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.

Thank you, Christoph, and good morning, everybody, also from my side. We'll start right away with stage 21, group overview. So I'll start with revenue. Revenue was down 173 million in the first half year, 60 of which is due to currency, so the net effect is really minus 107. Switzerland contributed minus 77 million. If you look at the quarters, Q2 looks like an acceleration of revenue decline. Actually, this is very much driven by hardware sales without any impact on margin, as we shall see. Italy, minus 13, minus 8 in the first quarter, minus 5 in the second quarter, almost stable revenues. APTR group overview. Group APTR was down 144 million. There is a number of Adjustments totaling minus 64 million. We have this year, obviously, integration costs . We have pension reconciliation, which we put into adjustments. Last year, we had a release of a regulatory provision in Switzerland, et cetera, et cetera. So, there's quite a number of adjustments in there. So, it makes absolutely sense to look at the adjusted number first, which is down 80 million compared to prior year. Practically stable EBDR with minus six in the first half year and stable development over the quarter. In Italy, minus 65 million in Swiss francs. This is mainly due to the B2C business as we shall see. Q2 looks a bit better than Q1 with minus 15 after minus 50, but part of it is not recurring. So, the minus 15 are certainly not the new run rate of EBITDA evolution in Italy. All of these on this page very much in line with expectations, and in particular, the agencies are also in line with our full year guidance. I move on to page 22. CapEx was below prior year, 127 million positive impacts on operating free cash flow. This was very much driven by Q1. that both in Switzerland and in Italy, in particular Vodafone, had very high capex in Q1 2024. Q2 is a much more normal quarter, as you can see from the numbers. So Switzerland in Q2 plus 10 million, Italy Q2 zero, so same level as last year. The first half year numbers are completely driven by what we talked about already in Q1. If you look at operating free cash flow, adjusted plus 17 million in Switzerland, plus 26, so as a result of stable, if it's the island lower, capex, so not only stable free cash flows from Switzerland, but in the first half year, even improving free cash flows from Switzerland, Italy, minus 7 million, almost stable operating free cash flow, but very much driven by the lower capex that I talked about in Q1. Let's dive into Switzerland, page 23, starting with revenue. So as I said, revenue is down 77 million in Switzerland. If you look at the individual segments, B to C, minus 18, not much new, so small and steady service revenue decline. We'll talk about service revenue on the next page. B2B minus 68 million down from prior year in the second quarter minus 43. So that requires an explanation. It's exactly here that you see the impact of the lower hardware software revenue. B2B had about minus 40 million hardware software revenue compared to prior year. This is part of a strategy that we implemented in Q1 to focus on high margin business rather sometimes very low margin hardware deals. So that's very much intended and does not have an impact or certainly not a negative impact on the bottom line. If you look at ADTR, the adjusted number is almost stable at minus six, split between the segments B to C, small decline, even stable in Q2, which is obviously very good. So the service revenue decline In B2C, that there is could be compensated by lower subscriber acquisition costs and indirect costs. That's excellent. B2B, minus 31 million. That's almost exactly the telco service revenue decline. And as I mentioned, no impact from lower revenues that we see. And finally, wholesale, very small and steady growth, both on revenue and APDR, which is obviously due to the growing that Christoph already alluded to. Move on to page 24, the deep dive into the Swiss P&L. A very busy slide. Let's look first at the bottom left corner with the service revenue evolution over the last couple of quarters. A very steady picture, as Christoph already explained. So we had minus 31 million in the second quarter after minus 26 million in the first quarter. This is all very much within the usual range of ups and downs that we have seen over this year and last. So not much of a trend to be seen. There are rather no news is good news. The drivers of service revenue decline in the second quarters are the ones we know quite well on the B2C side. We do increase our subscriber numbers, but ARPU is being diluted by the second brand share that