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Swisscom held its ground during a challenging 2016. An impressive market performance helped Swisscom generate stable revenue and retain its strong market position. Large investments ensure that the Swisscom network infrastructure stays fit for the future. Fastweb continues to develop nicely and the company boosted its revenue, operating income and customer numbers in 2016.
Swisscom holds its ground in a challenging environment
At CHF 11,643 million (–0.3%), Swisscom’s net revenue was practically on a par with the previous year. This is a remarkable achievement given current price pressure and the market environment. Compared with the prior year, Swisscom increased its operating income before depreciation and amortisation (EBITDA) by CHF 195 million or 4.8% to CHF 4,293 million primarily as a result of non-recurring items in the prior year. On a like-for-like basis, EBITDA fell slightly by 1.2%. Cost cutting and growth at Fastweb were unable to compensate for declining returns in the Swiss core business. Net income rose by 17.8% to CHF 1,604 million, largely due to non-recurring items. At CHF 2,416 million, Group-wide capital expenditure was roughly on a par with last year (+0.3%).
Swisscom maintains its strong market position in Switzerland
Net revenue in the Swiss core business declined by CHF 105 million or 1.1% year-on-year to CHF 9,440 million. While revenue from telecommunications services fell as a result of increasing competitive pressure and lower roaming prices, revenue in the solutions business with corporate customers increased. The number of revenue generating units (RGU) dropped by 96,000 or 0.8% to 12.4 million as a result of market saturation. Nevertheless, the Company maintained or, as in the case of Swisscom TV, even increased its market shares. Operating income before depreciation and amortisation (EBITDA) rose by CHF 85 million or 2.4% to CHF 3,686 million. After adjustments for non-recurring items, EBITDA fell by CHF 125 million or 3.2% due to pressure on pricing, higher costs for roaming and subscriber acquisition as well as low subscription growth. Capital expenditure in Switzerland remained high at CHF 1,774 million (–2.6%).
Successful business year at Fastweb in 2016
Fastweb acquired many new customers in the broadband business (+7.0% to 2.36 million) and boosted its revenue by EUR 59 million to EUR 1,795 million (+3.4%) as a result. Operating income before depreciation and amortisation (EBITDA) rose by EUR 85 million or 14.8% to EUR 661 million. Excluding non-recurring items, the increase amounted to EUR 45 million or 8.0%. Fastweb continues to make progress on the expansion of its network. 810,000 customers were connected to the company’s own ultrafast broadband network at the end of 2016 (+25% year-on-year), which represents around one-third of all Fastweb broadband customers. The Fastweb network now extends to around 100 towns and cities in Italy, thus covering 30% of the population or 7.5 million households. Capital expenditure at Fastweb grew by 7.4% to EUR 581 million due to accelerated broadband expansion.
Swisscom share performance in 2016
The Swisscom share price fell by 9.3% in 2016. In terms of total shareholder return (share price movement and dividend payout), Swisscom achieved –5.4% thanks to the high dividend yield. The Swisscom share outperformed the Stoxx Europe 600 Telecommunications Index (–16.9% in CHF; –15.8% in EUR). Payment of an unchanged ordinary dividend of CHF 22 per share will be proposed to the Annual General Meeting of Shareholders. This is equivalent to a total dividend payout of CHF 1,140 million. Swisscom is thus upholding the principle of continuity in its dividend policy.
Digitisation as an opportunity and challenge
Processes previously involving tedious manual work are being digitised. We are producing new services more quickly and cost-effectively in the cloud. Not only are our infrastructures being controlled from the cloud, but physical devices themselves are being migrated to the cloud (virtualisation) as well. This digital environment is giving rise to new business models and behaviours. Instead of buying, people rent and share (sharing economy) and new platforms emerge. In this way, digitisation is permeating our everyday lives and the world we work in. Swisscom views digitisation as both an opportunity and a challenge. Constantly available high-performance networks and infrastructures form the backbone of all digitisation projects. Swisscom’s infrastructure and ICT expertise are opening up excellent opportunities for the company to sustain this success in nearly every area of business and daily life. Yet at the same time, we see the economic and social changes that accompany digitisation. We therefore make an effort to embrace our responsibility as a company through a variety of different initiatives and commitments.
More challenging market environment
Global, web-based foreign providers have stepped up their activities in our markets as well. While these competitors have mainly been gearing their products toward private users up until now, they are increasingly extending their offers to business customers and forming partnerships to launch efficient, scalable products and services.
Demands for data security on the rise
Swisscom has the right product portfolio and capabilities needed to continue growing in the information security market. We already fend off 99% of all hacker, phishing or spam attacks with our current resources.
What we stand for
As a partner, pioneer and shaper, Swisscom aspires to offer its customers the very best in today’s networked world. As an exemplary company offering digitisation solutions, we let people choose flexibly how to interact, work and live. As a technology partner, Swisscom helps companies improve their products, processes and marketing and, in doing so, remain competitive. We thereby strengthen and promote all of Switzerland as a business location.
