Swisscom Ag Ittigen R/Shs

Good morning, ladies and gentlemen. Thank you for joining the Swisscom Q3 2025 results hosted by Christoph Eschlimann, Eugen Stermetz and Louis Schmidt. Louis, the floor is yours.

Good morning, ladies and gentlemen, and welcome to Swisscom's Q3 2025 results presentation. My name is Louis Schmidt, Head of Investor Relations, and with me are our CEO Christoph Eschlimann and Eugen Stermetz, our Chief Financial Officer. Let's now move to page number two with the agenda of 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 third quarter. Then in chapter two, Christoph presents the business update for Switzerland and Italy. In the second part of today's results presentation, Eugen runs you through chapter three with our third 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 this Q3 2025 call from my side. I will move directly to page number four, showing the highlights of Q3. You can see that this quarter, again, was packed with a number of highlights. We have been able to complete the Connect service test with the last test that we won this year. We have now won all four service tests, highlighting our unwavering commitment to the best customer service. We reinforced the multi-brand play with a new micro offering. And we are extremely proud of our new Beam offering, for which we launched new additional services, advanced editions, apps and further tiers which have been launched in the past weeks south of the alps in italy everything is going according to plan integration is proceeding as we have foreseen with integration costs and synergies fully in line the highlight in q3 in italy was the aligned new market portfolio that we launched for the b2c and b2b market which we'll talk a bit more into later on in the italian chapter and finally we have confirmed Group guidance of revenues roughly at the lower end towards 15 billion, EBITDA of 5 billion, and CAPEX between 3.1 and 3.2, also probably rather at the lower end of the range. Now, moving to page number five, you can see the NetAd trends in Switzerland and Italy. I will start with Switzerland. Overall, the competitive environment is broadly stable with, I would say, more aggressiveness recently from Sunrise again, as we will probably discuss later on also in the Q&A. On the mobile side, the NetAd evolution is stable. You see with roughly a run rate around 45%. Net ads on a quarterly basis. Very pleasing results from our perspective for our mobile business. And broadband and TV are slightly improving quarter on quarter. We're still negative net ads, but much better run rate than we had in Q1 earlier this year. If you look at the wholesale side, we have a very pleasing result in Q3 with plus 14,000 net ads. So you can see stable or accelerating growth on the wholesale side. and overall we have more net ads on the wholesale business and we are losing lines on our b2c so we can at least partly compensate what we are losing on the consumer side on broadband with new access lines on the wholesale side which is especially tilted towards cyber connectivity as you will see later on in the details now on the italian side the market remains competitive but prices have been pretty stable in the last year. So we can see that the prices are clearly bottoming out. and the market is not getting more aggressive. Now, in terms of net ads evolution, we have on the mobile side an accelerating loss, which is actually, if you look at the underlying, the B2C losses are improving. So we have less losses this year, clearly better B2C business, but we have less net ads coming in on the B2B side because the TM9 government contract ramp up is coming to an end. So let's say net ads on B2B, so a bit less compensating the B2C decline, which leads to an overall minus 39,000 net ads on a company level. On the other side, broadband is improving. And we will see, particularly on the B2C side, things are improving very rapidly. And I will talk a bit more about that later on. But overall, quarter over quarter, you can already see that net ads lost has been halved, more than halved between Q1 and Q3 from minus 67 to minus 33,000 net adds. And then overall wholesale also pretty stable, run rate around 50,000, 45,000 net ads per quarter. So we have been able to stabilize the growth in the wholesale side and also compensating the losses on the broadband side. So I think pretty happy about the wholesale business in Italy. So now moving on to page number six, you can see that Q3 revenue was slightly softer. at 3.7 billion minus 1.8%. We're bringing up to years-to-date revenue of 1.1 billion Swiss francs, which is minus 2.1%. And the EBITDA average, you can see on the right-hand side, Switzerland is pretty stable with minus 5 million in quarter three, bringing us to a total minus 11 year-to-date. And in Italy, we have the transitional year with the integration and the turnaround of the B2C business. And Eugen will detail the financial numbers a bit more in detail later on in the financial section. But so far, I would say Ebitdaal is in line with expectations and in line with our full year guidance. Now I will move on to page as a business update for Switzerland and Italy and directly go to page number eight, where you can see our priorities for 2025. So pretty unchanged compared to last quarter. In Switzerland, we want to defend the telco top line, make sure the service revenue erosion is as slow or low as possible, deliver on the cost savings. And you have seen that we have already achieved the full year cost target by end