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Results of operations

Income statement

In CHF million, except where indicated   2015   2014   Change
Swisscom Switzerland   9,475   9,253   2.4%
Fastweb   1,862   2,043   –8.9%
Other operating segments   340   406   –16.3%
Group Headquarters   1   1   0.0%
Revenue from external customers   11,678   11,703   –0.2%
Swisscom Switzerland   3,601   3,835   –6.1%
Fastweb   619   625   –1.0%
Other operating segments   69   103   –33.0%
Group Headquarters   (117)   (123)   –4.9%
Reconciliation pension cost 1   (60)     –100.0%
Intersegment elimination   (14)   (27)   –48.1%
Operating income before depreciation and amortisation (EBITDA)   4,098   4,413   –7.1%
             
Net revenue   11,678   11,703   –0.2%
Goods and services purchased   (2,342)   (2,369)   –1.1%
Personnel expense   (3,019)   (2,751)   9.7%
Other operating expense   (2,697)   (2,540)   6.2%
Capitalised costs of self-constructed assets and other income   478   370   29.2%
Operating expenses   (7,580)   (7,290)   4.0%
Operating income before depreciation and amortisation (EBITDA)   4,098   4,413   –7.1%
Depreciation, amortisation and impairment losses   (2,086)   (2,091)   –0.2%
Operating income (EBIT)   2,012   2,322   –13.4%
Net interest expense   (189)   (218)   –13.3%
Other financial result   (83)   (42)   97.6%
Share of results of associates   23   26   –11.5%
Income before income taxes   1,763   2,088   –15.6%
Income tax expense   (401)   (382)   5.0%
Net income   1,362   1,706   –20.2%
Share of net income attributable to equity holders of Swisscom Ltd   1,361   1,694   –19.7%
Share of net income attributable to non-controlling interests   1   12   –91.7%
             
Average number of shares outstanding (in millions of shares)   51.802   51.801   0.0%
Earnings per share (in CHF)   26.27   32.70   –19.7%
1 Operating income of segments includes ordinary employer contributions as pension fund expense. The difference to the pension cost according to IAS 19 is recognised as a reconciliation item.
WSGE_DP_GR_ge_AntOperSeg_NetUms_EBIT
WSGE_2_DP_GR_ge_AntOperSeg_NetUms_EBIT
Operating results
Net revenue

Revenue performance in 2015 was heavily affected by the weaker EUR exchange rate as well as company acquisitions and disposals. The average CHF/EUR exchange rate, at 1.075, was 11.4% lower than in the previous year. At constant exchange rates and excluding company acquisitions and disposals, Swisscom’s net revenue increased by CHF 83 million or 0.7%. At Swisscom Switzerland, revenue increased by CHF 57 million, or 0.6% on a like-for-like basis. The higher number of customers was partially offset by the lower roaming prices. The number of revenue generating units (RGU) grew at Swisscom Switzerland by 170,000 or 1.4% to 12.5 million. Revenue of the Italian subsidiary Fastweb was EUR 48 million or 2.8% higher at EUR 1,736 million. All customer segments contributed to this increase. Compared with the end of 2014, the number of Fastweb broadband customers rose by 129,000 or 6.2% to 2.2 million. Revenue of Other Operating Segments was lower by CHF 38 million on an adjusted basis, due to a decline in construction services performed by cablex.

Operating expense

Operating expense of Swisscom rose by CHF 290 million or 4.0% year-on-year to CHF 7,580 million. This includes non-recurring items resulting from provisions recognised for the Competition Commission proceedings on broadband services (CHF 186 million) and headcount reduction (CHF 70 million), gains from the sale of real estate (CHF 26 million; prior year: CHF 66 million), non-cash pension expenses in accordance with IAS 19 (CHF 60 million) and compensation from legal proceedings (CHF 17 million). At the beginning of October 2015, the Federal Administrative Court confirmed in principle the ruling issued by the Competition Commission for the alleged improper pricing of broadband services in the period up until the end of 2007; however, it reduced the penalty to CHF 186 million. Swisscom therefore recognised a provision for this amount in the income statement. Swisscom does not consider the penalty justified and has lodged an appeal with the Federal Supreme Court. At constant exchange rates and excluding non-recurring items, operating expense decreased by CHF 20 million or 0.2%, largely due to lower costs for subscriber acquisition and retention at Swisscom Switzerland, which declined by CHF 31 million as compared to the prior year. The higher personnel expense on a like-for-like basis was compensated for by an increase in capitalised costs of self-constructed assets. The rise in personnel expense was due to higher headcount and a general increase in salary.

Operating income before depreciation and amortisation (EBITDA)

The reported operating income before depreciation and amortisation (EBITDA) was CHF 315 million or 7.1% lower at CHF 4,098 million as a result of non-recurring items. EBITDA on a like-for-like basis rose by CHF 103 million or 2.3%, of which Swisscom Switzerland accounted for CHF 54 million and Fastweb CHF 56 million. The rise in EBITDA for Swisscom Switzerland and Fastweb was largely due to the higher revenue from growth in the customer base. On an adjusted basis, Swisscom’s profit margin increased 0.8 percentage points to 37.9%.

Depreciation and amortisation, non-operating results
Depreciation, amortisation and impairment losses

Depreciation, amortisation and impairment losses decreased by CHF 5 million or 0.2% in 2015 to CHF 2,086 million. Higher depreciation related to the increase in capital expenditure was more than offset by the weaker EUR exchange rate. Intangible assets resulting from business combinations were capitalised for purchase price allocation purposes. Depreciation and amortisation includes amortisation of intangible assets deriving from business combinations (e.g. brands and customer relationships) totalling CHF 125 million (prior year: CHF 123 million).

Net interest expense and other financial result

Net interest expense declined by CHF 29 million to CHF 189 million as a result of lower average interest costs. Other financial expense rose year-on-year by CHF 41 million to CHF 83 million. This increase is largely attributable to the foreign exchange result, which was down by CHF 41 million from the prior year.

Associates

The share of results of associates fell by CHF 3 million to CHF 23 million in 2015. Dividends received, amounting to CHF 22 million (prior year: CHF 30 million), largely concern dividends paid by LTV Yellow Pages and Belgacom International Carrier Services.

Income tax expense

Income tax expense was CHF 401 million (prior year: CHF 382 million), corresponding to an effective income tax rate of 22.7% (prior year: 18.3%). The increase is mainly attributable to the fact that no income tax effects were recognised on the provision created in 2015 for the Competition Commission proceedings regarding broadband services. Without this exceptional item, the effective income tax rate would have been 20.5%. Excluding non-recurring items, Swisscom expects the income tax rate to remain around 21% in the long term.

Net income

Net income fell by CHF 344 million or 20.2% to CHF 1,362 million. Earnings per share fell accordingly from CHF 32.70 to CHF 26.27. The drop in profit was mainly attributable to the decrease in operating income before depreciation and amortisation (EBITDA), which was CHF 315 million lower as a result of non-recurring items and weaker exchange rates. In addition, the lower net interest expense was more than offset by the rise in other financial expense and higher income tax expense.