Swisscom AG (OTCPK:SCMWY) Q4 2024 Results Conference Call February 13, 2025 8:00 AM ET Company Participants Louis Schmid - Head of Investor Relations Christoph Aeschlimann - Chief Executive Officer Walter Renna - Fastweb SpA, CEO, GM & Member of Management Board Eugen Stermetz - Chief Financial Officer Conference Call Participants Polo Tang - UBS Andrew Lee - Goldman Sachs Josh Mills - BNP Paribas Luigi Minerva - HSBC Steve Malcolm - Redburn Christian Bader - Zürcher Kantonalbank Maurice Patrick - Barclays ...

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Swisscom (SCMWY) has revised its full-year earnings outlook for 2024, following the acquisition of the telecom company Vodafone Italia. The revision is attributed to costs of up to €200 million ($207.20 million) that will be reflected in Swisscom's 2024 financial results. However, the company emphasized that this would have no impact on its free cash flow. The Swiss telecommunications company has lowered its expected EBITDA to CHF 4.3-4.4 billion from the earlier estimate of CHF 4.5-4.6 billion. Additionall ...

Financial Data and Key Metrics Changes - Q3 revenue was CHF 2.7 billion, a reported decrease of 1.2%, but a slight increase when adjusted for stable exchange rates [9] - EBITDA for Q3 was CHF 1.15 billion, down 1.3% year-over-year [9] - Operating free cash flow decreased by CHF 140 million due to lower EBITDA and higher CapEx [35] Business Line Data and Key Metrics Changes - In Switzerland, telco service revenues slightly decreased, while B2B IT revenues continued to grow [5] - Mobile net adds in Switzerland were 35,000 in Q3, while broadband connections decreased by 9,000, offset by a growth of 10,000 in wholesale [7] - In Italy, Fastweb achieved 92,000 mobile net adds, increasing market share to over 5% [8] Market Data and Key Metrics Changes - The competitive environment in Switzerland remains highly promotional, with no expected changes in Q4 [60] - In Italy, the market is stable but highly competitive, with targeted win-back campaigns [84] Company Strategy and Development Direction - The company aims to delight customers through quality service, innovation, and cost savings [10][11] - Strategic priorities include launching new B2B and B2C products, such as insurance and energy offerings, to generate new revenues [10] - The company is focused on increasing fiber coverage and improving network quality, targeting 80% fiber coverage by 2030 [67] Management's Comments on Operating Environment and Future Outlook - Management expects continued pressure on service revenues in Switzerland due to aggressive competition [60] - Confidence remains in closing the Vodafone Italia acquisition in Q1 2025 despite ongoing regulatory reviews [31][81] Other Important Information - The company confirmed its full-year guidance for revenue, EBITDA, CapEx, and dividends [56] - Cost savings initiatives are on track to exceed CHF 50 million for the year [45] Q&A Session Summary Question: Competitive environment and service revenue trends - Management noted that the competitive environment remains highly promotional, with no expected changes in Q4 [60] Question: B2B IT margin improvements - Management indicated that margins in the cloud business are stable, with ongoing efforts to improve profitability across all product categories [62] Question: Future of fiber network and potential consolidation - Management does not foresee significant consolidation in the Swiss market but remains open to opportunities if they arise [72] Question: Economics of the loyalty program - The loyalty program is designed to be cost-neutral, financed within the current cost structure, aiming to reduce churn and enhance customer loyalty [73] Question: Fiber preference trends - Management stated that there has not been a significant shift in consumer preference from cable to fiber yet, but this may change as fiber coverage expands [76] Question: Cost-saving opportunities - Management remains confident in achieving cost savings beyond CHF 50 million, driven by AI and automation initiatives [77] Question: Churn trends in broadband - Management reported that churn numbers are stable, with slight fluctuations, and are not overly concerning [80] Question: Update on Vodafone Italia acquisition - Management expressed confidence in closing the acquisition in Q1 2025, despite ongoing regulatory discussions [81] Question: Price competition in Italy - Management described the price competition in Italy as stable and highly competitive, with no worsening trends [84] Question: Huawei ban update - Management indicated that a potential Huawei ban is under consideration but does not expect immediate action from the government [88] Question: Contribution of new businesses to revenues - The energy business is already contributing positively, while the insurance business is still in its early stages [89]

If you thought our angle on this company was interesting, you may want to check out our idea room, The Value Lab . We focus on long-only value ideas of interest to us, where we try to find international mispriced equities and target a portfolio yield of about 4% . We've done really well for ourselves over the last 5 years, but it took getting our hands dirty in international markets. If you are a value-investor, serious about protecting your wealth, our gang could help broaden your horizons and give some in ...

