Swisscom Ag Ittigen R/Shs

Good afternoon and welcome to Swisscom's full year results presentation 2023. My name is Louis Schmidt, Head of Investor Relations. Let's start the online meeting with a short introduction and move to slide number two with the agenda for today. Christoph Eschleman, our CEO, starts with chapter one of successful 2023, where he dives into some of the achievements commercially, operationally and financially. Then in Chapter 2, Empowering the Digital Future as Innovators of Trust, our CEO presents the Swisscom Group's story and strategy before explaining the strategic priorities for Switzerland and Italy. Thereafter, we move to Chapter 3, Trusted Leader in Digital Life and Business in Switzerland and Italy, covering achievements, market trends, Strategic Priorities, including Ambitions for Swiss B2C, presented by Dirk-Wirt Spitzke, our Head of Residential Customers, Swisscom Switzerland, for B2B, presented by Urs Lehner, Head of Business Customers, Swisscom Switzerland, for Swiss Networks and IT, presented by our CEO, and our Italian business, presented by Walter Enna, CEO of FACET. After Walter's presentation, our CFO, Eugen Sternmetz, will present in Chapter 4 our rock-solid financials, including the Outlook 24. In the wrap-up chapter, some final remarks from our CEO, Christoph Eschleman. After the presentation, we move directly into the Q&A session, which starts at around 4 o'clock. With that, I would like to open the meeting and hand over to Christoph. Thank you, Louis.

We will move directly into the achievements of 2023. I think we can say that 2023 was again a very successful year for Swisscom and Swisscom delivered again all operational and financial targets. We are leading in Switzerland. We were awarded the strongest brand in Switzerland. We have a very large NPS leadership and were able to win many shop service and network tests in the past year. Also in Italy, we had a strong growth. We continued to grow in IT and Walter Renner took over successfully from Alberto in the CEO role. On the Swiss side, B2B had a strong development especially on the IT side with a strong growth further positioning Swisscom as an integrated connectivity and IT leader. Last year, we have also seen a lot of innovation. Many new products were launched both on the B2C and the B2B side to strengthen Swisscom's innovator image and to make sure that we can generate new revenues in the future years. On the ESG side, we made a major milestone by obtaining the accreditation or the approval of our SBTI targets, which we handed in, and we are now on track to execute against our 2035 net zero SBTI approved target. On the next slide, we can see a brief overview of the operational performance of both Switzerland and Fasturb, and you can see that overall it is a very pleasing result. In Switzerland, we were able to continue our growth in Q4 on the mobile side and were able to attract 129,000 new customers on our post-pay offering, leading to a market share of 53%. Broadband was roughly stable, slightly declining, but overall compensated by a slight growth on the wholesale side by plus 13,000 connections. We also had some structural changes, so you can see that TV decline continued in Q4. Also, the fixed voice decline continues in line with structural changes in the market and many customers canceling their fixed voice lines or TV behavior shifting more and more to other media content such as OTT streaming providers. On the Italian side, we had a very pleasing development on the mobile side with plus 422,000 subscriptions, reaching 3.5 million customers year-to-end, representing nearly a 5% market share. We also continued our value strategy on the broadband side and accept a certain decline in our broadband customer base, which we overcompensate largely by the growth in our wholesale business. Because as you know, last year or quarters, I've seen many new entrants in the Italian fixed line market with Iliad, with Sky and lately Enel. And these customers are customers of our wholesale division, leading to a very spectacular growth of 69,000 lines in Q4 and an overall growth year on year of 108,000 lines. largely overcompensating the loss we have on the B2C side. Overall, this led to very pleasing financial results. We had a stable group revenue of 11 billion Swiss francs, representing 0.2% change. We had a growing EBITDA at 4.6 billion, up 4.9%, growing net income at 7.1 billion, and with stable CapEx, a very strong growth in operating free cash flow proxy and overall free cash flow also growing to 1.48 billion or plus 9.7%. And Eugen will later detail the financial numbers and go into more details on this. I will now move on to Swisscom Switzerland, or Swisscom Group first, the Swisscom Group story. So one year ago, we gave ourselves a new vision to clarify the purpose of Swisscom, which is helping all our customers achieving the maximum value in the digital world and extracting value from digital technology. We believe that achieving value out of digital technology requires, on the one side, obviously innovation and new digital technology, and on the other side, it also requires a trusted base between the customers and the company. This is why we established a new vision one year ago, Innovators of Trust, where we say that we want to be a trusted, digital technology innovator, making new technology available to our customers in unique and easy-to-use customer experiences. We also focus on generating a positive impact for society with digital technology because we strongly believe that this again generates new trust in digital technology and makes it easier for our customers to accept new technologies such as 5G or at one point in the future, 6G. And now, in the past year, we also worked on our group strategy to decide how we want to achieve our vision. And we decided on the following four strategic pillars we want to work on within the Swisscom Group. And this new group strategy is valid for all our group companies in Switzerland and in Italy. The first two pillars are focused towards our customer base and the second two pillars are focused more internally and is about the transformation within Swisscom. So as you know, Swisscom has always had a very high customer focus and we want to continue to delight our customers as they are the basis of our future success. Delighting customers starts with the best network, both wireline and wireless, but obviously also extends into having a sales and service excellence in the shops, in the call center, in the B2B sales force or an excellent digital interaction for our customers. We also need to focus on the future to generate future growth. This requires new products that we need to invent and build both for consumers and for digital customers, which I will talk a bit more about, or Urs and Dirk in particular