000 this year. More information on that later on in the past web section. On slide six, you can see the overall financial performance in Q3. So, revenues stood at 2.7 billion, which is up by 1.5 percent. EBITDA on 1.174 billion, which is up 2.1 percent. and net income going up by 7.7% to 462 million. On the EBITDA bridge on the right-hand side, you can see that from Q3 22 to Q3 23, it's roughly stable. Switzerland is slightly declining by minus 6 million, compensated by FASB increasing by 4 million. Then some effects in the other segments and the big pension reconciliation impact due to interest rate changes More details on this maybe later on by Eugen. But overall, a stable development bringing us to the 1.174 billion in EBITDA. Now I'll move to the business review chapter two. I'll go directly to page eight. We can say that Swisscom overall is continuing to executing along our strategic objectives. So number one is stabilizing the telco business in Switzerland and maximizing the value generation based on our customer base. I think on the B2C side, we can say that we are roughly stable evolution, slightly declining. On the B2B side, things are a bit more difficult. We still have an ongoing service revenue erosion, but we are working hard on this topic to decelerate the erosion in the years to come. This is also why the operational or driving operational excellence remains a key topic within Swisscom, mainly in simplification, pushing digital or automation to continue to deliver cost savings over this year and in the following years. We're also focused on growing our IT business, both in Switzerland and in Italy, And then last but not least, we want to achieve profitable growth in Italy on the telco side by growing our wholesale business and scaling up our mobile business in Italy. So looking in more details now at B2C on page number nine, we can, as I mentioned previously, we have again won the strongest brand in Switzerland, which is a very pleasing result and I'm very happy about the efforts of our teams in this area. And we also managed to win the best Connect shop test and the best digital app test by Connect. So we can say we sort of combine the best of both worlds, physical and digital care in Switzerland. And this then leads to further penetration of our blue portfolio, which has positive results on churn and value generation. What is also maybe noteworthy is we launched a new kids mobile subscription a couple of months ago and it shows very pleasing results and the market pickup is very, very good. On the other side, we continue to work on our second brand to make it more attractive. So we launched new subscriptions which are a bit higher in value and focus on the higher end of the second brand market with the Swiss 5G subscription. And we're also pushing Vingo as a full-service provider, focusing more on convergence offer, broadband and wireless together, and the new app for our customer service. On page 10, you see the details on our new or the next step in our entertainment strategy. I think today we are market leader with 1.5 million R2s, and we just launched our new TV box, which is now based on the Google Android TV app. operating system which allows our consumers to open up the complete world of Google services. So they have access to any app which is available on the Play Store and can use it on the big screen in their living room. And we also made quite a big progress on adding new OTT subscriptions to basically transform the TV box from a regular classical TV box into an entertainment hub for the home. And we added Paramount and Disney subscriptions and also new bundles, which one example is the Supermax bundle, which includes Disney, Paramount, Sky, and the Best of Blue, Blue TV, together offering good value for our customers. On page 11, you can see the results of all these strategic improvements and new product launches. So we have... a really pleasing turn actually. We around stable turn around 7, 8% on broadband and postpaid value. And we were able to continuously increase the blue product portfolio penetration moving into 49% on the mobile side and 81% on the broadband side. FMC penetration is roughly stable. And if you look at the RGU and ARPU trends on mobile, we see an increase in the RGU base. So we have now 3.3 million subscriptions, which is a very nice increase of 117,000 year over year, which was a bit counterbalanced by a slight decline in ARPU by minus one Swiss franc. And you'll see in Eugen's part later on, that the RGU effect and the ARPU effect roughly cancel each other out financially. The ARPU effect is mainly due to the shift of second brand or first brand to second brand, whereas the prices on the first brand are mainly stable. On the broadband, we have a bit different effect. So ARPU is stable, which is a great job that the teams are doing to keep the price levels where they are. And we accept a slight loss in the RGU base by minus 12,000 to 1.7 million RGUs on the broadband side. Now on page number 12, we will move to the B2B side of our business. And we are happy to report that we have excellent NPS results. We are working very hard on our network quality, IT service quality to make our services more resilient We bring new innovative products to the market in various parts of the IT business, and they continuously improve our sales and service excellence. And I think we can see that the NPS of our customer base is continuously increasing since a couple of years, and we have now achieved a record values of 45 in corporate and 27 on the SME side, which is very pleasing to me. On the telco side, we are on track according to guidance. So we had a flat service revenue evolution Q3 over Q2 with 382 million. Unfortunately, the erosion is still continuing year over year. So you'll see in the financial sector that we have a minus 17 million service revenue erosion year over year in Q3, which