Financial Data and Key Metrics - Q2 revenue growth of 1.8% to CHF 2.75 billion, with H1 revenue stable at CHF 5.45 billion [7] - EBITDA slightly lower by 1.3% to CHF 1.12 billion, mainly due to softer cost savings in Switzerland [7] - Full-year guidance for 2024 confirmed, with revenue and EBITDA in line with expectations [7] - Fastweb in Italy achieved 7% revenue growth, contributing significantly to the overall top-line increase [3] Business Line Performance - Switzerland: Postpaid subscriber base increased by 22,000, while broadband saw a slight decline of 9,000, better than Q1 [5] - Italy: Mobile net adds of 113,000, achieving over 5% market share, with broadband and wholesale combined growth of 33,000 net adds [6] - IT service revenue growth in Switzerland driven by AI and cloud offerings, with a 7% increase [3] - Fastweb launched a new energy offering for B2C customers, contributing to ARPU uplift [4] Market Performance - Switzerland: Improved momentum in mobile and broadband, with measures showing positive results [5] - Italy: Strong mobile growth, with Fastweb being the second-best performer in the market behind Iliad [6] - FiberCop stake sale in Italy for €439 million, with proceeds used for deleveraging [4] Strategy and Industry Competition - Strategic priorities for 2024 remain unchanged, focusing on customer delight, innovation, cost efficiency, and skill development [8] - Fastweb's integration with Vodafone Italy is on track, with financing secured and regulatory approvals progressing [4][24] - Competitive dynamics in Switzerland remain intense, with promotional activity increasing in Q2 [45] Management Commentary on Operating Environment and Future Outlook - Management highlighted the success of Fastweb in Italy and the progress of the Vodafone Italia transaction [4][24] - Cost-saving measures remain a top priority, with a focus on achieving more with less, despite a weaker Q2 [17] - The energy business in Italy is expected to have a marginal impact on EBITDA and revenues in 2024, with potential for future growth [47] Other Important Information - Fiber rollout in Switzerland has achieved cruising speed, with FTTH coverage now at 49% [16] - Fastweb launched an AI sovereign infrastructure and an Italian LLM offering, enhancing its B2B services [22] - The company appointed a new CTIO, Mark Düsener, to continue the network modernization strategy [15] Q&A Session Summary Question: Swiss Competitive Dynamics and Fiber Rollout Impact - Competitive dynamics in Switzerland remain intense, with increased promotional activity in Q2 [45] - Fiber rollout in Switzerland offers upselling potential but also increases competition, balancing out the impact on B2C revenues [46] Question: Fastweb Energy Business and EBITDA Impact - The energy business in Italy is still in early stages, with marginal impact on 2024 EBITDA and revenues [47] - The economics of the energy offering involve reselling energy with fixed pricing, avoiding exposure to wholesale energy prices [53][55] Question: Swiss Retail Margins and Italian Competitive Dynamics - Swiss retail margins have improved year-over-year, with increased sales orientation but no significant increase in marketing spend [58][59] - Italian competitive dynamics remain intense, with mobile prices stabilizing but wireline slightly deteriorating [60] Question: Vodafone Italia Transaction and Energy Business Read-Across - The Vodafone Italia transaction is progressing, with regulatory approvals expected in Q1 2025 [63] - The energy business in Italy is seen as a growth opportunity, but a read-across to Switzerland is unlikely due to market differences [64][65] Question: Swiss Service Revenue and AI Initiatives - Measures to improve ARPU in Switzerland have shown results, particularly in the wireline segment [69][71] - AI initiatives in B2B are still in early stages, with potential for high margins but no significant revenue impact yet [72][73] Question: Insurance Opportunity in Switzerland and Italian Wireline Market - The insurance business in Switzerland is still in early stages, with potential for future growth but currently not meaningful [76] - The Italian wireline market is slightly deteriorating, but Fastweb's positioning remains stable with manageable churn [78] Question: Swiss Guidance and Free Cash Flow - The company expects significant cost savings in H2 to meet the full-year EBITDA guidance [81] - Free cash flow is expected to see a significant swing back in working capital by year-end [82] Question: FTTH Targets and Fastweb Guidance - FTTH targets remain on track, with 57% coverage expected by 2025 [85] - Fastweb's revenue growth for 2024 is expected to be above the original guidance of 2%-3%, with EBITDA growth likely in the 1%-2% range [86]

| --- | --- | --- | |----------------------------------------------------------------------------------|-------|-------| | | | | | Introduction | | | | Louis Schmid, Head of Investor Relations Swisscom | | | | 1. Achievements | | | | Christoph Aeschlimann, CEO Swisscom | | | | 2. Business update - Switzerland and Italy Christoph Aeschlimann, CEO Swisscom | | | | 3. Transaction update - Vodafone Italia Eugen Stermetz, CFO Swisscom | | | | 4. Financial results | | | | Eugen Stermetz, CFO Swisscom | | | | Ques ...