will talk more about the new products that we are currently working on and launching that will generate new revenues in the coming years. Now, as you know, on the technology side, in particular in telecom, what is great today is average tomorrow, and customers will not be willing to pay the same amount in the future for a similar service. They expect more at a lower cost. So it is important to work on our own efficiency and cost base, and we need to make sure that we can achieve more with less resources to be able to satisfy future customer demands at a lower cost. This we will achieve by implementing or focusing heavily on our future digitization internally at Swisscom, but also automating more and obviously applying artificial intelligence at scale across all sectors in our company. This will allow us to work in a different way and achieve more with less input. But it also requires our people to change, to perform together. So we also need to work on our collaboration within the company, but also constantly develop our employees. We need to learn new skills. We need to learn how to use artificial intelligence, train our people that they are also fit for purpose in the future. And this is what the last and final pillar of our strategy is about. Now, I don't want to go into too much detail of these pillars because my colleagues will talk about it with what it means regarding their relevant segments. But next to delighting customers within our interaction with the customers, obviously branding is also an important aspect and we will continue to work on the branding of both FastWeb and Swisscom in the future. And the basis for growth is obviously, as I talked about, new products in the future. Next to digitizing to achieve more with less and using AI, we will also focus on standardization, on simplifying continually our IT, and to focus also on excellence both in service and sales organizations. We also defined new Swisscom group goals. We have defined five group goals for the overall group, which apply to all subsidiaries within Swisscom. Today's presentation, we will focus on the first two ones. How do we become a trusted leader for both consumer and business in Switzerland and in Italy? And how do we achieve rock solid financials in the future? But the other three are not less important, but you can find the details in the appendix of the presentation, and we're also happy to obviously answer any questions in the Q&A on the remaining three group calls. Now I'm at the end of my presentation, and I will hand over to Dirk Wierzbicki to talk about consumer in Switzerland.

Okay, thank you very much, Christoph. Good afternoon, everybody. Looking back at 2023, we obviously utilized the Group Strategy Framework to guide the presentation. Overall, we are happy with the results that we have achieved in the consumer segment in the last year. Obviously, key to this has been delighting customers as always. We were able to extend our NPS leadership on the back of great connectivity and networks, great and outstanding experiences with products and entertainment, and obviously also great services, be it assisted or non-assisted. They're all packaged in compelling propositions that are delivered via Swisscom and the bingo brand and certain brands in a segmented approach to the market with a clear focus on value for customers that ultimately led also to a stable app use situation which in turn then led to an almost stable service revenue situation in the B2C business for last year. Innovate for Growth, a key topic last year was certainly entertainment. I'm going to explore that in a minute a bit more, but you know clearly we upped up the experiences from an experience and functionality and content perspective, both for our own content offerings, but equally also with liaisons for compelling third-party offerings that we brought to our customers. These two pillars then also helped to achieve more with less. I'm happy to report that we have a stable EBITDA, so while the left and middle pillar clearly work for the top line, we are also busy working on our cost structures. particularly on things like simplicity or stability, avoiding customer interaction, which is of no value for us and for the customer. So clearly, let's say we have a good workload reduction, and that shows in its results, combined also with a push into digital experiences that have helped to achieve this. Looking at the next page, which is probably to most of you known, the market is slightly growing, which is basically really coming from the fact that roughly 100,000 population growth is there every year in Switzerland, which in turn means roughly 40,000 new households, which we are profiting from, and particularly in the mobile space, there is still pre- to post-migration ongoing, which is another source of growth that we can participate from. We do that, as I said, you know, with our own brand and the second and third brands. Clearly, our focus here is value and quality and not, you know, pricing. But we also likewise see an increased development of digital maturity in the population overall, which is, you know, helping also the shift to digital as we service or as we address customers. And with respect to pricing, we expect that, you know, we have an unchanged situation as we had it last year, also this year. I'm not going into the right-hand side here as I touch upon, you know, most of the topics later on. When we look ahead, and you would ask chat GPT, tell me the difference between this chart and last year, you'll probably not find too many differences there. which basically means, you know, we continue our course, which is along these three pillars, delight customers, innovating and achieving more with less. And the particular focus here on delighting customers is really, you know, our focus is on delivering great value for our customers. customers with the best experiences there. And in innovation, you know, next to, you know, further upping up our experience in entertainment, we are looking into certain segments or product segments where we believe, let's say, we can serve customer needs and grow a bit more. And achieving more with less, we're also maintaining course, And as Christoph said already, particularly with new possibilities like exploiting AI to serve customers, we see even further opportunities that we want to unleash. The value side of things that I touched upon, I'm really pleased that we have mostly stable app use. As you can see in the middle on that graph, on wireless there's a slight decline, which is mostly from the fact that we have a slight brand shift going on there, as you all know. But overall the situation is a rather stable situation. That also is a result of itself by focusing on value which is the first point on the left hand side as you can see it. Some