goes up. On the buyer line side, we have the fixed white line losses and also some limited broadband losses, but ARPU is holding up nicely due to all the measures that Christoph mentioned before. Also, B2B, not much news. ARPU, by and large, that is certainly on the buyer line side. slide decline on the wireless side. This is here, ARPU effects driven by post-bred value only. So the ARPU number is a bit different from the one that Christoph mentioned before. The major impact on B2B is some customer losses in wireless, mostly in the SME segment. And in wireline, we had some corporate customers migrating sites away, actually a bit faster than in the prior year, which shows up in the wireline. Overall, we confirm our service revenue guidance of about minus 100 million for the full year. So, that's the service revenue. Two or three other things to note on this slide. On the top left corner, you see the telco P&L, and you see the cost savings. So, in the first half year, we had plus 31 million in the books, 22 million of which in the second quarter. as Christoph already explained, not necessarily the run rate to expect per quarter, so the guidance remains about 50 million plus for the full year. And finally, top right, you see the P&L for the IT business, and there you can see the minus 38 million, which is the hardware revenue that are lower than previous year or as intended and without impact on the margin. With that, I move on to page 25. CapEx a bit lower than previous year. We have a bit higher fiber CapEx in the first half year with full year still as expected. So the lower CapEx was very much driven by some one-off items in the previous year that we already referred to when we talked about it in the first quarter. And finally, operating free cash flow with stable EBITDA and lower CapEx. Free cash flow from Switzerland, as I mentioned, is not on this. stable but even slightly growing. Let's dive into Italy now, page 26, starting with revenue. Revenue is almost stable year over year, minus 13 million in the first half year. The B2C decline was almost compensated by growth. in b2b and wholesale so b2c down minus 44 million the service revenue decline is higher as we shall see but there is the growing energy business that compensated part of this b2b a plus of 23 million here it's due to the ip business mostly which offsets the And the wholesale business with growth of 15 million in the second quarter, very nicely the growth in the UBB business and from the MBO business showing up in the numbers. If there are adjusted number of minus 68 million, so this is the Euro number, minus 68 million. As you can see immediately, almost entirely driven by declining contribution margin in B2C, which is the same in Q2 as in Q1 and driven by the same driver's service revenue decline on the one hand, and also still in the first half of the year prior to the migration of the faster customers onto the waterfall network, higher mobile cogs out of the existing MBO agreements for the faster subscribers. Contribution margin B2B, slightly down, minus 12 million, despite higher revenue. So this reflects a change in business mix, both IT business replacing the DELCO business, but also within the DELCO business, impact of the public administration TM9 contract, which has very low prices and margins, which then show up in the bridge. Contribution margin from wholesale, A+, that's very good. Indirect costs, We're a bit lower than previous years, but there is a very big difference that you see between Q1 and Q2 with Q2 plus 20 million. Unfortunately, this Q2 is driven mainly by high-cost waterfowl in Q2 in the prior year and is more of a one-off. So for the moment, at least, A 16 million EBITDA run rate per quarter is not sustainable in Italy, and we stick to our full year guidance of minus 150 million adjusted and 50 million integration costs. So fully confirm the guidance for the full year. Don't over extrapolate some of the detailed numbers of this Q2. Move on to page 27, deep dive into service revenue on the Italian side. Top left, you can see minus 100 million in the first half year, three quarters of which from B to C, the minus 77 million from B to C. If you look at the quarterly evolution at the bottom of the chart, same, same, minus 47 million in the first quarter, minus 53 million in the second quarter. B2B stable, B2C a bit worse in the second quarter than in the first quarter. So while the operating KPIs start to improve as we implement the volume-to-value strategy, we do not expect those improved operations to show up in revenue year-over-year changes before 2026. And so we fully confirm our guidance on service revenue, as