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.

Thank you Christoph and good morning everybody also from my side. Very brief update on the Vodafone Italia acquisition. Everything going according to plan. So we received the approval by the European Commission under the EU foreign subsidies regulation in Q3. So there is three more approvals to go. the most important obviously being the one by the Italian competition authority. The Italian competition authority opened as expected a phase two investigation. This is a large transaction, so that's completely natural, and we expect the transaction to go, as we said previously, in the first quarter of 2025. I move on to the financial results and go directly to page number 19. As usual, I'll give a Overview over the group numbers and then deep dive into Switzerland and Italy and then go back to the group for free cash flow and net income and the guidance. So let's start with the overview of the first nine months. Page 19, top part revenue. Revenue in the group was down 29 million. Net of currency effect that was up 21 million. The mix in the third quarter is similar to what we have seen over the whole year. So, year-to-date, Swisscom Switzerland down 101 million and Fastweb with strong growth up 117 million. As I said, always in the third quarter, similar pattern with Switzerland down 45 and Fastweb up 29. However, the Fastweb growth has come down in the third quarter a bit as expected and as we discussed already in Q2. Overview of Ebitda development, Ebitda down minus 39 million, underlying minus 32. Also here, not dissimilar to the revenue picture, Switzerland down 45 million and Fastweb up plus 8 million. However, as Chris has already noted, the positive development here on the Swiss side is in the third quarter, Ebitda was essentially flat, as now in the third quarter, cost savings started to kick in and compensate at least partly for the service revenue. The IT business in Switzerland came in with a positive contribution to year over year. So we ended up on the Swiss side almost flat. I'll move on to page 20. CapEx in the group up 101 million years a date. That's exclusively driven by Switzerland and is a mere phasing issue, as I shall explain later when I discuss Switzerland in more detail. Operating free cash flow down 140 million. Obviously, a mix of lower EBITDA and higher CapEx and the latter, the CapEx part being a transitory phenomenon, as I shall explain. So I move on to the Swiss numbers on page 21. Revenue first, down 101 million. Let's look at the individual segments. B2C, finally, same number, down 101 million. So that's a combination of lower service revenue, but also lower hardware revenues, in particular in the first quarter. But the same basic combination was present also in the third quarter. And by the way, the hardware revenues both on the B2C side and on the B2B side contributed to the revenue consensus miss that you noted and I repeat what I said already quite often that the hardware revenues have very little impact on the margin and this is also why you see no effect coming out of this on consensus EBITDA where we are above consensus in the third quarter. On to B2B, B2B revenue here today is up 13 million, so that's a steady service revenue decline on the one hand. For the full nine months, hardware and software revenue is flat, but in the third quarter, with a decline, as I already mentioned, and IT service revenue is growing, and the net balance year-to-date is at 13 million in the third quarter, a minus 15 due to the hardware deviation. Wholesale was down 14 million, but this is very much driven by roaming revenues with little impact on EBITDA, as you can see in the EBITDA bridge. So let's go there to the EBITDA bridge. Year-to-date, 49 million down in Switzerland. Q3, just minus two, as discussed. B2C, very stable picture over the year. So minus 13 million EBITDA year-to-date, almost the same. number every quarter. So very stable picture with service revenue decline on the one hand compensated almost completely by cost savings, mostly on customer care. I move on to B2B. B2B down minus 34 million. That's quite simply the service revenue decline dropping down to the bottom line in Q3, mitigated to some extent by a better EPDR contribution. from the IT business. Move on to page 22, a couple of details on Swiss revenue and costs. I'll start in the bottom left, the service revenue evolution. So service revenue decline in Q3 was basically stable compared to Q2 with minus 24 million, which puts us on a trajectory of roughly minus 100 million for the full year as everybody can do on their own with simple mathematics. On the drivers, B2C and B2B, overall no big change to Q2. I would just like to highlight two factors. One is on B2C byline APU, you see a plus here of plus 5 million year-over-year effect coming from the byline APU. That was a negative number in the first quarter and a zero in the second quarter. So you see the effects of the after stimulating measures that we talked about in Q1 and Q2 finally showing up in the numbers in a positive way. At the same time, and that's the second point I would like to highlight, the price competition is still quite strong. And so what you saw in the first quarter where we had quite sluggish net ads numbers, now shows up in the RGU service revenue effect compared to prior year on the wireless side and on the wireless side. So it's the two factors that basically balance out to a net same number in the Q3 as in Q2 with minus 24 billion. On the B2B side, it's all very stable. The numbers are basically all the same as in Q2. But obviously, we all know that B2B is typically not as smooth. It's the more bumpy part of the business. So the smoothness quarter over quarter might more be the exception than the rule. Finally, on this page, a word on cost