is in line with the guidance we provided early of the year. What is very important to note is that we launched a new enterprise mobile portfolio in the market for the SME customers, which will help us in the coming years to work on stabilizing the service revenue and bringing new attractive products to the market on the telco side. On the IT, we see a similar trend as the ones we had in the previous quarters. So we have a slight growth of 2 million quarter over quarter. and plus 13 million or plus 5% year-over-year, part of which is organic growth, and another is linked to M&A or the acquisition of recent targets. IT is slightly behind our expectations, so we were actually planning for more growth, but the market is a bit sluggish at the moment. Many of our customers are delaying some of their key projects. So overall, we are happy with the IT results, but working on accelerating this again for the future. On page number 13, you see the latest standings on our technology side. So we are continuing to push both the wireless and wireline rollout and network coverage. And I'm happy to report that we have now hit 79% 5G plus coverage in the population, which is up 10% year over year. and we maintain our midterm aspiration of 90% coverage by end of 2025. On the wireline side, we are also going full steam ahead. We are now covering nearly 2.5 million households with FTTH, our 10 gig offering, which is 45% of Switzerland now covered by Swisscom FTTH. And there is also discussion in Parliament about gigabit funding for very remote locations. So this is still too early to tell what the impact could be of this, as the discussion in Parliament has just started, but this will be something to observe over the next quarters. On the IT side, we're also making good progress, building up our in-house capabilities and our local talent hubs in Rotterdam and Riga. and continuously simplifying and standardizing our IT landscape and moving to modern cloud architectures. So you can see that the impact of this on page 14 is our operational excellence and telco savings that we are delivering. And many of the savings are linked to networks and IT simplification, as I just mentioned. Also the digitization of customer interaction, On the service side, moving to chatbots, self-service in the app is an important lever. And then internally, always simplifying and making our organization leaner and becoming more data-driven and embedding AI and automation in our internal processes is helping us to deliver our cost savings. Year-to-date, we achieved approximately 75 million gross savings, leading to about 50 million in net. after increases in salaries and energy costs. And we expect, as already discussed in the last quarter, about 100 million gross this year, leading to about 70 million net end of the year, which should roughly compensate the service revenue decline, which we are expecting for the full year. Last slide about Switzerland. On page number 15, you see the overall Swisscom Switzerland But I will not go into the details as Eugen will outline this more later on. But revenue slightly declining to 2 billion in this quarter, minus 0.8%, mainly driven by slightly lower hardware sales and EBITDA at 911 million, slightly down by 0.7%, but up on a full year basis. Okay, so now I move to FastWeb on page number 16. So I can say that I'm very pleased with the evolution of FastWeb in this quarter and this year in general. We had another quarter of solid growth with 9% more revenue and 2% more EPTR. We have an increasing UBB and mobile customer base. And what is especially important is that we have a very positive momentum on the enterprise side. We have a strong development on the order book enterprise with plus 36%. And also on the wholesale side, our customer mix of Enel, Sky, Wintrae, and Iliad is paying off and performing very strongly in the market with the best result ever in Q3. Now, moving to page number 17, we can see some details on our RGU base. So we are continuing our value strategy on the B2C side. So our broadband subs are down by minus 3% to 2.6 million subs. But we are continuously, although we are executing price increase in the market, we have been able to improve the churn further year over year. Also, I think what is helping is an increased penetration of the UBB or ultra broadband penetration overall in our customer base. On the mobile side, we have a very pleasing growth of plus 17% of the customer base year over year, which leads to nearly 500,000 more subscriptions year over year or plus 85,000 in Q3. You can see that the FMC penetration is continuing to increase in our customer base. It's now at 42%. which is also an important result because our converged customers have more ARPU and highly reduced churn overall. So this is an important level for us to continue to work on. As mentioned before on page 18, you see the very pleasing results on the enterprise business. We have plus 20% in revenues, bringing us to 287 million revenues in Q3. maybe one word of caution on this revenue increase. Don't extrapolate this on a full year basis or for the next year. There are some phasing effects between Q2, Q3, and Q4, which lead to a spike in revenue in Q3, which is obviously very positive, but we shouldn't get overly excited about this and stick to the full year guidance regarding FastWeb. On the wholesale side, we are also moving ahead with full steam with our new customers. And the wholesale line increase you see with plus 39% is mainly driven by Sky, Enel, Vintre, and Iliad, and leading to 5% higher revenues, 84 million in this quarter. So passive financials, page number 19, we can see 660 million revenues in Q3 plus 9.5%. On a full year basis, 1.9 billion plus 6%. EBITDA is also slightly growing with plus 1.8% this quarter to 225 million more in the financial section of Oregon. So this I will now hand over to Eugen for the financial details.