Christopher already mentioned, on the upper end of the $200 100 to 200 million for 2025. Drivers of service revenue decline in the second quarter, P2C mostly, as I said, minus 42 million, wireless minus 25, wireless minus 17. On the wireless side, there is ongoing output dilution, even if the spread between inflow and outflow is narrowing, and the washing machine, as Christoph already explained, is declining or decreasing so the exchanges are decreasing as both both sales and churn come down but there is still actually decline obviously also driven by lower acquisition even if compensated by partially by a better term so for all the operating improvements to show up in the echo service revenue year-over-year numbers will obviously take a bit On BioLine, it's mostly the impact of the lower customer base, R plus R, by and large, fortunately, stable. I move on to page 28. CapEx, 78 million below prior year, adjusted at 60 million. So, that's mainly because of the very strong Q1 CapEx at Vodafone in the prior year, with the major IT project being completed already 12 And Q2 was basically a prior year level. Q2 adjusted to CapEx was a prior year level. Operating free cash flow adjusted minus 8 million, almost stable. That's thanks to the Q1 CapEx effect as explained. On to page 29, synergies and integration costs. So we realized the first synergies in the first half year of 14 million. This is mostly from Vodafone. We confirm the full-year target. The big ticket this year will obviously be the first tranche of synergies that we see out of the migration of the fast-track mobile customers onto Vodafone, which will hit the numbers from H2 onwards this year, mostly in Q4, obviously. Integration costs also confirm the full year target. We have 40 million in the books so far, 20 million in OPEX, 20 million in CAPEX. There's a lot more to come, among others in connection with the network expansion cost as we host the faster customers also on the Waterfront network. And now move back to group numbers. Page 30 with the free cash for bridge, which is compared to reported numbers. So far, we talked about comparison to performer number 2024. This is compared to reported numbers. Free cash flow is up 143 million compared to prior year, driven mainly by two factors. One is net working capital. Although we had a negative effect from delta net working capital, as we always have in H1, we had a positive deviation or favorable deviation to the prior year number by 153 million. So, that is one part of the equation, and the other part is on the negative side, higher interest payments due to the Vodafone acquisition and net-net with all the other effects. That's a plus of 143 million on free cash flow. On net income, page 31, also this one is compared to prior year reported figures. So, it's a bit messy this year, given that the first time consolidation of Vodafone. shows up everywhere, in particular the additional lease expense that shows up in three places at least. So we'll focus straight on the deviation of the net income versus prior year, which is minus $211 million, and it's basically driven by two factors, minus $211 million. One is the amortization of purchase price allocation assets of minus $123 million. million, which is part of the DNA bucket on this slide. So that's minus 123. And then there is additional interest expense for the additional debt out of the Vodafone acquisition of 79 million. So these two facts basically explain the deviation in net income. Everything else at the level of EBIT is just minus 20 million. So Switzerland, Italy, and others combined. So it's really those two facts that drive net income this year. On to page 32, in Q2, we successfully issued two bonds at very attractive conditions, so our average interest rate is still very low, stands at 1.89%. The net effect of these bond issuances was a further flattening of our maturity profile, in particular, reduction of the 2027 maturities that we had in connection with the bank loans that we took on for the Waterfront transaction and the further reduction of interest expense. I'll move on to page 33, Guidance. Very simple. We confirm the guidance with just one comment on Swiss revenue and client application group revenue. Based on the H1 results, in particular the lower hardware software revenues in B2B IT, we expect three-year revenue to come in at the lower end of the guided range, and we may even undershoot the guided range slightly. But if we do so with no impact, on APTR or on operating free cash flow. And with that comment in mind, we confirm the full set of numbers, including the dividend of 26.33 francs. I hand back to the operator.

