Menu

Segment results


In CHF million
  2. quarter
2017
  2. quarter
2016
 
Change
  1st half-year
2017
  1st half-year
2016
 
Change
                 
Net revenue
Retail Customers   1,501   1,549   –3.1%   3,018   3,114   –3.1%
Enterprise Customers   626   631   –0.8%   1,238   1,273   –2.7%
Wholesale   215   247   –13.0%   421   464   –9.3%
IT, Network & Infrastructure   42   42     84   83   1.2%
Intersegment elimination   (143)   (177)   –19.2%   (274)   (337)   –18.7%
Swisscom Switzerland   2,241   2,292   –2.2%   4,487   4,597   –2.4%
Fastweb   511   483   5.8%   995   965   3.1%
Other Operating Segments   210   195   7.7%   397   365   8.8%
Group Headquarters   1   1     1   1  
Intersegment elimination   (104)   (87)   19.5%   (190)   (159)   19.5%
Net revenue   2,859   2,884   –0.9%   5,690   5,769   –1.4%
                 
Operating income before depreciation and amortisation (EBITDA)
Retail Customers   910   926   –1.7%   1,841   1,877   –1.9%
Enterprise Customers   215   209   2.9%   416   426   –2.3%
Wholesale   103   97   6.2%   207   188   10.1%
IT, Network & Infrastructure   (304)   (305)   –0.3%   (612)   (610)   0.3%
Swisscom Switzerland   924   927   –0.3%   1,852   1,881   –1.5%
Fastweb   279   223   25.1%   434   367   18.3%
Other Operating Segments   40   46   –13.0%   80   80  
Group Headquarters   (21)   (27)   –22.2%   (47)   (57)   –17.5%
Intersegment elimination   (8)   (6)   33.3%   (12)   (9)   33.3%
Reconciliation to pension cost 1   (27)   (17)   58.8%   (47)   (35)   34.3%
Operating income before depreciation and amortisation (EBITDA)   1,187   1,146   3.6%   2,260   2,227   1.5%
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.

Segment reporting was adapted to the management structure in 2017. Swisscom’s financial reporting focuses on the three operating divisions Swisscom Switzerland, Fastweb and Other Operating Segments, and Group Headquarters. Swisscom Switzerland is the Swiss market leader in the field of telecommunications and comprises the customer segments Residential Customers, Enterprise Customers and Wholesale, as well as the IT, Network & Infrastructure division. Fastweb is one of the largest broadband telecom companies in Italy. Other Operating Segments primarily comprises the Digital Business division, Swisscom Broadcast Ltd (radio transmitters) and cablex Ltd (network construction and maintenance). Group Headquarters largely comprises the Group divisions.

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

Segment expense includes the costs of goods and services purchased, personnel expense and other operating costs less capitalised costs of 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
2017
  2. quarter
2016
 
Change
  1st half-year
2017
  1st half-year
2016
 
Change
                 
Net revenue and results
Telecommunications services   1,621   1,660   –2.3%   3,253   3,329   –2.3%
Solution business   271   269   0.7%   532   537   –0.9%
Trade goods   145   144   0.7%   292   301   –3.0%
Wholesale   135   148   –8.8%   273   287   –4.9%
Other revenue   50   50     99   102   –2.9%
Revenue from external customers   2,222   2,271   –2.2%   4,449   4,556   –2.3%
Intersegment revenue   19   21   –9.5%   38   41   –7.3%
Net revenue   2,241   2,292   –2.2%   4,487   4,597   –2.4%
Direct costs   (436)   (483)   –9.7%   (876)   (950)   –7.8%
Indirect costs   (881)   (882)   –0.1%   (1,759)   (1,766)   –0.4%
Segment expenses   (1,317)   (1,365)   –3.5%   (2,635)   (2,716)   –3.0%
Segment result before depreciation and amortisation (EBITDA)   924   927   –0.3%   1,852   1,881   –1.5%
Margin as % of net revenue   41.2   40.4       41.3   40.9    
Depreciation, amortisation and impairment losses   (379)   (371)   2.2%   (746)   (734)   1.6%
Segment result   545   556   –2.0%   1,106   1,147   –3.6%
                   