Building the best infrastructure – the basis for the networked world
In 2016, Swisscom became the first provider in Switzerland to set up an additional network dedicated to the Internet of Things. This Low Power Network is operated separately from the mobile phone network and forms the basis for the Internet of Things which will interconnect millions of sensors in future. Through all of these investments and innovations, Swisscom plays a pivotal role in shaping the markets where it does business.
Offering the best experiences – to set Swisscom apart from the rest
The new Natel infinity 2.0 subscriptions introduced in 2016 are proving extremely popular. Since the offer’s spring launch, over a million customers have opted in favour of more roaming, quicker surfing speeds and other included services like a device-independent cloud.
Seizing the best opportunities for growth – long-term competitiveness
The information services local.ch and search.ch were merged under the “localsearch” brand in 2016. We also collaborated with Coop to launch siroop, an online marketplace that unites merchants both large and small, nationwide and local. Our cooperation with the start-up Mila will continue as well: Around 22,000 interventions by Swisscom Friends, namely customers who help other customers locally, have been registered on the platform.
Swisscom is continuing to develop its subsidiary Fastweb. By expanding the ultrafast broadband network and mobile communications market, building partnerships, and improving service quality, Fastweb aims to further strengthen its strong market position in Italy and generate growth. The expansion of Italy’s broadband network is continuing at full speed: Fastweb and Telecom Italia intend to cooperate on the rollout of Fibre to the Home (FTTH). The aim is for 13 million or half of homes and businesses in Italy to be connected to the ultrafast broadband network by 2020.
At Swisscom, people and their relationships are at the heart of everything we do: We want to shape the future (sustainability), achieve great things (passion), be open to new ideas (curiosity), keep our promises (reliability) and be close to customers (customer focus). Swisscom’s centre of excellence for Human Centred Design develops methods and approaches with a focus on people and their relationships. Our values and beliefs are then incorporated into the development of new products and services.
Multi-generational thinking as an integral component of the corporate strategy
With regard to climate protection, we have cut our own CO2 emissions by more than half since 1990.Nowadays, customers using our services for mobile working, for instance, are reducing CO2 emissions by around 450,000 tonnes per year, which is equivalent to the emissions of around 110,000 cars. Newsweek magazine named Swisscom as the fourth most sustainable company in the world in 2016. And something of which we are very proud.
Challenging regulatory environment
A clear majority of voters and the all States rejected the “Pro Service Public” initiative in June 2016. In December 2016, ComCom decided to renew Swisscom’s licence for the Swiss universal service for another five-year period, beginning in 2018. The revised ordinance increases the minimum bandwidth from 2 to 3 Mbps, now includes IP technology and abolishes Swisscom’s obligation to operate one public payphone in each municipality. Several different topics are on the agenda in 2017: the complete revision of the Swiss Data Protection Act, revision of the Telecommunications Act, implementation of the Federal Law on the Monitoring of Postal and Telecommunications Traffic (BÜPF) and the Intelligence Service Act. With a view to the rollout of 5G, the telecommunications industry will continue to advocate for concessions for antenna construction.
Simplification and a focus on costs
Swisscom plans to reduce its cost base by over CHF 300 million between 2015 and 2020. We will achieve this through the organisational changes implemented in 2016, adjustments to our job vacancies, optimised processes and the transformation to All IP technology. These measures will free up funds, enabling Swisscom to continue investing in infrastructure and new business areas and to remain competitive over the long term.
Financial outlook for 2017
Swisscom will propose payment of a dividend of CHF 22 per share for the 2016 financial year at the 2017 Annual General Meeting. For 2017, Swisscom expects net revenue of around CHF 11.6 billion, EBITDA of around CHF 4.2 billion and capital expenditure of some CHF 2.4 billion. For Swisscom (excluding Fastweb), a slight decline in revenue is expected due to high competition and price pressure. A slight increase in revenue is expected for Fastweb. EBITDA for Swisscom, excluding Fastweb, is expected to be around CHF 100 million lower year-on-year. The reduction in EBITDA is attributable to price pressure and declines in the number of fixed-line telephony connections. In addition, the costs for roaming are expected to increase. EBITDA will be positively affected by cost savings. Fastweb’s EBITDA is expected to be slightly higher. Capital expenditure in Switzerland and at Fastweb is expected to be on a par with the prior year. Subject to achieving its targets, Swisscom will propose payment of an unchanged, attractive dividend of CHF 22 per share for the 2017 financial year at the 2018 Annual General Meeting.
A big thank you
2016 was a successful year, something that is not a given in light of today’s market environment. We owe this success to the trust placed in us by our customers. We owe it to the loyalty of our shareholders. And we owe it to our employees’ enthusiasm and eagerness to do their very best, every single day of the year. They deserve our most heartfelt gratitude. After all, they are the ones contributing their ideas, visions and innovations today in order to create the Swisscom of tomorrow and beyond. Their passion for Swisscom and the interest they show in our products fill us with confidence and pride as we look to the future.