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Segment results


In CHF million
  2. quarter
2016
  2. quarter
2015
 
Change
  1st half-year
2016
  1st half-year
2015
 
Change
                 
Net revenue
Residential Customers   1,272   1,283   –0.9%   2,559   2,574   –0.6%
Small and Medium-Sized Enterprises   343   340   0.9%   679   667   1.8%
Enterprise Customers   652   650   0.3%   1,308   1,307   0.1%
Wholesale   249   234   6.4%   469   464   1.1%
IT, Network & Innovation   31   31     61   65   –6.2%
Intersegment elimination   (210)   (196)   7.1%   (394)   (380)   3.7%
Swisscom Switzerland   2,337   2,342   –0.2%   4,682   4,697   –0.3%
Fastweb   483   453   6.6%   965   921   4.8%
Other Operating Segments   146   156   –6.4%   275   300   –8.3%
Group Headquarters   1   1     1   1  
Intersegment elimination   (83)   (87)   –4.6%   (154)   (161)   –4.3%
Net revenue   2,884   2,865   0.7%   5,769   5,758   0.2%
                 
Operating income before depreciation and amortisation (EBITDA)
Residential Customers   729   742   –1.8%   1,484   1,472   0.8%
Small and Medium-Sized Enterprises   228   232   –1.7%   452   449   0.7%
Enterprise Customers   205   226   –9.3%   417   445   –6.3%
Wholesale   100   92   8.7%   193   193  
IT, Network & Innovation   (316)   (323)   –2.2%   (634)   (635)   –0.2%
Swisscom Switzerland   946   969   –2.4%   1,912   1,924   –0.6%
Fastweb   223   148   50.7%   367   278   32.0%
Other Operating Segments   27   19   42.1%   49   35   40.0%
Group Headquarters   (27)   (29)   –6.9%   (57)   (58)   –1.7%
Intersegment elimination   (6)   (6)     (9)   (10)   –10.0%
Reconciliation to pension cost 1   (17)   (19)   –10.5%   (35)   (36)   –2.8%
Operating income before depreciation and amortisation (EBITDA)   1,146   1,082   5.9%   2,227   2,133   4.4%
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.

Reporting will be divided into three operating divisions: Swisscom Switzerland, Fastweb and Other Operating Segments as well as Group Headquarters. Swisscom Switzerland is the Swiss market leader in the field of telecommunications. Fastweb is one of the largest broadband telecom com­panies in Italy. Other Operating Segments mainly comprises Participations, Health and Connected Living. Group Headquarters largely comprises the Group divisions. Swisscom Switzerland consists of the customer segments Residential Customers, Small & Medium-Sized Enterprises, Enterprise Customers and Wholesale as well as IT, Network & Innovation.

The IT, Network & Innovation segment does not charge any network costs to other segments, nor does Group Headquarters charge any management fees to other segments. Other intersegment services are charged at market rates. Network costs in Switzerland are budgeted, monitored and controlled by the IT, Network & Innovation division, which is managed as a cost centre. For this reason, no revenue is credited to the IT, Network & Innovation segment within the segment reporting, with the exception of the rental and administration of buildings. The results of the Residential Customers, Small & Medium-Sized Enterprises, Enterprise Customers and Wholesale segments are reported as a contribution margin before network costs.

Segment expense includes the costs of goods and services purchased, personnel expense and other operating costs less capitalised self-constructed assets and other income. Segment expense contains the ordinary employer contributions as pension costs. Under IAS 19, the difference between the ordinary employer contributions and the pension cost is reported as a reconciliation item between the operating incomes of the segments and Group operating income.

Swisscom Switzerland


In CHF million, except where indicated
  2. quarter
2016
  2. quarter
2015
 
Change
  1st half-year
2016
  1st half-year
2015
 
Change
                 
Net revenue and results
Mobile single subscriptions   649   691   –6.1%   1,298   1,362   –4.7%
Fixed-line single subscriptions   382   435   –12.2%   779   887   –12.2%
Bundles   610   547   11.5%   1,213   1,077   12.6%
Solution business   273   260   5.0%   550   521   5.6%
Wholesale   148   140   5.7%   287   288   –0.3%
Other   259   252   2.8%   523   526   –0.6%
Revenue from external customers   2,321   2,325   –0.2%   4,650   4,661   –0.2%
Intersegment revenue   16   17   –5.9%   32   36   –11.1%
Net revenue   2,337   2,342   –0.2%   4,682   4,697   –0.3%
Direct costs   (483)   (461)   4.8%   (952)   (944)   0.8%
Indirect costs   (908)   (912)   –0.4%   (1,818)   (1,829)   –0.6%
Segment expenses   (1,391)   (1,373)   1.3%   (2,770)   (2,773)   –0.1%
Segment result before depreciation and amortisation (EBITDA)   946   969   –2.4%   1,912   1,924   –0.6%
Margin as % of net revenue   40.5   41.4       40.8   41.0    
Depreciation, amortisation and impairment losses   (377)   (343)   9.9%   (744)   (674)   10.4%
Segment result   569   626   –9.1%   1,168   1,250   –6.6%
                   
