Financial Condition and Debt - Sunrise has substantial indebtedness, which may adversely affect its ability to execute its business strategy [32]. - As of February 4, 2025, Sunrise's third-party debt obligations will mature between 2028 and 2032, impacting its cash flow and liquidity needs [34]. - Approximately 52% of Sunrise's indebtedness outstanding as of December 31, 2024, was subject to floating interest rates, exposing the company to interest rate fluctuations [52]. - Sunrise's ability to pay dividends or make distributions is limited by its subsidiaries' operating results and regulatory restrictions [51]. - Sunrise's financial covenants may be affected by adverse economic conditions, potentially limiting its ability to finance future operations [46]. - A downgrade in Sunrise's credit rating could increase the cost of its indebtedness and negatively impact its trading price [57]. - Sunrise's historical financial information may not be a reliable indicator of its future results as a separate publicly-traded company [62]. - Sunrise's pension fund was overfunded at approximately 117.4% of its obligations as of 30 June 2024, but any significant underfunding could require additional contributions that may impact cash flows [72]. Operational Risks and Challenges - The company expects to continue incurring significant capital expenditures for the expansion and maintenance of its mobile and fixed network infrastructure [39]. - Sunrise may face increased costs if required to implement changes under the Telecommunications Services Ordinance by 2030 to 2033 [41]. - The company may need to undertake unplanned infrastructure maintenance and upgrades, which could lead to additional expenses [41]. - A decline in Average Revenue Per User (ARPU) in Sunrise's mobile and fixed networks could adversely affect its revenues, earnings, and cash flows if the company fails to expand its subscriber base [65]. - Sunrise's reliance on Swiss Towers AG for access to approximately 56% of its mobile antenna sites, and any disruption in this agreement could materially affect its operations [76]. - Sunrise's planned investments in 5G SA active mobile infrastructure may not generate offsetting revenues, posing a risk to financial returns [85]. - Approximately 63% of Sunrise's subscribers were not under active fixed-term contracts as of December 31, 2024, allowing them to terminate services at any time [94]. - Sunrise's reliance on third-party suppliers has led to supply chain disruptions, including impacts from the global chip shortage in 2020 and 2021 [100]. - The recent adverse decision affecting simplified antenna permitting procedures for 5G upgrades may increase the time and resources required for network expansion [91]. - Sunrise's data centers and IT systems are vulnerable to various disruptions, which could harm its reputation and operational capabilities [90]. - The company faces reputational risks related to its brands, which could be damaged by external events or third-party conduct [88]. - Sunrise's ability to adopt and integrate new technologies is critical for maintaining competitiveness, and failure to do so could negatively impact revenues and earnings [84]. - Sunrise's IT and network systems are vulnerable to security breaches and cyberattacks, which could significantly disrupt operations and adversely affect business, revenues, earnings, and cash flows [126]. - The complexity of cyberattack techniques is increasing, and remote work arrangements may heighten cybersecurity risks, particularly in the context of ongoing geopolitical conflicts [127]. - Sunrise's cyber liability insurance may not be sufficient to cover all potential losses from future disruptions or breaches, and insurance costs may rise due to increased threats [128]. - The company collects and stores a large amount of personal information, which could be subject to misappropriation or misuse, potentially leading to regulatory fines and reputational damage [129]. - Compliance with evolving data protection laws, such as the Swiss Federal Data Protection Act and GDPR, may increase operational costs and complexity, with potential liabilities for non-compliance [131]. Market and Competitive Environment - The Swiss telecommunications industry is characterized by intense competition, leading to price erosion and necessitating Sunrise to diversify its product offerings to maintain market share [74]. - Sunrise faces risks related to inflation, which could increase costs faster than revenues, adversely impacting profitability [66]. - Legal proceedings against Sunrise regarding inflation-linked mid-term service price increases could limit future pricing strategies and revenue adjustments [96]. - Sunrise's spectrum allocations are crucial for delivering mobile services, and failure to renew these allocations could lead to a decline in service quality and subscriber loss [118][121]. - Sunrise's contracts with major customers include minimum service quality commitments, and failure to meet these could lead to revenue loss and reputational damage [99]. - Sunrise's ability to maintain its distribution channels is critical, as failure to do so could materially affect its business, revenues, earnings, and cash flows [104]. - The company may face challenges in attracting and retaining key personnel due to high demand and competition in the technology sector [105]. Regulatory and Legal Considerations - The company is subject to extensive regulation, and changes in laws or regulations could adversely affect its operations and financial