Swisscom Ag Ittigen R/Shs

Good morning, ladies and gentlemen. Thank you for joining the Swisscom Q2 2025 Results Conference Co., hosted by Christoph Aschleman, Eugen Sternmetz, and Louis Schmid. Louis, the floor is yours.

Good morning, ladies and gentlemen, and welcome to Swisscom's Q2 2025 Results Presentation. My name is Louis Schmid, Head of Investor Relations, and with me are our CEO, Christoph Aschleman, and Eugen Sternmetz, our Chief Financial Officer. Let's now move to page two with the agenda for today. As you can see, our CEO starts the presentation with chapter one and a quick overview on the highlights, the operational and financial performances of the second quarter. Then in chapter two, Christoph presents a business update for Switzerland and Italy. And then in the second part of today's results presentation, Eugen runs you through chapter three. with the second quarter 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, Louis, and welcome to the Q225 call from my side. I will directly move to slide number four, highlighting the successes of the last quarter. you can see we've been nominated again as the strongest telco brand in switzerland and we were able to win another connect test on the mobile hotline with a new record score of 490 out of 500 which demonstrates our outstanding customer service that we provide in switzerland i'm also extremely pleased with the launch of beam our new convergent B2B connectivity portfolio, which unites connectivity with security for our B2B customers. And we will talk a bit more about this later on in the presentation. I'm also very happy with the progress we are doing in Italy. Integration is going exactly as planned. Synergy ramp-up is as planned. Integration costs are as planned. And we are on track to deliver our full-year targets for the second half year. We also make big progress on integrating FASO and Vodafone on the offering side. We launched or expanded the energy offer to the Vodafone customer base and have extended our AI offerings, as you will see a bit later on. And overall, after Q2, we are confirming our full year guidance with revenue being at the lower end of the guidance of 15.0 to 15.2, so rather at the lower end, but overall, We confirmed the guidance for this . Now, moving on to slide number five, we can see that the keyword is stability. We have a stable RGU base overall in Switzerland and Italy, and we have very similar trends in the second quarter as we had in the first quarter. So, on the one hand side, you can see that we have a growing post-paid mobile base in Switzerland, roughly in line with Q1, and a stable mobile base in Italy. Mainly driven, we have growing B2B side, compensating the losses that we have on the B2C side. On the broadband wholesale side, it's also quite a similar picture. We have slightly lower growth in the wholesale business, both in Italy and in Switzerland. But on the other side, compensated by lower losses on the broadband side, both in Switzerland and in Italy. So overall, a very stable picture and similar to last. Now I move on to slide number six. Q2 revenues were slightly lower than in Q1, or the decrease was slightly bigger than in Q1. On the EBTL side, the second quarter EBTL was slightly better than in Q1. And overall, we are posting revenues for the first half year of 7.44 billion Swiss francs down minus 2.3%. and an APTL of 2.47 billion Swiss francs down 5.5%. Mainly driven, as you can see in the bridge on the right-hand side, by the APTL decrease in Italy due to all the integration work and the work we're doing bringing together Vodafone and Italy with minus 65 million in the first half year, and overall stability in Switzerland with minus 3 million in Q2 bringing to minus 6 million in the first half of the year. Again, we, as usual, dive more into the detailed financial numbers later on in the call. Now, we're moving on to the business update in Switzerland and in Italy. We can jump directly to page number eight to recap our priorities and the roadmap for 2025. It's quite easy. We have three priorities per country. In Switzerland, we are managing the telco top line, making sure that the service revenue erosion is as low as possible. We continue to execute on the cost saving side and are working hard to achieve profitable IT growth, which faces some challenges at the moment that you will see later on. On the Italian side, we have similar but slightly different Priorities, the first and biggest priority is integrating Vodafone Italia and FastWeb to capture the synergy potential, and at the same time, turning around the B2C mobile business to stabilize the telco top line, accelerating the growth on the energy side. And on the B2B, we want to scale up further the IT business and stabilize the wholesale business so that we have stability on that front. Now I'm moving or diving a bit deeper into the Swiss business. We will start with B2C on page number nine. On the B2C side, the main goal at the moment is to drive differentiation further to effectively defend our R2 base. We can say that overall the market is slightly less promotional. We can see that clearly Sunrise is sticking to what they announced in their Q1 call being less promotional. while salt is still very aggressive in the market. But overall, we see the market a bit calmer and are hopeful that it continues in this way for the second half of the year as well. On our side, we are reinforcing our brand awareness, so we launched a new branding campaign and sort of reworked a bit the Swisscom branding with a new claim, Discover Your