of Q3. And we want to further grow on the IT side. In Italy, It's similar priorities, but more geared towards integration. So, of course, the priority number one is to proceed on the integration of the two organizations and capture the synergy potential, but at the same time, stabilizing the telco business and reducing the service revenue erosion that we are seeing this year, so that next year we have a substantially better position, especially on the B2C side. And at the same time, we want to accelerate the energy business selling more services beyond the core while scaling up the B2B IT and wholesale part to stabilize the overall business in Italy. And you can see now how we are doing regards to these priorities. So I'll move on to page number nine, looking into B2C Switzerland. So as I already highlighted at the beginning of the call, we are extremely proud to be the winner of all Connect service tests for best shop, best app and best wireline and mobile hotline. I think this is an important achievement to test and show and demonstrate to the market that the Swisscom customer service is indeed the best customer service in the country. We're also very pleased with the evolution of the We Are Family offering that we launched earlier this year. We continue to drive this offer in the market to sustain NetAds on the main brand and make the main brand more appealing for family households. With this regard, we have also worked on our third brand, positioning, especially with Migros. Before, it was called mBudget. Now, Migros relaunched the mobile brand under the main retailer brand, which is called Migros. So this should help generate more net ads going forward with attractive offers under a new name and a more customer-centric offering. And we have also launched a dedicated AI offering or AI chatbots for private consumers. This offering is called Swisscom My AI. It's a chatbot basically in a sovereign mode where the consumer data is not used for training and respect data privacy. And so there is a free version and then a paid version at 14.90. And we see quite some good traction already, at least on the utilization side in the consumer space. You can see on the right-hand side, RGU and ARPU evolution churn is at a very stable Record low level of 7.7% for fixed and 6.8% for mobile. ARPU on the wireline side is pretty stable, which is, I think, a very positive news. And the mobile ARPU erosion of minus one Swiss franc is mainly driven by the ongoing brand shift between main brand and second brand. But the ARPUs on a brand level are actually stable as well. So moving on to B2B on page number 10, we are gradually integrating the BEAM offering in all our existing product portfolios. But we do see quite a lot of competition in the market. And you can see this on the ARPU box in the middle, where you see quite a heavy erosion on postpaid and average underlying product of minus 3 Swiss francs, which is basically driven by price competition in the market and this is why it is so important that we launched a new beam offering to be able to upsell more security services and also create convergence effects on the b2b side and retain more customers with a broader product portfolio instead of competing just on on price with um salt and uh and sunrise so we will continue to ramp up the beam services we have launched the new atl campaign marketing campaigns in september And so far, subscription take up is very pleasing. We are ahead of plan, which is a good news. And we have now started enabling our partner channels so that we can, as you know, on the SME front, a lot of sales are not driven in a direct sales mode, but more in an indirect sales mode through partner channels. And this is an important piece of the ramp up next year. So we have started enabling all our partners to sell the beam offering, especially the higher end additions, which are more complex to sell, but obviously are more interesting from a revenue perspective. On the IT side, quarter on quarter, we have, or year on year between Q3 and Q4, we have, sorry, between Q3 24 and Q3 25, we have a stable revenue evolution. The growth, we were not able to materialize the growth on the IT side. suffering to some extent a bit from macro conditions in Switzerland. So there is quite a substantial slowdown in the IT market in Switzerland, also still due to the integration of Credit Suisse and UBS, which took out quite a lot of volume out of the IT market. And we can see this now in the numbers. So I think already a stable service revenue evolution is actually quite a good achievement. but we are obviously aiming to bring that back to growth starting Q4 this year, but especially also next year. The highlight is the new cloud platform that we delivered for the Swiss Armed Forces. This project is now nearing completion by end of the year and will be the basis for new IT services that we deliver to the Swiss Armed Forces going forward over the next years and will be a good driver of further IT revenue growth going forward. In the parallel, we are also working on the profitability and our operating model, which we continue to transform to improve IT profitability. So you can see that despite having no revenue growth, we were able to increase profitability by 10%. So up 3 million to 35 million quarter on quarter. which is I think an excellent news and we will continue to drive IT profitability also next year to extract more cash flow from the IT service revenues. And also on the IT side, we have just launched a couple of weeks ago