Swisscom Ag Ittigen R/Shs

Good morning and thank you for joining the Swisscom Q3 2024 results conference call 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 2024 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. Our CEO starts the presentation with Chapter 1 and a quick overview on the highlights, the operational results and financial performances of the third quarter. Then in Chapter 2, Christoph presents a business update for Switzerland and Italy. In the second part of today's presentation, Eugen gives a short update on the Vodafone Italia transaction in Chapter 3 and runs you through Chapter 4 with the Q3 financials, including the confirmation of our full-year guidance. With that, I would like to hand over to Christoph to start his part.

Christoph. Thank you, Eugen, and welcome everybody to this Q3 2024 call on Halloween day. I will move directly to page number four, highlighting the highlights of Q3. You can see that we have a flattish underlying top line and EBTA development, but with telco savings picking up and slightly higher capex But overall, we are confirming our full year guidance for 2024. In Switzerland, the business trends are unchanged. And we delivered Q3 as expected with slightly decreasing telco service revenues, but continuous growth on the B2B IT side. We're also very happy that we were able to win all Connect tests, both on the wireline network side, as well as in the B2C shops hotline side. and the best app. We also reached a milestone on the wireline construction side, delivering or having built over 50% of Switzerland, and we are now in the second half of our rollout. On the Italian side, FastWeb is continuing to grow with ongoing commercial success, managed to deliver growth both in B2C, B2B, and in wholesale, and we have continuous mobile growth with second best performer in the market. And in September, we even managed to be number one in the market on mobile number portability. Also, our energy offer in Italy is going very well with the first 50,000 customers and now extension to the offer to SME customers. Overall, also, the acquisition of Vodafone is on for closing in Q1 2025. and more info on this later on by Eugen. Now I move to page number five, operational performance. First, I will talk about Switzerland on the left-hand side. You can see that mobile net ad performance is continuously picking up. We have now delivered plus 35,000 connections in the third quarter, which is a pleasing development overall if you look at the quarterly evolution throughout the year. On the broadband side, we managed to stabilize the situation, still losing slightly on connections with minus 9,000, but compensated by growth on the wholesale side, which is delivering continuous growth quarter by quarter. As you can see, again, wholesale grew by 10,000 connections in Q3. On the Italian side, we have a pleasing situation with continuous growth on the mobile side with 92,000 net as in Q3, bringing us to over 5% market share on the mobile side with 3.8 million RGUs in mobile. Broadband also quite a lot better in the third quarter than in Q1 and Q2, so B2C did a good job at stabilizing the business, focusing on the high-value customers, but at the same time stabilizing RGU performance by increased net as and reduced churn. delivering or, let's say, resulting in a minus of 9,000 connections, but which is largely overcompensated by our growth on the wholesale side, where we grew by 54,000 connections in Q3. Overall, you can see the financial results on page number six, with a Q3 revenue of 2.7 billion, a reported decrease of 1.2 percent. If you look at this at stable exchange rates, we actually have a slight increase in revenue, and EBITDA is 1.15 billion minus 1.3%, and Eugen will go into all the details later on during the presentation. I will now move to the chapter number two, the business update in Switzerland and Italy, starting with our strategic priorities for the group as a recap. So first and foremost, one of the important strategy pillars is delighting our customers with a strong brand, with quality, with customer loyalty, and the best network. And then for the future, one of the most important pillars is innovation for growth, generating or building and implementing new B2B and B2C products that generate new revenues in the coming years. For this, we have launched in the past the insurance offering in the B2C Switzerland side. We launched the energy offering in Italy. We launched new workplace products, security products, and digital trust products, which are already or will generate revenue in the near future, delivering future growth not only this year, but for sure in the coming years. Next to this, we are continuously working on cost savings, achieving more with less, essentially working on efficiency through automation, but also simplification, removing and phasing out old legacy products, tariffs, systems, and platforms, and by introducing AI and Gen AI in all major business processes to become more efficient. And next to this, or last but not least, we also work on our