savings. Cost savings very bit low in Q1 and Q2. As you remember, now we have plus 14 million in the third quarter. That's a reasonable average quarterly run rate that we would be shooting for, keeping our overall target of 50 million plus for the full year, which, by the way, we do confirm. So we do confirm the overall target of 50 million plus, which by implication simply means that we do expect Q4 to still be a bit stronger than what we saw in Q3. Let's go to CapEx and operating free cash flow in Switzerland, page 23. So CapEx is up $105 million compared to prior year. Most of this is due to increased CapEx in Switzerland. Sorry, increased CapEx from the violin access network, so from the FTTH rollout. Why is it so much higher than in the previous year? You might remember that the Switched last year from the multi-point rollout to the point-to-point rollout, which slowed us down considerably in the first two quarters of 2023 when we switched the technology, so that slowed down the rollout, so the numbers are higher this year. That's the simple explanation. However, there is another factor that comes into play with regard to the full year outlook. This deviation of 105 million plus is not going to last for the full year, certainly not to that extent, because Q4 fiber capex in 2023 was exceptionally high and will almost certainly be lower in Q4 2024. And so this is why we confirm the CapEx guidance for the full year 2024, despite this 105 million higher CapEx in the first nine months. Operating free cash flow down 159 million. This is obviously driven by the deviation of EBITDA and very much by the deviation in Fiber CapEx. That will turn around, as I explained, to some extent in the fourth quarter. On to page 24, deep dive fast web revenue and APTR. So fast web revenue was up 120 million in local currency or in the third quarter plus 31 million, which is a bit smaller growth than in the first two quarters as announced and certainly a bit more sustainable than what we saw in the second quarter, but still a 4.7% growth, which is obviously significant. Fantastic. If you look at the individual segments, B2C in Q3 was up 3 million. It's basically mobile growth compensating for losses on the wireline side or overcompensating the losses on the wireline side. B2B in the third quarter was up 17 million and wholesale was up 11 million. So the growth is very much driven as in the past quarters by B2B growth And wholesale growth, which itself is driven by the continuous growth of the UBB business, with EROS bouncing around a little bit, as you saw in the second quarter, for example. That showed stronger wholesale revenue growth. Now the Q3 is mainly driven by the UBB business. So all in on fast-track revenue, we are on track to about 5% growth for the full year that we already talked about previously. I move on to EpicTier. Underlying EpicTier is up $8 million year to date. Q3 was up $2 million. Looking at the individual segments B to C, EpicTier was actually down $7 million. So what is going on is basically the higher margin wireline revenue dropping out and lower margin wireless revenue coming in. So please remember that we are still and MVNO in Italy, and so the buyerless margin is lower than what we see on the buyer line side. On to B, also a small minus in APTR development year-over-year in the third quarter despite revenue growth, also a mixed effect going on here. Quite simply, high margin connectivity revenues being replaced by lower margin IT service revenues obviously don't conclude that we should not grow because there is no incremental EBITDA to the growth. Quite the other way around, if we wouldn't grow on IT business, the picture would be worse than what we see. So where does the EBITDA growth come from in the third quarter? Then it's mainly wholesale, again, as in previous quarters, and cost savings in the infrastructure and overhead segment, which then adds up. to positive APDR evolution. I move on to page 25, CapEx. We can do this quite quickly. CapEx in Italy is in line with prior year. Operating free cash flow is slightly up. It's up 18 million, but if you adjust in the APDR for the exceptionals that we had last year, it's a plus of 5 million since we booked 13 million provision for four weeks bidding last year. So that's it. small plus of 5 million, which is in line with what we saw in the P&L on APTR. I'll move back on to group level, group free cash flow, page 26. The same as last year, stable despite the lower operating free cash flow. Where do the positive effects come from? On the one hand, from a better evolution of networking capital in the first nine months. And also we had very low net cash interest costs in the first nine months. It's a bit of a weird effect. Essentially what is going on is that we are investing the funds we raised in order to fund the Vodafone Italy acquisition short term and earn ongoing cash interest on these investments, while the coupons on the bonds that we issued to finance the acquisition will come on stream mostly later this year or start actually only next year. And so this is why we have a very welcome and positive mismatch on the cash, net cash income in the first nine months. I move on to the net income bridge. Net income is slightly down, 28 million year over year. 39 million coming out of EBITDA, slightly higher depreciation. So EBITDA is down 62 million. Two positive effects compensating for that. On the one hand, interest expense also lower in the accrual view due to some carry that we earn on the water fund, on the funds that we raise for the water fund acquisition. Also, tax expense was a bit lower. And with that, I come to our final page on guidance, page 29. We do confirm the guidance for the full year for revenue, EBITDA cutbacks, and also for the dividends. And with that, I hand back to the operator.