performance [115][117]. - Sunrise may incur substantial additional expenses if Huawei is prohibited from operating in Switzerland, as most of its mobile infrastructure relies on Huawei [108][109]. - If Huawei is deemed a high-risk vendor, Sunrise may need to replace existing equipment, leading to significant capital expenditures and potential disruptions in mobile network quality [110]. - Sunrise's ability to successfully execute strategic transactions, such as acquisitions or partnerships, may be limited by various factors, including market conditions and regulatory hurdles [143]. - The company may face indemnification liabilities to Liberty Global, which could materially affect its financial condition and performance [149]. - The terms of agreements with Liberty Global may not be as favorable as those that could have been negotiated with independent third parties, potentially impacting Sunrise's business [150]. - Sunrise may have significant indemnity obligations to Liberty Global, which are not limited in amount, potentially affecting its financial position [151]. - Sunrise's tax separation agreement includes restrictions on certain transactions for two years post-spin-off to maintain favorable tax treatment [154]. Shareholder and Market Dynamics - As of February 17, 2025, Mr. Malone holds approximately 22.75% of the combined voting power of Sunrise Shares, significantly influencing corporate decisions [158]. - Mr. Fries beneficially owns about 6.69% of the aggregate voting power of Sunrise Shares as of February 17, 2025 [162]. - Future equity sales and share issuances could dilute shareholders' equity interest in Sunrise, reducing their share of future dividends or capital appreciation [172]. - The price of Sunrise Shares may be volatile due to various factors, including market conditions and operating results [156]. - Sunrise does not expect to be classified as a Passive Foreign Investment Company (PFIC) for U.S. federal income tax purposes for the foreseeable future [163]. - Non-Swiss shareholders may face challenges exercising preemptive rights in future equity issuances, potentially leading to dilution of their ownership [171]. - The trading market for Sunrise Class A Common Shares may be limited, affecting liquidity for shareholders [157]. - Sunrise's articles of association include an "opting-up" clause, allowing certain shareholders to acquire significant voting rights without mandatory tender offers [169]. - Sunrise is a foreign private issuer and is exempt from certain disclosure obligations under the Exchange Act, resulting in potentially less publicly available information compared to U.S. domestic companies [173]. - If Sunrise loses its foreign private issuer status, compliance costs would significantly increase due to more extensive requirements under the Exchange Act [174]. - The Nasdaq listing of Sunrise Class A ADSs is for a transitional period of approximately nine months, after which they may trade on an over-the-counter basis [183]. - Sunrise plans to cease reporting under the Exchange Act as soon as it meets specific conditions, including maintaining a listing on the SIX for at least 12 months [179]. - Upon ceasing reporting under the Exchange Act, holders of Sunrise securities may have access to less information about the company compared to the period before the cessation [180]. - Sunrise ADS holders do not have direct shareholder rights and may face limitations in exercising voting rights [184]. - The rights of Sunrise ADS holders to receive dividends are more limited compared to direct shareholders, as subscription rights may not be offered to them [187]. - The depositary may impose limitations on the ability of Sunrise ADS holders to cancel their ADSs and withdraw the underlying shares [188]. - Legal claims against Sunrise or the depositary by ADS holders are subject to specific jurisdictional limitations and may not allow for a jury trial [190]. - If a lawsuit is brought against Sunrise or the depositary, it may be heard only by a judge, potentially leading to different outcomes than a jury trial [194]. Corporate Governance and Management - Sunrise operates 4,752 antenna sites to support its mobile network, with approximately 55% accessed through a long-term master services agreement with Swiss Towers [209]. - As of December 31, 2024, Sunrise leased 19 offices, including its headquarters in Opfikon, which spans approximately 21,590 square meters [210]. - Total compensation for the Board of Directors for the 2024 fiscal year amounted to CHF 284,767, including employer-paid social security contributions [223]. - Sunrise does not engage in meaningful research and development activities related to network infrastructure technologies [213]. - The lease on Sunrise's headquarters expires on December 31, 2033, with an option to extend until December 31, 2043 [210]. - Sunrise shareholders have pre-emptive rights to subscribe for newly issued shares in proportion to their holdings, which can be excluded or restricted under certain conditions [196]. - The company has a defined target-setting and performance-management process for its Executive Committee, with targets subject to approval by the Sunrise Board [231]. - The cash component of the Board Fees is paid in semi-annual installments, with the share component granted following the AGM [220]. - Sunrise's Class A Common Shares are listed on the SIX under the symbol "SUNN" and the Class A ADSs are traded on the Nasdaq under the symbol "SNRE" [200].
Sunrise Communications AG(SNRE) - 2024 Q4 - Annual Report