people skills, developing ourselves, developing the collaboration between teams, and continuously working on diversity and talents and leadership development to further improve our overall delivery focus. Now on page number nine, you can see the individual aspect of this group strategy in action and the results we achieved, starting with B2C Telco, where we are working on constantly strengthening the number one position that we hold in Switzerland. So we have one, the Connect test, as pointed out earlier, 24 for the service app, the hotlines and the shops. This one the first time in a row. So really demonstrating our quality lead that we have in Switzerland in all service dimensions. We also launched a new or several new products on the Wingo side in the second brand to further complement the portfolio in the second brand arena. We also work on stimulating ARPU and demand by customers, mainly by a more-for-more approach, where we migrated outdated wireline products onto the new offerings, which typically results in an uplift of ARPU as these new products have more aspects and more content and at a higher price. To further decrease churn and compensate customer loyalty, we launched a new loyalty program called Swisscom Benefits, which already has over 100,000 participants since the launch a couple of weeks ago. And this allows customers to get rewarded with cinema tickets, where they can participate in certain events or win new devices and be compensated for their longstanding participation. loyalty and gives us also opportunities to upsell and cross-sell new and additional products. In terms of results, you can see on the right-hand side that Schoen is by large stable and very low. And the ARPU wireline is also stable at 89 Swiss francs for fixed bundles and slightly decreasing for mobile by one Swiss franc to 50 Swiss francs for post-paid value. As in the past, this decrease in ARPU and mobile is mainly linked to the brand shift, customers moving from the main brand to the second brand, Wingo, and the other third brands. Now, moving to page number 10, you can see further information about the B2C. As announced in Q3, we are working on our sales approach. We slightly adjusted the promotional approach to counteract the promotional intensity of Sunrise and Salt. But I would like to point out that as a market leader, we continue to be a price follower. But our main intention is to defend our RGU base and make sure that we are attractive to in the market and we will continue to act with selected promotions and discounts throughout Q3, throughout Q4 also to make sure that we have the relevant net ads and orders in the market. We also extended our insurance portfolio that we launched earlier in the year with additional products and we implemented the first marketing campaign and we can now see that sales are picking up although still at a very low level. We also launched new TV packages and content. For example, one binge option where we combine Netflix and Disney together, allowing our customers to profit from very attractive bundle combinations. Overall, you can see on the right hand side, the RGU base we have combined in post paid 3.6 million RGUs, which is a 62,000 increase year on year. And on the broadband side, we have nearly 1.7 million customers minus 25,000 on a year-on-year basis. Moving on to slide number 11 and B2B, our B2B business in Switzerland, which is mainly driven by reinforcing our premium positioning as a trusted business partner. For this, we worked on our branding in the B2B space with a new slogan to better position our trusted business partner aspect and increase the brand awareness and customer loyalty. We also worked on new offerings on the device side with a device as a service offering, but also we worked or continued to deploy our Swiss AI platform delivering sovereign AI services, which is now fully installed and scaled up. And we have first customers running on the AI platform and generating first revenues of this new product. We also launched a digital marketplace for SME customers to accelerate sales of our workplace offerings and help SMEs digitize their business faster. In terms of results, you can see on the right-hand side that telco service revenue stood at 374 million for Q3, which is a 2.9 percent decrease, or 11 million year-on-year, mainly driven by decreasing prices, which you can see below on the RPU line, where the RPU wireless has slightly decreased by one Swiss franc to 26 Swiss francs in Q3 2024. On the other side, we have development of the IT service revenue to 296 million in Q3, which is a plus of 3%, 3.1%, or 9 million year-on-year. So this is a very pleasing result with continued IT growth. Now, moving to networks and IT, on page number 12, we are working very hard on creating tomorrow's best network in Switzerland. We increased our 5G plus coverage. We are now covering 85% of population with the new frequencies of 5G. which is an 8% increase year-on-year. And as mentioned at the intro, we also reached the milestone of 50% FTTH coverage, which is up by 6% year-on-year. So