Thank you, Eugen. To ask questions, please press star 14. I repeat, star 14 on your keypad. If you wish to withdraw your request to speak, please press star 15. Thank you. 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 then introduce yourself by name and company before asking your question. So, let's take our first question.

Hi, it's from UBS. I just have three questions. The first one is on Switzerland. So on competitive dynamics, you mentioned there were some signs that Sunrise was being rational, but that Salt was still being promotional. However, the market is going to focus on value rather than volume. Is Swisscom willing to see some subscriber market share, just given your high starting point? It seems like you're pushing harder with family plans on the Swisscom brand. and also pushing harder on secondary brands too. So therefore, how do you think about the balance of value versus volume? And on Switzerland, can I clarify, for Swiss service revenue declines or telco revenue declines, are we still expecting minus 100 million Swiss francs, and is there anything to call out in terms of quarterly seasonality? Second question is, just in terms of Italy, Telcom Italia was flagging how price rises from last quarter are landing well. If you look at both the FastWeb and Vodafone brands, you've put through price rises. But can you talk through how these price rises have been received? Where is the average quantum of price rise? And roughly, what proportion of the subscriber base does it cover? So I'm just going to try and get a sense of the overall quantum of benefit from the moves that you've made. And does this add upside to the minus 200 million price of Italian telco revenue declines that you've guided towards. My final question is on Italy again. Can you comment on trends in terms of both IT service revenues and wholesale? And is there anything to call out in terms of seasonality for the rest of the year? So, for example, on wholesale, have you hit full run rate for the co-op MVNO? And also on IT service revenues,

there was a slowdown in q2 so is this the dropping out of eu recovery funds or is there something else in terms of quarterly seasonality things thank you polo um so i will start with a question number one on on switzerland so we're um on the competitive dynamic so it's um I think, and your question, if we are willing to give up some market share, so the answer is clearly yes. So, I mean, you can see the effect of this on page number five, where we have the RGU numbers and the RGU market shares. So, you can see that both in broadband and in postpaid, we are actually losing RGU market share. So we are down 1.2%, for example, on the post-pay side. So although we have an increasing customer base this year, we are still relatively growing slower than the other market participants in the market. And this is exactly like what we intend to achieve our value strategy, focusing really on ARPU and maintaining value in our customer base and not necessarily like driving volume and acquisition. But of course, we also need to ensure a certain level of acquisition so that market share doesn't decline too rapidly, which wouldn't be good as well. And as the market is still, I mean, you know, we say it is better and more value focused, but it is still very promotional. And you can still see 70% promotions by SALT. And this also requires some actions on the sales side. to expand a bit our sales footprint because also our competitors are still increasing their sales footprint. So we have to somehow align with those market developments to make sure that we don't lose too much on the RTO market share side. On the service revenue decline full year, so I would say the guidance is still minus 100, but it is also maybe fair to say that, you know, multiplying the decline of the first half year is not completely wrong. So, of course, there is always some seasonality, but you can see that we are at a slightly higher run rate compared to the full year. So, maybe it is safer to just multiply the first year by two, and then you get to somewhere around 110-ish for the full year. So price rises, we didn't execute price rises in our customer base yet. So Tim did this in the first half year. We didn't do back book price increases so far. What we did is we increased our front book pricing to align it between the two brands. And we can see that our inflow ARPU is now higher. So I think overall price decrease are well received. We have slightly lower inflows. But I think overall still very good sales numbers. So with the market I think is positive with regards to the price increases that we did on the front book prices. And we intend to, you know, continue to work on the front book to make sure that it is more aligned with the back book. And then overall we will see we'll be able to give you a bit more information in the Q3 call once we launched the new portfolio. But at the same time, we are also working on the back book to make sure that the customers that we have with higher ARPU or in higher ARPU brackets, that they actually receive more value than lower-priced customers to make sure that the churn continues to go down in the back book and everybody gets the value they pay for. In terms of service or trends on the IT and wholesale side, so your third question, we do expect some acceleration on the IT side in the second half of the year, but it is quite hard to predict IT revenue overall because sometimes it's also driven by singular, you know, contracts and orders. But overall, IT service revenue anyway doesn't have a big impact on our APTR guidance and free cash flow. So it's overall I think we expect it to be as guided. And on the wholesale side, it's similar. So the corp run rate is not yet at full run rate. So we are still migrating customers onto our network from corp blockchain. So we will still see further increases from this and also full year effects and carrying into 2026. Thank you.