Operational data at end of period in thousand
Fixed access lines               2,518   2,697   –6.6%
Broadband access lines retail               1,978   1,922   2.9%
Swisscom TV access lines               1,400   1,238   13.1%
Mobile access lines               6,623   6,592   0.5%
Revenue generating units (RGU)               12,519   12,449   0.6%
Bundles               1,515   1,307   15.9%
Unbundled fixed access lines               125   150   –16.7%
Broadband access lines wholesale               342   291   17.5%
                 
Capital expenditure and headcount
Capital expenditure   447   453   –1.3%   872   841   3.7%
Full-time equivalent employees at end of period               16,969   17,062   –0.5%

Revenue generated by Swisscom Switzerland with external customers fell by CHF 11 million or 0.2% to CHF 4,650 million (–0.2% in the second quarter). Compared to the previous year, revenue from telecommunications services fell by CHF 46 million or 1.4% to CHF 3,322 million, while the solutions business grew by CHF 29 million or 5.6% to CHF 550 million. The decline in revenue from telecommunications services is due to increasing competitive pressure and falling roaming prices. Unlike in the past, this trend could not be offset through customer growth. The number of revenue-generating units (RGUs) increased year-on-year by 70,000 or 0.6% to 12.5 million, although this figure fell by 24,000 in the first half of 2016 as a result of increasing market saturation. In the Residential Customers and Small and Medium-Sized Enterprises (SME) units, third-party revenue remained stable at CHF 3,150 million (–0.6% in the second quarter). The decline in the mobile market due to lower prices for roaming was offset by higher revenue as a result of the acquisition of search.ch in July 2015. In the Enterprise Customers unit, third-party revenue remained almost the same compared with the previous year at CHF 1,202 million or –0.2% (–0.2% in the second quarter). The price-related decline in revenue in the mobile market was offset by higher revenue in the solutions business, albeit it with a lower margin. Incoming orders in the corporate business fell by 2.0% to CHF 1,028 million as a result of strong competition.

The huge demand for bundled offerings with flat-rate tariffs continues. By the end of June 2016, 1.52 million customers were using a bundled offering, which corresponds to an increase year-on-year of 208,000 or 15.9% (+99,000 in the first half of the year). Revenue from bundled contracts rose year-on-year by CHF 136 million or 12.6% to CHF 1,213 million (+11.5% in the second quarter).

The increasingly saturated market is reflected in the increase in the number of subscribers in the mobile market. Year-on-year, the number of mobile lines increased by 31,000 or 0.5% to 6.6 million; However, this figure fell by 2,000 in the first half of 2016 as a result of market saturation. The number of postpaid lines including bundled offerings rose by 50,000 (+10,000 in the first half of the year), while the number of prepaid lines declined by 19,000 (–12,000 in the first half of the year). In the roaming business, a drop in roaming fees and the inclusion of roaming in the Natel infinity subscription packages has driven roaming volumes up at an even faster pace. The related price reduction in 2016 is around CHF 100 million. In the first half of 2016, data traffic rose by a factor of 2.4 year-on-year, and voice traffic rose by 13%. With the introduction of Natel infinity 2.0 in March 2016, customers benefit from much higher speeds, more roaming options and unlimited online storage. By the end of June 2016, 632,000 customers had opted for the new infinity subscriptions. The number of customers for all Natel infinity subscriptions is 2.33 million, which is equal to 70% of postpaid lines (excluding corporate customers).

Despite stiffer competition, the number of Swisscom TV connections increased year-on-year by 162,000 or 13.1% to 1.40 million (+69,000 in the first half of the year), of which basic package subscriptions accounted for 1.15 million. Three-quarters of customers use the cloud-based Swisscom TV 2.0 service. Retail broadband access lines grew year-on-year by 56,000 or 2.9% to 1.98 million (+20,000 in the first half of the year). As a result, the growth in TV and broadband connections in the fixed network business more than offset the reduction in the number of fixed-line phone connections of 179,000 (–111,000 in the first half of the year). The decrease in the number of fixed-line phone connections is mainly the result of customers switching from fixed to mobile telephony.

Segment expense fell by CHF 3 million or 0.1% to CHF 2,770 million (+1.3% in the second quarter) with direct costs increasing and indirect costs decreasing versus the prior year. The CHF 8 million or 0.8% rise in direct costs to CHF 952 million (+4.8% in the second quarter) mainly reflects higher expenditures for roaming and international traffic as well as higher costs for customer acquisition and retention. The CHF 11 million or 0.6% drop in indirect costs to CHF 1,818 million (–0.4% in the second quarter) is mainly attributable to cost savings as a result of efficiency improvement measures and lower expenses for maintenance. Headcount fell year-on-year by 93 FTEs or 0.5% to 16,969. On a like-for-like basis, the decrease corresponded to 214 FTEs or 1.3% (–291 or –1.4% in the first half of the year), which came as a result of efficiency measures. The cost savings partially offset the lower revenue from telecommunications services. The segment result before depreciation and amortisation (EBITDA) was CHF 12 million or 0.6% lower at CHF 1,912 million (–2.4% in the second quarter), while the profit margin fell 0.2 percentage points to 40.8%.