chatbot for SMEs. So it's basically very similar to the MyAI for consumers, but this one is geared towards SME companies so they can upload their own documents and use a highly secured and data private chatbot for their own company, which is quite a high demand, especially in the public sector and some other areas where people have more need for data privacy and cannot use the, let's say, public cloud or public offering. Now, on the network and wholesale side on page 11, we can see that our, let's say, network rollout is continuing. We are now at the 5G plus coverage of 88%, fully on track to achieve our 90% target for the full year in 2025. And also fiber rollout is continuing. It's up plus 5%. We have now a 55% coverage with 10 gig connectivity across the country, also in line to achieve our full year target that we have set up for the FTTH. Rollout and also on our network, we were able to win the Connect fixed network test for the fifth time in a row with a record 991 points out of 1,000. And you can see that on the right-hand side that we are able to monetize also our network in better ways, especially with fiber rollout. So we are accelerating the net ads on the wholesale side. We have more market share on the line. and also plus 4% revenues. So access revenues are up by 4% from 48 to 50 million on a quarterly basis. And I think what is especially interesting, you can see that the FDTH penetration on our wholesale business is increasing very rapidly. Bless you, Louis. It's up by 7%. And we have now nearly half of our wholesale lines, which are fiber-based, precisely 49%. And we expect this to be over 50% by the end of the year. Linked to this also, the copper phase-out is going very well. So we don't have numbers on this slide, but we already managed to decommission over 350,000 copper lines. So at the peak, we had 2 million lines in activation, and we are now standing at 1.65 million copper lines, which is already – so we already achieved our full-year phase-out target by end of Q3, which is also a very pleasing development on the network side. So if you look on page number 12, you can see that we have already achieved our full year target of 50 million cost savings by the end of Q3. But I would like to put in a word of caution. We shouldn't get too excited about this because, I mean, it's great that we have achieved the full year target, but we don't expect much more cost savings to come in. in Q4, so please don't extrapolate the growth we had between Q2 and Q3 further into the year. This is definitely way too optimistic. But I would say we come in at 50 plus, but not much more in Q4 to come. But I would say the good news is that the cost initiatives continue to deliver, especially we continue to digitize our customer service. We continue to automate it. We continue to push AI everywhere. We have now launched our unified contact service platform, which is heavily AI driven, which will continue to deliver new cost savings next year. We are experimenting with new shop formats, AI in the physical stores. We are further expanding near shore. And of course, we are especially pushing further simplification on the network in IT. And this also will continue to deliver cost savings, especially 26 and onwards. Okay, so that was it for Switzerland. I will now move on to Italy. On page number 13, you can see the highlights of the integration, which is progressing as planned and synergies are ramping up. So we have completely finalized our integrated organization, which is fully operational now. We have launched a new aligned product portfolio. So it's not a unified single product portfolio, but we essentially have exactly the same product portfolio under two different brands, one on the Fasub side, and once on the Vodafone side. And we are now able to serve customers of both brands in all stores. And also, most importantly, the SIEM migration is progressing in line with plan. So as you know, we have about 200 million of synergies planned next year linked to the SIEM migration. So we can confirm that the migration is going according to plan and we will be Roughly all customers will be migrated by year end, and we are very confident to realize the planned 200 million of synergies in 2026. Also, the other projects are ongoing as planned. We have already shut down the first waterfall group services, and we have terminated and transferred to internal resources, and we are continuously working on carving out more and more services over the coming months. and also IT and network consolidations have started. Now, moving on to page number 14, we will have a deeper look into the B2C mobile side. So you can see that we have this joint mobile portfolio there. You can see some screenshots in the middle. So the pricing and the features of the products are completely aligned. And we are continuously working also on improving customer treatment in the shops, but also in call center. And you can see on the right hand side that all this work is starting to pay off. The churn has significantly decreased from 20 or nearly 23% to roughly 18%. And we will continue to work on better customer service, also leading to higher NPS. And we can already see in our customer surveys that NPS on both brands is improving. So this, I think, is good news. We can see that the value strategy that we are executing or moving from volume to value is paying off. We are seeing an improved net ads picture, so you can see on the top right. We typically had over 100,000 negative net ads. We are now at minus 