of you might remember we talked about that already last year. We have reduced quite substantially first on the main brands on the Swisscom brand our promotional activity in terms of promotional discounts, in terms of times, in terms of gifting promotions and so on and last year at around spring time frame We also took back the aggressiveness in promotional activity on the second brand and also focusing even in the budget segment more and more on delivering value for money as opposed to like the cheapest price around. And that apparently, let's say, is a trend that we have begun with and we want to continue in 2024. So we continue to execute our multi-brand play with a focus on value and quality all along. We do see certain opportunities, particularly also from the fact that The fiber network build-out is continuing that gives us great opportunities both in the customer base but also then obviously to acquire new customers in those areas and regions where we beef up the network from copper to fiber. Next page, you see the RGU development which is mostly flat. Obviously, looking underneath, there are a couple of changes. We had quite a good growth on post-paid RGU's. We have a further decline on voice RGU so the kind of like fixed mobile substitution on voice is still ongoing and we were mostly stable on broadband and we had a slight decline on TV. Some of that you know correlates obviously with the decline in broadband and some of that also correlates with the effect that Christoph has already touched upon. As you can see also from the graphs in the middle of the page at the bottom, we are pleased with the uptake of our blue portfolio, which we launched mid of 2022, so most of the customers are already there. The white spaces to me and to you should indicate that there's still possibility from some of the base customers that happen to be in older tariff schemes to bring them into the new A blue tariff scheme, which then also is mostly a more for more deal, meaning, you know, for a little more money, customers get much more in there, be it broadband, speed performance, data, entertainment, or whatever. On the FMC penetration, we also still see room for growth that we want to address and tackle. And equally also, there's not a graph for that here, but similarly for the household penetration, we see an opportunity for growth. That not only then for the FMC part for the main brand, for the Swisscom brand, but also for Wingo. We have a bit of an imbalance. We have many more. mobile customers and broadband customers, obviously also to cross-sell broadband into the mobile base that we would have with Vingo. Looking at the customer satisfaction or NPS development, we are really pleased with what we have accomplished, not only according to our own measurements and insight, but also testified by third parties like Consumer Magazines and other organizations where we mostly won like each and every prize that is around there. Strong recognition also again from Brand Finance for the overall brand work for Swisscom. And really that to us is at the heart of our success, you know, happy customers stay. churn less and obviously a good company is a good reason to join us when everything works so well and the brand has such a high recognition. The churn rates you see at the bottom there are more or less on a similar level than last year. So really something that we are pleased with and we want to continue, which obviously goes without saying in a saturated market environment, you continue and have strong efforts into your customer base to have them happy and recommend us and our brand for others. At page 19, then, a bit of a deep dive into TV. TV is really, let's say, next to the connectivity product, if you wish, the reason to come and reason to stay, a main pillar of our proposition. And as you remember, we have got from nowhere to market leader. over the last decade and we still do believe that we have the best proposition around. Nonetheless obviously we have upgraded the proposition as I said last year. So it gives people even more pleasure and choice of content and other possibilities in their connected home by utilizing the Google platform and the Google Play Store with the world of applications and content that is in there. we also cut special deals with third-party streaming providers like paramount and disney who are hugely relevant to our customers and our customers and can profit for instance from special discounted prices but also from a better convenience as you know sign up and billing and so on it was all come from one hand and that is us and obviously that is something that we want to continue also this year. Looking in the broader product and offering portfolio, then obviously next to connectivity and entertainment, we see pockets of growth in areas like accessories, connected devices, security offerings and we also want to expand our insurance offering that we already provide for like device insurances and so on and so forth into other insurance areas this year as we believe we can leverage the strength of our brand and leverage the size of our customer base also in other product areas that are correlated to our connectivity and to the relationship that we have with customers. Last part then, taking a look into the development of service and particularly the move from assisted service to digital service. But we are particularly pleased with how that has developed for eCare. 70% of our workload and interaction already is brought about on the digital interface. You also see at the bottom of the page, we have been immensely working upon you know, reducing the contact center workload, which in turn, by the way, has the side effects that customers are more happy because quite often as customers call in, something new doesn't work, something isn't as simple as it should be, and so on and so forth. So we have put a great deal of effort into working on high-performing networks and products and stability, but also on ease of use, simplicity, and so on and so forth, so that questions don't arise at all and then leads into the workload reduction as we have it. And on the right-hand side, you see our focus areas for this year. We basically want to continue that route, leveraging also the possibilities that AI offers for the digitalization of the customer interface. And also, you know, whilst we had quite a, you know, focus on hotline and customer care, since last year also putting quite some focus on our retail network, where we equally believe that the retail network can profit from new ways of servicing customers and digital opportunities and so on and so forth. So that's clearly a focus area, both for pleasing customers, but also to become leaner in operation for next year. Et voila, that concludes the briefing on B2C and I hand over to Urs Lena for B2B.