Possibilities. that we launched in the second quarter. The campaign is very well received, and we are pleased with the feedback we are getting and really working hard to further position Swisscom as a premium brand that helps customers achieve what they want to do in their life. We're also working on the value of our subscriptions with the We Are Family proposition. We've updated roaming propositions for the summer and the extended blue kit offering. So we do a lot of sort of targeted work on the product portfolio to make sure that customers get enough value for the price they pay. And at the same time, we continue to drive the second brands, especially increasing sales presence with sort of a new low-cost type pop-up stores, which allows us to drive, further drive sales on the second and third brands. Overall, you can see that the shift to second brands So we have about 35% second, third brand customer base now. It's up 3%. It is also the main driver of the R2 decline that you see on the next page of minus one franc. Penetration rates of blue have increased slightly by 3% on mobile and plus one on the blue side, which is the good news, meaning that most of the customers are now on our in-market blue portfolios. and on the higher-value subscriptions, and FMC is roughly stable overall at the customer base. Now on slide number 10, you can see the ARPU evolution I already mentioned. The mobile is slightly declining due to the ongoing shift to second brands, whereas the wireline is roughly stable, slightly increasing, as we manage to upsell customers into higher-value bundles, higher-value TV products, extending value added services. And at the same time, we are really heavily investing in our customer service to make sure that we continuously deliver the best customer experience. And as I mentioned at the beginning, we managed to win another Connect Hotline test. And this then materializes in MPS leadership. So you can see that we are now, we managed to slightly increase our MPS regarding to the last measurement. mainly driven by the Swisscom benefits and loyalty program, which had a positive impact on customer satisfaction, also leading now to a lower churn, both on the wireline and mobile side. So you can see overall, I think a very pleasing picture on the B2C side, managing to create value, position Swisscom as a premium brand, and at the same time, defend the customer base overall to make sure that we maximize revenues on the B2C Now, on slide 11, we are moving to the B2B business. On the left-hand side, you see telco. On the right-hand side, IT. The main objective is really to innovate both on the telco side and on the cloud security and AI side for IT and delivering new products to make sure that we can drive revenues in the coming year. But overall, first, maybe we can say that you can see our crews are still declining. So the pricing pressure, especially in corporate, but also on the SME side, is still very strong on the B2B market, which is driving mainly the loss in service revenue. As I said before, we launched the new Beam product portfolio, the new conversion connectivity solution. We did this in May. It was very well received by the market. We had a very big media response. And at the same time, also the sales numbers we see so far are very pleasing. They're in line with our expectations. And we already managed to sell several thousands of subscriptions, which is, I think, excellent news. And we will see now over the coming quarters if we are able to scale the sales of Beam as we are expecting. At the same time, we are continuously launching new features. So this is also maybe a novelty in the telco world, so it's not like a one-time big bang, but every month we are launching new services. We brought out the new apps. We will bring new features mid-August and then continuously over Q4 also deliver new enhanced features, which allows us to continuously upsell the customer base towards the future. Proud of this world's first. I think it's really changing the way we look at B2B connectivity, really combining security and connectivity in our core network. And I think we can be proud of what we delivered here together with our teams, delivering many world's first in the telco space. On the IT side, we expanded our product offerings, also in cyber, but also in sovereign cloud. We expanded our AI offering. which should deliver incremental IT service revenue in the future. You see that in the Q2, we were able to grow organically by plus 2 million. It's slightly lower what we see usually and also what we expected overall when we planned for the year, but looking at the current macro situation Switzerland and the tariff situation, which is impacting quite a lot of our customers, especially on the manufacturing side. We are still pleased with the result. As many B2B customers are now into, went into cost-saving mode or delaying or redimensioning IT investments, it makes it a bit harder to grow on the IT side. And we do expect this to remain like this for the full year. As you've seen that the Trump tariffs are now in effect since this morning, 6 a.m., And it also led to a slightly lower EPTL contribution of minus 4 million because we are underutilizing our consulting capacity due to also these missing sales that I just referred to. But overall, still, I would say a good result. Margin on the IT side is roughly stable at around 6% EPTL. So I think not a bad situation, but let's say less positive than we hoped for due to the macro, current macro challenge. Now I will go to slide 12, network and wholesale. So