79,000, so still negative. But the outflow, which is typically high ARPU outflow, has been substantially slowed down. Sales coming in is also slightly lower, but a much higher quality. So with customers really using our services. So the ARPU delta we are having between churn and net ads has been substantially decreased. And we are further working on this to close the gap and reduce service revenue erosion gradually over the next year. One other important topic on the B2C mobile side is the repositioning of Ho. So we have positioned Ho as a clear attacker brand. And FASTA and Vodafone is a clear premium brand, and we will continue to work on this brand positioning to make it clear that we have a clear dual brand strategy with a different service offering on both brands. Now, moving on to page number 15, you can see that we have also launched a new fixed portfolio, which is what we call super convert. Converged, which is essentially broadband with energy services, which is an important element to drive new service revenue in Italy. So you can see that up to now, we have a minus 170,000 RTUs year to date, which is impacted by this value strategy and from book price alignment. But transparency and customer centricity are delivering first positive results. You can see we have higher NPS. churn has also substantially decreased to 15.8%. And you can now see that the RGU development between Q1, Q2, and Q3 is very pleasing. We are now at minus 26,000 RGUs in Q3. But actually underlying to this, in September, we were at a zero net ad balance. So the whole loss in Q3 is still coming from July and August. And we have now substantially achieved a stable RGU development. And we are hopeful that in Q4, we will see again a much more improved figure on the broadband-led side, clearly showing that the strategy and turnaround is working that we are executing on the consumer side, and we will continue to push the new portfolio in the market and continue our value strategy. And I think also one maybe last word on the B2C. The new product portfolio is offered at higher price points. So previously, our lowest price point on mobile was around €8. Now it is at €10 or €9.95. And actually, we can see that the sales inflow or the gross ads are exactly the same. So we are able to sustain the sales performance despite having increased prices from or like the entry level prices from 8 to 10 euros. And the same we see on broadband. Our sales numbers have not decreased despite having aligned prices on both sides and now executing at, let's say, increased or above increased prices than previously. So I think that's an excellent news for the Italian market that there are consumers that value quality and are willing to pay for it. Now moving on to page number 16, looking into B2B. So we keep managing also the telco top line on the B2C side, growing with IT cloud security and ai so as mentioned at the beginning of the call rgu net ads have slowed down a bit because we are reaching sort of the end of tm9 contract ramp up so we have a bit softer rgu development But overall, I think a pleasing result on the telecom side. Also on the B2B side, we have integrated both product portfolios from FastWeb and Vodafone, offering the best of two worlds now to our customer. And all, let's say, corporate accounts have now been allocated to our internal sales force. customers have been allocated in the indirect channels. It took a bit more time than on the B2C side because it's more complex to execute. And you can see also, this is why we have a bit slow down in growth on the B2B side, as we still were a bit internally focused due to the merger. And you can see that the IT service revenue growth is still there at plus 1.5%, but it is a bit lower than it used to be. But here we intend to accelerate IT growth again going forward next year. as we have now finalized integration and the Salesforce is again focused not on what is my account, but actually really selling to the market. We also have signed a new contract of Oracle to offer a sovereign Oracle cloud offerings in Italy. And as in Switzerland, we have also launched already last quarter our AI suite for SME companies in Italy, which is a sovereign AI chatbot offering for Italian SMEs. And we are very pleased that we have already been able to sell over 10,000 paying subscriptions Also showing that there is a clear market need or demand for these type of services also in Italy and we will continue to work on this going forward. Now moving on to my last slide about Italy, page number 19. You can see also that the network rollout is continuing in Italy as well. We have now 87% 5G+. coverage up 11%, and fixed rollout or FTTH rollout is also proceeding rapidly in Italy. Now it's at 54% FTTH coverage with about half of it active and half of it passive in our footprint based on our fast-web secondary network. We continue to drive wholesale business, both on the wireline and mobile. So on mobile, we have essentially finished the COPE migration onto our network, and this will help us also to compensate part of the post-immobile loss next year. And as you might have read in the press, Sky announced the new partnership between FastWeb, Vodafone, and Sky. So we will continue to also provide Sky both on wireline and mobile services, which would also help us to compensate some of the post-mobile losses, 26 going forward. So overall, I would say very pleasing development on the network and wholesale side in Italy. And I will now hand over to Eugen for the detailed financial results.