Compared to the previous year, depreciation and amortisation rose by CHF 70 million or 10.4% to CHF 744 million (+9.9% in the second quarter) as a result of the high capital expenditure. The segment result declined accordingly by CHF 82 million or 6.6% to CHF 1,168 million (–9.1% in the second quarter). At CHF 872 million, capital expenditure was CHF 31 million or 3.7% higher (–1.3% in the second quarter), mainly on account of increased investments in broadband networks.

Fastweb


In EUR million, except where indicated
  2. quarter
2016
  2. quarter
2015
 
Change
  1st half-year
2016
  1st half-year
2015
 
Change
Residential Customers   227   219   3.7%   450   435   3.4%
Corporate Business   177   177     348   345   0.9%
Wholesale   35   36   –2.8%   79   80   –1.3%
Revenue from external customers   439   432   1.6%   877   860   2.0%
Intersegment revenue   2   1   100.0%   4   2   100.0%
Net revenue   441   433   1.8%   881   862   2.2%
Segment expenses   (237)   (293)   –19.1%   (546)   (602)   –9.3%
Segment result before depreciation and amortisation (EBITDA)   204   140   45.7%   335   260   28.8%
Margin as % of net revenue   46.3   32.3       38.0   30.2    
   
Capital expenditure   132   132     286   279   2.5%
Full-time equivalent employees at end of period               2,422   2,377   1.9%
Broadband access lines at end of period in thousand               2,257   2,157   4.6%

Fastweb’s net revenue rose year-on-year by EUR 19 million or 2.2% to EUR 881 million (+1.8% in the second quarter). Despite a difficult market environment, Fastweb’s broadband customer base grew year-on-year by 100,000 or 4.6% to 2.26 million (+56,000 in the first six months of the year). Fierce competition reduced average revenue per residential broadband customer by around 3% versus the prior-year period. Nevertheless, this decline was outweighed by customer growth. Revenue from residential customers rose accordingly by EUR 15 million or 3.4% to EUR 450 million in comparison with the previous year (+3.7% in the second quarter). Thanks to a strong market position in the market for business customers, revenue from business customers grew by EUR 3 million or 0.9% to EUR 348 million (unchanged in the second quarter). Revenue in the wholesale business remained stable at EUR 79 million.

The segment result before depreciation and amortisation (EBITDA) at Fastweb rose by EUR 75 million or 28.8% to EUR 335 million. This includes compensation from Telecom Italia in the amount of EUR 55 million as a result of an out-of-court settlement following a legal dispute. Adjusted for this one-off effect, EBITDA rose by EUR 20 million or 7.7% (+6.4% in the second quarter) and the profit margin by 1.6 percentage points to 31.8%. Spending on the continuing expansion of the broadband network resulted in a rise in capital expenditure of EUR 7 million or 2.5% to EUR 286 million. In July 2016, Fastweb and Telecom Italia announced plans 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 ultra-fast broadband network by 2020.

Other Operating Segments


In CHF million, except where indicated
  2. quarter
2016
  2. quarter
2015
 
Change
  1st half-year
2016
  1st half-year
2015
 
Change
Revenue from external customers   81   87   –6.9%   157   177   –11.3%
Intersegment revenue   65   69   –5.8%   118   123   –4.1%
Net revenue   146   156   –6.4%   275   300   –8.3%
Segment expenses   (119)   (137)   –13.1%   (226)   (265)   –14.7%
Segment result before depreciation and amortisation (EBITDA)   27   19   42.1%   49   35   40.0%
Margin as % of net revenue   18.5   12.2       17.8   11.7    
   
Capital expenditure   11   6   83.3%   17   12   41.7%
Full-time equivalent employees at end of period               1,743   1,722   1.2%

The development of the Other Operating Segments is mainly affected by the sale of companies in the previous year. In the first half of 2015, Swisscom sold Alphapay Ltd and the Swisscom Hospitality division. This is the main reason for the decline in revenue and segment expense.

The net revenue of Other Operating Segments fell year-on-year by CHF 25 million or 8.3% to CHF 275 million (–6.4% in the second quarter). Adjusted for the sale of companies, net revenue rose by CHF 4 million or 1.4%, mainly as a result of higher revenue for construction services at cablex. The segment result before depreciation and amortisation increased by CHF 14 million or 40.0% to CHF 49 million (+42.1% in the second quarter), mainly as a result of higher revenue as well as one-off charges at cablex in the prior year. The profit margin improved by 6.1 percentage points to 17.8%. Headcount increased year-on-year by 21 FTEs or 1.2% to 1,743 FTEs.

Group Headquarters and reconciliation of pension cost

Operating income before depreciation and amortisation improved year-on-year by CHF 1 million or 1.7% to CHF –57 million. Headcount fell year-on-year by 4.9% to 309 FTEs.

An expense of CHF 35 million (prior year: CHF 36 million) is recognised as a pension cost reconciliation item under IAS 19 for the first six months of 2016.