Chicago, IL – July 15, 2024 – Today, Zacks Equity Research discusses Swisscom AG (SCMWY) , Telefonica, S.A. (TEF) and Telenor ASA (TELNY) . Industry: Communication Services The Zacks Diversified Communication Services industry is likely to benefit from the diminishing supply chain adversities, increased fiber densification and accelerated 5G deployment across the globe. However, high capital expenditures for 5G infrastructure upgrades, unpredictable raw material prices, geopolitical conflicts and elevated i ...

Industry Description What's Shaping the Future of the Diversified Communication Services Industry? Diminishing ROI: Video and other bandwidth-intensive applications have witnessed exponential growth owing to the wide proliferation of smartphones and increased deployment of the superfast 5G technology. This has forced the industry participants to invest considerably in LTE, broadband and fiber to provide additional capacity and ramp up the Internet and wireless networks. These companies are rapidly transform ...

Financial Data and Key Metrics Changes - Group revenue decreased by CHF44 million, with a negative currency effect of CHF31 million, resulting in an underlying revenue decline of CHF13 million [74] - Reported EBITDA was CHF1.16 billion, slightly ahead of consensus, with a stable EBITDA compared to the previous year [92][109] - Net income increased by CHF13 million to CHF455 million, despite a slight decrease in EBITDA [27] Business Line Data and Key Metrics Changes - In Switzerland, revenue decreased by CHF52 million, primarily due to a decline in B2C revenues, which were down CHF59 million, largely from lower hardware sales [5][8] - B2B revenue was flat, with a slight increase of CHF4 million, driven by higher IT service revenues from acquisitions [7] - Fastweb in Italy reported a revenue increase of €35 million, or 5.6%, with strong growth in B2B and wholesale segments [20][21] Market Data and Key Metrics Changes - Swiss service revenue was down CHF30 million, with B2C service revenue down CHF17 million and B2B service revenue down €13 million [11] - Fastweb's mobile customer base grew by 12% year-on-year, reaching 3.6 million subscribers [63] - Wholesale revenues in Italy increased by 18%, driven by new connections [66] Company Strategy and Development Direction - The company continues to focus on value over volume, particularly in the B2C market, and is implementing measures to improve service revenue [32][112] - The acquisition of Vodafone Italia is expected to create significant value, with anticipated synergies of €600 million per year [69][80] - The company is investing in digital services and customer experience enhancements, including new offerings in energy and insurance [60][94] Management's Comments on Operating Environment and Future Outlook - Management indicated that the competitive environment in Switzerland remains aggressive, particularly from Salt, but emphasized a focus on value rather than increased promotional intensity [32][45] - The company maintains its guidance for service revenue decline in Switzerland, projecting a total decline of CHF70 million to CHF90 million for the year [15][31] - Management expressed confidence in achieving the fiber rollout targets and the necessary infrastructure upgrades by the end of 2025 [52][53] Other Important Information - Capital expenditures (CapEx) increased by CHF49 million, primarily due to the FTTH rollout in Switzerland [4][19] - Operating free cash flow decreased by CHF57 million, attributed to lower EBITDA and higher CapEx [4][26] Q&A Session Summary Question: Swiss service revenues trajectory - Management clarified that the CHF30 million decline is not the new normal and expects B2B service revenue to align with full-year guidance [29][31] Question: Swiss competitive dynamics - Management noted aggressive promotional activity from competitors and emphasized a focus on value rather than increasing promotional intensity [31][32] Question: Swiss cost savings and EBITDA phasing - Management expects higher cost savings in Q2 to Q4, with guidance for CHF50 million plus net savings for the year [33] Question: Wholesale margin in Italy - Management provided insights on the wholesale margin, indicating it is lower than 60% but still healthy [39] Question: Impact of Sunrise's customer loyalty initiatives - Management acknowledged the competitive pressure from Sunrise but emphasized a strong existing customer base and the need to attract new customers [43][45] Question: Integration of Vodafone Italy - Management expressed confidence in realizing the €600 million synergy target from the Vodafone acquisition, with plans already in place for integration [80][81] Question: Concerns regarding NetCo deal and competition - Management highlighted the importance of maintaining a healthy wholesale business and expressed concerns about potential impacts on competition from the NetCo carve-out [82][83]