Thank you, Eugen. To ask questions, please press star 14 on your keypad and repeat star 14. To withdraw your request to speak, press star 15. Thank you. You already have several requests. I will now open the lines one by one. As soon as your line is open, you will hear a corresponding text on your own line. Please introduce yourself by name and company before asking your question. Thank you. First question.

Hi there, it's Joshua Mills here from BNP Powerbar Exxon. I had a couple of questions, please. The first obvious one is around the competitive environment. And I think in the call just now, you've talked about some of the moves you're making to try and steer front book pricing more positively. And we heard a similar message from Sunrise yesterday, that looking at your service revenue trends and then also the ARPU development, particularly in consumer fixed line, it looks like there's still some pressure So the short question would be, how are you seeing the market right now? What are your expectations into Q4? And at what point do you think you will start to see some of the benefits come through in your Swiss service revenues? And then the second question, just on B2B, one of the things which other telcos have been talking about more recently is their ability to improve margins on some of the IT and cloud businesses by bringing the development of those services in-house. Given that you've been kind of front leading on this for some time. Perhaps you could give us a bit of color about the incremental margin you're seeing on some of those IT businesses and whether that's actually improving versus where it was in the past. Thanks very much.

Okay. Thank you, Joshua. So on the competitive environment in Switzerland, I would say that it is still highly promotional and we see no Despite what our competitors are saying in analyst calls, we see no change in behavior on their part. They are actually increasingly aggressive. For example, Sunrise increased promotional duration from 24 to 30 months now. So we don't expect any change in this regard in the coming, not in Q4, certainly with Black November starting today or tomorrow. and certainly also not in the foreseeable future. So I expect that, you know, the service development we see in Switzerland right now, we will probably see a similar evolution in the coming quarters, and we will provide full guidance on 25 in February. But I don't expect any positive, you know, trend reversal on that side in the near future. But that's also why we changed a bit our promotional approach to protect the RGU base we have in place. But on the other side, on ARPU, we are stable, especially on broadband. You see we have a stable ARPU. So all the other measures that we are implementing with changing pricing on some of the options, bringing customers from the back book into the front book, like the new tariffs, is actually helping us keeping the ARPU stable overall. Now on B2B IT, our cloud business is actually already fully insourced since many years. So we are producing this ourselves. We are also reselling, obviously, Azure and AWS, but most of our cloud customers are running on our own private cloud infrastructure that we have built a couple of years ago or many, many years ago and continue to operate. So there is not so much room on that side to increase margin actually to the, maybe there's even a risk with the Broadcom pricing moves that they are trying to do on a worldwide basis. You've probably seen that they are increasing prices everywhere for VMware. We are working currently on this to actually keep margin stable in our cloud business despite the price increases of Broadcom. But overall, I can say that we are obviously working on also increasing margins in the B2B space as a whole. So this is a permanent priority to increase profitability across all product categories that we deliver. And we have measures in place to continuously improve margins. And so we will not only deliver EPTI improvement through increasing revenues in the future, but also some improvement through profitability measures.

Next question.

Yeah, morning, guys. Yes, Maurice, Patrick, Evan Barclays. Thanks for the opportunity to ask a question. Just a couple from me, please. Just the first thing is, I mean, Sunrise is very topical given the likely spin coming. There's been a big discussion around sort of wholesale dynamics and whether or not Sunrise might use its own HSC network or maybe use wholesale or bought its own fiber. Just curious if you like the Swisscom view on the future of the fiber network, whether you consider co-financing, whether you consider netco models would be appropriate. Just wider thoughts on how you see the evolution of your wholesale offering beyond just what you currently do. And second question, just on the NPS side. So I was curious to see KPN calling out on their earnings call, possibly deteriorating NPS trends because of cost of living. And in the sort of light of