Thank you, Paulo. Next question.

Hi, guys. It's Josh Mills here from BMC Power by Exam. I will stick with one question, please, and it's related to the copper switch-off that you talked about earlier in the presentation. Could you just give us a bit more colour on what level of copper savings you've seen so far from the lines you have switched off, both in absolute terms and perhaps on a per-line basis? And then going forwards, what you think that copper switch-off could result in in terms of overall savings by the time you get to full shutdown. I know it's in 2035, but just to get an idea of what that would look like would be very helpful.

Thanks. Thank you, Josh. So we don't calculate or also communicate per line savings. And overall, the corporate savings are – unless you really shut down a complete central office, savings tend to be quite low. And at the moment, we are shutting down copper lines across the whole of Switzerland. We so far didn't shut down complete central offices yet, so this will be sort of the next focus 26 going onwards that we can really then shut off the equipment which is in the central office, shut off the GDOT fast equipment that we have running which consumes quite a lot of electricity. But so far we are not yet there because this requires, you know, in one municipality to migrate really the full set of copper customers to fiber. So this will take another, you know, one or two years until we are there to be able to shut down really complete municipalities. And until then, so overall, until now, copper savings, I would say limited and smaller than the costs of copper shutdown, because we also have migration costs, CP costs, et cetera, that we need to replace. So at the moment, I would say copper is still slightly a net negative issue. But in the long run, I think we communicated this one or two years ago, we had 100 million run rate cost savings that we do expect from the full customer shutdown.

As a combination of energy savings, customer care savings, and lower field service interventions. Okay. Thank you.

Next question.

Hello, it's AJ from Jacob Morgan. I've got two questions. The first is around Italy. You talked about a more rational market. So I just wanted to understand what you are seeing here when you say that. And then the second one is around the Italian energy offering. You said your sales, I think you said your sales have doubled in the Italian energy. So can you provide some context on what size the revenues are here and what the margins are on these sales revenues? Thank you.

So I start on the energy question. So far we haven't given any, haven't disclosed any numbers, but it's a solid double-digit number already in revenues that is growing quickly, as Christoph mentioned, and we expect to go further into the next year. And when it takes on a certain size, we would also comment on the precise figures up as far as that would go on energy.

So I think on your Italian, you know, question, what we see in the market is that both Tim or all the operators seem to be working on back book and front book and trying to make sure that prices are more aligned in the market. And we also see less aggressiveness in acquiring new customers. So what we feel is that all the operators are more in the mode of, okay, we have a customer base and how can we value this customer base in a better way through up and cross-selling rather than chasing the next customers at the lowest price. So I think this has a very positive effect overall in the market. It also helps us to drive downturn and driving downturn is inherently positive because it limits the ARPU outflow because typically customers flowing out are rather the high ARPU customers rather than the low ARPU customers. And this is, I think, for us a positive sign overall in the market in Italy. And we will see how it evolves now in the second half of the year. But we are quite confident that the market will remain at the current level. That's great.

Can I just have one follow-up on the energy margins? Maybe if you could just give me an indication whether these margins are dilutive to the segment or not. I understand you don't want to give too much detail on it.

Oh, you know, it's a healthy margin. Obviously, it's a reselling business, so you would need to compare it to, say, a reselling business on the Delco side. You can't compare it with an infrastructure business. But we are quite happy with the margins we are seeing, so it's clearly accretive to our absolute EBITDA and operating free cash for numbers, and this is what counts most.

Great.

Thank you.

All right, that was the last session, and with that, I would like to conclude today's conference call. Thank you, and if you have any further questions, we are available for you. Thank you, and have a nice day.

Dear participant, the conference call has come to an end. Thank you for your participation. Goodbye.