we again pushed further our network coverage, both on the mobile and the fixed site. So mobile coverage is up by plus 4% on the 5G side. We are now covering 87%. with 5G+, so the new 5G 3.6 gigahertz frequencies. Also, 3G phase out is completely on track. We will shut off the network end of the year and migrate customers onto our 4G, 5G network over the next month. On the FTTH side, the rollout is progressing very nicely, also up by 5% year on year, and we now cover 54% of the country. with FTTH, and in Switzerland, FTTH means 10 gigs connectivity, so we have excellent connectivity coverage and continue to roll out as we plan to hit our target of 75 to 80% coverage by 2030. We also continuously invest in network quality and resilience, and you can see that these investments are paying off. We have record high. network stability scores both mobile and on wireline, demonstrating the quality that we deliver on both networks. This also helps to grow further our wholesale business. So you see that the FTTH penetration in our wholesale business has increased by 5.5%. So now 47% of all wholesale lines are FTTH lines. And I expect to hit the 50% number, maybe still this year, but the latest early next year, we will probably have more fiber lines in our wholesale business than copper lines, which is excellent news for the future, meaning that we can monetize really the fiber rollout. And you can also see it drives our access service revenue plus 9%. to 49 million, and we do expect this access revenue, access service revenue to continue to grow over the coming years as we are rolling out more fiber across the country. Now, one last slide on Switzerland, slide 13, telco cost savings. I think we can keep it short. The key message is on track. For a full-year delivery, we send it plus 31. Please don't extrapolate this to year end. We confirmed the 50 million. We are slightly ahead in our savings, but we don't expect much more than 50 million for the full year. So, I think it's good if you stick to the plus 50 million number for the full year, but it's obviously good news that we already managed to bring in over half of the planned savings. I think one of the topics I would like to highlight is the copper phase-out associated, obviously, with the fiber rollout. So, you can see on the slide that we already managed to phase out 300,000 copper lines. If you compare it to our peak copper estate that we had in 2023, about 2 million lines, so we already turned off about 15% of all copper lines, and we are on track to achieve our target for full copper phase-out So I think I'm quite happy with the progress on that side as both B2C, B2B, and wholesale are phasing out copper lines on their side. And this will continuously help us to generate some savings over the next years. Okay, this was it for Switzerland. So overall, very stable, good news, on track. with our strategic project or strategic initiative execution. And I will now move on to Italy with page 14. I think the key word here is also integration is progressing as planned, and we are on track for synergy ramp up in the second half of the year. So the most important topic, as you know, in Italy is the migration of our mobile customers. from the old mobile FastWeb customers from the Wintry and TIM network onto the Vodafone network. So the migration of these SIMs is progressing exactly as scheduled. We are making good progress, and we are confident to finalize the migration by year end so that we can deliver the cost synergies for this year, but also, and even more importantly, deliver the roughly 200 million mobile COG synergies for next year in 2026. We completed the organization integration, the design is done, all the management positions are nominated, so now we have a completely integrated and functioning organization so that we can really focus on executing our business tasks and also all the other integration tasks are on track. we have already first optimizations that we were able to do from carving out the voter from group services, and we will continue to work on all these topics in the coming months. Next to the synergy realization, which is, I think, going exactly according to plan, another important topic is the turnaround of the B2C mobile business, which is the main driver of the service revenue erosion in Italy. And if you look at the numbers, and also the guidance that early of the year we guided 100 to 200 million service revenue erosion. We will most likely end up at the very high end of this guidance, and it's obviously more than we had hoped for, anticipated for, so this topic is really of key importance as we continue to execute on changing the B2C strategy. So early in the year, we decided to shift from a volume strategy or the historic volume strategy that Vodafone pursued to a value strategy, focusing really on higher ARPUs, managing the customer base, and especially getting down, lowering churn to decrease the ARPU outflow, increasing NPS, and then having lower inflows, but the inflows we have at higher RPOs. So we believe that this is a much more sustainable strategy for the long term. It would also help the Italian market to become less promotional and less price-driven if all the operators focus on value and the customer base rather than chasing another 1,000 new SIMs and driving down further the price in the market. So I think we can already see the first signs that this strategy We can also see that the market is becoming much more rational and slowing down. But overall, as you know, telco is quite a slow-moving business, so we also need