this is something I'm really happy about, that we are now covering more than half of Switzerland with 10 gigabit connectivity, and we are continuing to deploy according to our rollout plan. and confirm or are confident that we will reach our goal of 57% coverage by end of 2025. We also managed to win the Connect test on the fixed network and continue to work on the stability of our network. So not only did we not have escalated major incidents, but we also managed to decrease regular incidents overall which then results again in cost savings because we have less calls in call center less feed force interactions so this is not only good for customers in terms of quality but also good for us in terms of cost that allows us to further improve our bottom line now last page on the swisscom switzerland page number 13 working on our cost base remains a top Priority, not only decreasing costs, but also increasing quality at the same time, so really achieving more with less input. The main levers of this are simplifications and phase-out, automation, shoring activities, and introducing artificial intelligence. So you can see some examples on the left-hand side. So we are working heavily on the B2C side, both on the digital interaction between our customers and us, but also introducing GenAI support in our call center processes, supporting the agent or augmenting the agent to allow the agents to provide better and faster help to our customers. We also expanded our nearshoring activities, both for the own and second brands and with the scale up of Kosovo, Poland and Bulgaria. And we are seeing pleasing results on that side with good NPS and solution rates. So we will continue to scale up these centers in the future, and this will continue to deliver cost savings. Also, what is really interesting and promising for the future is what we see on the GenAI chatbot front. So we upgraded our traditional AI chat or traditional chatbots to the latest GenAI technology. And you can see that we had a jump in automation rate by factor 2x. We saw an improvement in the solution rate by 3x. And this is obviously a very positive result and yields a great promise for the future. And we will continue to invest on these topics to further improve customer care for our customers. Because this is also, I think, delivering a very nice benefit for our customers as they can solve their issues anytime they want. Even if it's 3 a.m. in the morning when the call center is closed, they can solve their problems in an easy and fast way. Okay, so now moving over to Italy, starting with B2C on the FAST website, where we continue to execute our high-quality approach and at the same time evolving beyond the core. So the most important aspect of this strategy is the launch for what we call 3 per T, or 3 for U, which is a convergent proposition, wireline, wireless, and the energy offering, which is picking up quite rapidly in the market. As I mentioned before, we are close to 50,000 customers in the past six months. And you can see on the right-hand side that 81% of these customers are convergent. So they are wireline customers that upsell to the energy offering. but there are also some customers which only buy energy for us, which then gives us an opportunity to cross and upsell mobile and wireline connectivity to these new customers. We also managed to improve NPS on the mobile side, and we were the second best performer in the mobile market in Q3 and managed to surpass Iliad even in September on the MNP balance, which is promising for the future, and we continue to work hard to sustain our mobile growth in Italy on the FAST website. You can see the number of RGU's in mobile is now 3.8 million plus 11% year on year. And we also managed to increase the convergence or the FMC rate to 43.77%. B2C revenue, after some decline in the past years, managed to turn around this year and stabilize it at first. And now this quarter, we see a slight growth of 1% to 292 million in Q3, up from 289 million, which is an absolutely excellent result looking at the overall Italian B2C market and the results that our market competitors are delivering. Now moving over to B2B on page 15 and wholesale, we continue to enjoy a really good market momentum. We managed to win many new customers on the B2B side and revenues have grown by 6% to 304 million in Q3 and for the first time are actually higher than our B2C revenues in Italy. The same you can see at the wholesale side, where we have a growth of 13% to 95 million in Q3 2024. And we have over 830,000 UBP wholesale lines now active, which is also higher than our wholesale business in Switzerland. And we managed to gain a new customer, Edison Energy, which will continue to drive growth in the future. We also bought a small company, in Italy ADT, which delivers Oracle cloud system integration, which complements our capabilities on the cloud side in Italy, which is an important aspect for the future and complements our AWS activities in the market. Okay, this was it and I will now hand over to Eugen for the transaction update.