no obvious price increases in switzerland i'm just curious your thoughts in terms of the importance of price and nps and how that's trending thank you okay so i'll take the second question first and so i can confirm what the kpns said on their call so we also see slightly deteriorating nps numbers on the b2c side due to uh price uh um so yeah We can probably say that, you know, in the current setting, the economical and inflation setting or cost of living setting, price is becoming increasingly important for customers. So obviously, you know, the work we are doing with sort of more for more moves and things like this also has at least a short term impact on NPS, where we see a slight dip. But I would say that over time, we expect to keep the NPS stable at a good level. On the Sunrise or wholesale dynamics question you had earlier, I think we see wholesale business as a positive evolution. So we continue to build out the fiber footprint. So we announced up to 80% coverage by 2030. So this will give us more opportunity to wholesale Fiber connectivity also, for example, to competitors like SALT, which only buy fiber in the market. So this will increase or stimulate our wholesale revenue in the future. And on the construction side, I mean, we are already partnering with quite a lot of companies in Switzerland to build out the fiber footprint. So co-financing or co-building is something that we are used to execute in the markets. but we have no intention to spin out the NETCO or something like this. So we believe in a fully integrated or vertically integrated telco operator model. And we will continue to operate on this model, owning our own network build out and then owning the network for the future, as we believe that is an important aspect of our offering and also delivering revenues from the wholesale business, which are growing. Very clear. Thank you.

Next question.

Good morning, all. Thank you very much for taking my questions. It's Titus Cran here from Bank of America. Just two questions on my side, please. First one, maybe following up on Fibre as a topic, just because we had so much commentary during this Q3 earnings season about kind of smaller fiber alt net consolidation, also infra owned by municipalities being potentially taken over by the incumbent, for example, in the Nordics. And I just wondered if you had any updated view on this in Switzerland as well, given that we know kind of this fiber net, for example, with a couple of municipalities and energy providers, would this be a consolidation opportunity for you at some point in the future? And then secondly, A question a bit on the economics of the loyalty program that you've introduced now. Maybe I'm showing a bit of ignorance on my side, but can you talk a little bit about how these economics work and how the payoff works between the costs, I assume, you have for offering those special events or discounted tickets and the benefits from kind of lower churn and cross-selling and how those additional costs are split and booked. Thank you so much.

Okay, thank you, Titus. So on the fiber side, this is not something that we see in the Swiss market consolidation of altnets, or at least not on a larger scale. Next to the 50% Swiss gold footprint, there are about 8% altnet footprints that have been constructed in the past. So it's not a huge footprint. Obviously, if a municipality wants to sell a network, we will look at it. But we don't see really big activity on that side or not a lot of intention of Altnet trying to sell off their network. So we will continue to focus on the build out of our or upgrading our existing copper net to FTTH and continue to build out our new fiber footprint. In terms of the economics of the benefit program or the loyalty measures, This will be financed, so this will not create incremental costs. The objective is to finance it within our current cost envelope by also decreasing churn, resulting in lower, for example, service acquisition costs, or taking out or modifying other activities that we have done, like maybe financing devices or financing devices being moved under the benefits program. So it's positioned in a different way. But it doesn't generate incremental cost. And for example, the movie ticket side, this is a business we own. So typically, customers can buy tickets at reduced rates. But then once they are in the cinema, they also generate new revenue buying popcorn or drinks. So overall, it is not just like a cost measure, but also a revenue opportunity for us, but still perceived as a benefit by the customer because they get a discounted or free entry fee. into the movie theater.

Okay, great. Thank you.

Thank you. Next question.

Good morning, it's Andrew Lee from Goldman Sachs. I had two questions. First question, just your commentary around fibre. We had Telenor yesterday saying that it's seeing an increased preference across B2C for fibre over cable in Norway. It's seeing a step up there. Just wondered if you're seeing any shifting trends for consumer preference on fibre versus cable in Switzerland. And then second question, just on the cost-saving opportunities Obviously, you've scaled back your ambitions earlier this year in terms of cost saving. I wonder if you've found or are seeing any greater scope for cost savings than the kind of low end of your guide, the 50 plus, going forwards from AI, digitalization, softwareization. You're starting to get more confident in your ability to expand margins. Thank you.

So thank you for your question. The first one, fiber versus cable preference. I wouldn't say that we see a change in preferences yet. The cable network in Switzerland is of good quality. So for the moment, I would say it is pretty much stable. but we will see how it plays out in the future once the fiber footprint is even bigger and customers get more used to fiber. I wouldn't exclude that this could change in the future, but at least for the moment, we don't see a big change in customer preferences. On the cost-saving side, so we said that we will deliver north of 50 million, so there is an opportunity to deliver a bit more, but it also depends on the phasing of the individual initiatives. So some of the cost savings might come in this year or next year depending on this phasing that the number will be more or less north of 50 million. But anyway, cost savings will continue over the coming years and the technologies you mentioned like AI and automation and other activities will continue to deliver cost savings in the future. Also the fiber rollout, copper shutdown, So we are confident that we can continue to deliver cost savings in the coming years, which is an important aspect of keeping the Swiss telco EBITDA or cash flow at a stable level.