to be patient as this work requires some time, and I do expect this to last until way into 2026. But we can already see the first positive signs, as you can see on slide 16. So, on site 16, you see the mobile business evolution. So, net ads are still, or net ad losses are still stable. So, we slowed down the sales side with four higher ARPU inflows. At the same time, we were managed to massively decrease the churn, as you can see on the right-hand side, churn has decreased from nearly 24% to 18% in second quarter. So, this is an excellent sign, mainly driven by a different handling of the customer base, a different handling of the call center. So we invest more in the customer base. We provide more value to our customers and improved customer service at the touch point, mainly driving NPS up and at the same time releasing churn. And you can see ARPU is slightly going down overall, but substantially slowed down. and is very close to stable evolution. One other important aspect of this was aligning the front book prices between Fastweb and Vodafone, which has been done to a large extent. And the next step is now the launch of a completely integrated product portfolio, which we will launch in September, so that we have completely aligned prices for one single price point between Fastweb and Vodafone, and we will do this after the summer in Italy to be ready to launch it for our new customer base. At the same time, we are also moving into a multi-brand positioning, clearly repositioning FastWeb Vodafone as a premium brand and Ho Mobile as a second brand for sort of the value seekers or smart shoppers. And similar to the strategy we are executing in Switzerland with the main brand Swisscom and Vingo, and we will execute a similar strategy in Italy to make sure that we have the higher value customers on the main brand. And then for the people who are chasing the lowest prices, we will use the whole brand, and we expand the sales footprint of the whole brand to make sure that we can sell it more at touchpoint. On slide 17, you can see the same picture for the wire line business in B2C. Here as well, you can see that churn is going down from 20 to roughly 18.4%. NPS is also going up, and ARPU is already stable. As we have aligned also the new front book prices between Vodafone and FastWeb, we've already managed to – to align or stabilize the ARPU, whereas broadband losses are still there with minus 52,000 in the last quarter, but also slowing down as the churn is going down overall. So you can see that overall the strategy seems to start to take effect, but as you know, overall, until you really see this in the numbers fully, it will take several quarters still to come. So we need to be patient on this side, but we are confident that we are on the right track to minimize the service revenue erosion in Italy. Another important piece on the wireline side is also the energy offer that we continue to push. So we opened it up to all the sales channels on the Vodafone side in the second quarter, and we're able to double the sales speed with this move. and we are confident that we can continue to scale up this offer. This will also generate new service revenues compensating some of the losses that we still have on the wireline or the mobile side. Now, moving on to B2B on page number 18. As for Switzerland, you can see telco on the left-hand side and IT on the right-hand side. Telco is still growing quite heavily on the mobile side, plus 11%, mainly driven by the TM9 government agreement, while the broadband side is roughly stable overall. We're also cross-selling energy for the SME customers, which is driving new service revenues on the B2B side and launched a new product portfolio on the private MPN side, where we did a contract with the University of Palermo. On the IT side, similar to Switzerland, we also launched new offerings on the AI space with the FastWeb AI Suite for SMEs, enterprises, and public administration. This is a full platform allowing for AI infrastructure, but also agents, FastWeb AI for work, really helping both private customers, but especially SMEs and enterprises, to use AI in a sovereign way in Italy. And we are quite confident that this will be a positive move in the IT space in Italy. On page number 19, you can see the achievement on the network side. So I will first start with the network rollout. We also continued to roll out 5G Plus in Italy. And due to the move from the Wintrae and TIM network onto the Vodafone network, we managed to increase Our 5G plus coverage by 14 percentage point, and we now stand at 87% 5G plus coverage in Italy. And also, the FTTH expansion continues with FiberCop and OpenFiber building out more fiber, and our FTTH coverage is up by plus 14%, with now 53% of the country covered by FTTH overall. And I would say really one of the highlights of the quarter in Italy is the surpassing of 1 million UBB lines on the wholesale side. So we now have 1,018,000 lines sold to wholesale customers in Italy, which is plus 31%, so I think really an outstanding achievement of the Italian team. And also the Corpoce customer is steadily onboarding new customers onto our mobile network. And this is going also as planned. And you can see that the wholesale revenues are up by 9% to 173 million revenues. This was it from the Italian piece. So, overall, I would say Italy with some challenges that we need to tackle, but we are on track. We have a strategy, clear plan, and overall synergies and integration work is going according to plan. I will now hand over to Eugen for the financials.