Thank you.

Next question.

Hi, good morning. This is Nuno Vash from Bernstein. Thank you for the opportunity to ask questions as well. Two from my side. One, firstly, on Switzerland B2C broadband, because I've noticed the churn trends have actually worsened quarter on quarter. So third quarter in the year used to be your lowest churn quarter. We've actually picked up quite a bit from second quarter, the churn on broadband. So just wondering what effect. I realize, as you said, the market is very competitive, but that was the case already in Q2. So just wondering why it worsened. so significantly year on year. And then a question on Italy and the sort of ongoing investigation on the Vodafone Italy deal, because we saw reports in the press last week that Iliad was interested in potentially buying your B2B fixed or the Vodafone, sorry, FastWeb B2B business in Italy. I know you might not be able to say much on this, but is this something you would consider? And why do you still feel confident on the first quarter close when it seems that remedies are still being discussed and the process is still in a sort of not so advanced stage? Thank you.

Okay, so on the B2C broadband churn question, from my perspective, actually, the churn numbers are pretty stable. They're sort of fluctuating around somewhere between 8.5 and 9 something. And right now we are at 8.8. And depending a bit on the quarter and phasing, it goes up and down. But I would say overall, you know, flattish. And I think in Q3 last year, churn was actually at 8%. Now it's at 8.8. So there is a slight increase, but it's, I would say, not overly concerning. And that also has a bit to do with what competitors do in one quarter or not versus one year and the other. On the Italian question, obviously we cannot comment on the ongoing investigation and discussion with Vivica, but I can only say Iliad has a habit of communicating through press releases. They also wanted to buy Vodafone through a press release and it didn't happen, so I wouldn't put too much weight on what they communicate in the press. And we are focusing on our discussions with the ICA and confident to close in Q1. And we are also confident that the deal is really pro-competitive for Italy and helping Italy to have a more competitive telco market with a better infrastructure over time.

Understood. Thank you.

Thank you, Nuno. Next question.

Hi, it's Usman Ghazi from Berenberg. Thank you for the opportunity. I was just wondering if you could perhaps give an update on the price competition that you perceive is going on in Italy, please, and whether, you know, things are stable or getting worse. Yeah, any... Any view on that would be helpful, please.

Thank you. Okay, so easy answer. I would say stable, highly competitive, very, you know, a lot of targeted win-back campaigns or below-the-line offers, but overall market is not worsening, but price levels, I would say, are remaining stable.

Thank you.

Last question.

Hi, it's Drew from UBS. Thanks for the presentation and for taking the question. A couple of quick ones, if that's okay. First is on Switzerland and if there's been any update with regards to a potential Huawei ban in terms of the network, so just any update or color that would be helpful. And then secondly, if you could kindly share some more color on the Swiss insurance business and then separately the energy business in Italy. So are they already contributing to revenues in Q3? But more importantly, do they have a positive margin contribution? Or are you really seeing these as more of a tool to drive convergence and customer loyalty? Thanks very much.

Okay, so on the Huawei ban, so there will be, or let's say the government is working on a new law to allow them to potentially introduce a ban of certain vendors or country based on country. But this law has not yet been changed and still needs to go through parliament. But we expect this law to go through probably somewhere next year. But this then just introduces the possibility for the government to introduce a ban. And we don't expect the government to actually introduce a ban, but it is just for the case, you know, if let's say the geopolitical situation should worsen so that actually the government has a way to act, which is not the case today. So if today, even if they wanted to do a ban, they couldn't implement one because there is no legal basis for it. But even when there is a legal basis at the moment from what we see from the government, there is no appetite or intention to actually introduce such a ban currently. In terms of the new businesses, So the intention is obviously to make them profitable so that they don't only deliver a top-line contribution but also a bottom-line contribution on a standalone basis. This is already the case for the energy business in Switzerland, not yet for the insurance business because it's still quite a small and young business and needs to deliver more sales first. But next to this sort of standalone profitability contribution or EBTR contribution, we also expect positive effects on the turn level, which are a bit hard to quantify, obviously. So we are really more focused on measuring, let's say, the standalone profitability of these businesses in the future.

All right. Thank you. Thank you. All right. Thank you. I would like to conclude today's conference call. If you have any further questions, please do not hesitate to contact us on the IR team. Speak to you soon. Have a nice day. Thank you. Thank you. Bye-bye. Bye.

Dear participants, the conference is now over. Thank you for your attention. Goodbye.