Operational data at end of period in thousand
Fixed telephony access lines               2,208   2,518   –12.3%
Broadband access lines               1,989   1,978   0.6%
Swisscom TV access lines               1,447   1,351   7.1%
Mobile access lines               6,589   6,623   –0.5%
Revenue generating units (RGU)               12,233   12,470   –1.9%
Bundles               1,784   1,515   17.8%
Unbundled fixed access lines               116   125   –7.2%
Broadband access lines wholesale               402   342   17.5%
                 
Capital expenditure and headcount
Capital expenditure   362   448   –19.2%   719   872   –17.5%
Full-time equivalent employees at end of period               15,420   16,221   –4.9%

Net revenue for Swisscom Switzerland fell by CHF 110 million or 2.4% to CHF 4,487 million (–2.2% in the second quarter) as a result of fierce competition and fixed-line telephony substitution. Of this decline, CHF 67 million (–2.2%) was attributable to the Residential Customers segment, CHF 27 million (–2.2%) to the Enterprise Customers segment and CHF 14 million (–4.9%) to the Wholesale segment. The trends in 2016 are continuing in the second quarter of 2017, as expected. Revenue from telecommunications services decreased by CHF 76 million or 2.3% to CHF 3,253 million (–2.3% in the second quarter), with around half of the drop due to the declining subscriber base in the fixed-line telephony business, which dropped year-on-year by 12.3% to 2.2 million, and by 3.9% in the second quarter of 2017. The other half of the reduction is the result of price cuts, including roaming fees, and a decline in the Enterprise Customers segment. In addition, revenue from the solutions business within Enterprise Customers decreased by CHF 5 million or 0.9% to CHF 532 million. (+0.7% in the second quarter). In Wholesale, lower revenue as a result of the reduction in termination tariffs on mobile networks were partially offset by higher inbound roaming volumes.

In the saturated market, subscriber numbers in mobile telecommunications remained flat. Year-on-year, the number of mobile lines fell by 34,000 or 0.5% to 6.59 million (–0.2% in the second quarter). Swisscom saw slight growth in postpaid offerings (+1.3%), while the number of prepaid customers fell (–4.5%). The number of broadband connections rose year-on-year by 11,000 or 0.6% to 1.99 million (+1,000 in the second quarter). The number of TV connections increased by 96,000 or 7.1% to 1.45 million (+9,000 in the second quarter). In April 2017, Swisscom radically simplified its price plan with inOne. inOne offers Internet, TV, telephony and mobile in a single package that can be tailored to individual customers. From the end of June 2017, i.e. just three months after launch, over 450,000 customers opted for inOne with more than 920,000 connections, boosting demand for bundled offerings. At the end of June 2017, 1.78 million customers were using a bundled package, which represents an increase by 17.8% year on year. Revenue from bundled contracts increased year-on-year by CHF 157 million or 12.9% to CHF 1,370 million.

Segment expense fell by CHF 81 million or 3.0% to CHF 2,635 million (–3.5% in the second quarter), with both direct and indirect costs decreasing versus the prior year. The decrease of CHF 74 million or 7.8% in direct costs to CHF 876 million is due to the lower termination tariffs on mobile networks and lower costs to purchase products (–9.7% in the second quarter). Indirect costs fell by CHF 7 million or 0.4% to CHF 1,759 million (–0.1% in the second quarter). Excluding gains from the sale of real estate in the prior year, the decrease was 1.2% and is chiefly due to the lower headcount. Headcount fell year-on-year as a result of efficiency measures by 801 FTEs or 4.9% to 15,420, including 456 FTEs or 2.9% in the first half of 2017. The segment result before depreciation and amortisation fell by CHF 29 million or 1.5% to CHF 1,852 million. A large proportion of the drop in revenue was offset by active cost management. Excluding gains from the sale of real estate in the previous year, the decline was 0.8%. Capital expenditure decreased as a result of delayed investments by CHF 153 million or 17.5% to CHF 719 million.

Fastweb


In EUR million, except where indicated
  2. quarter
2017
  2. quarter
2016
 
Change
  1st half-year
2017
  1st half-year
2016
 
Change
Residential Customers   238   227   4.8%   470   450   4.4%
Corporate Business   173   177   –2.3%   341   348   –2.0%
Wholesale   57   35   62.9%   108   79   36.7%
Revenue from external customers   468   439   6.6%   919   877   4.8%
Intersegment revenue   2   2     4   4  
Net revenue   470   441   6.6%   923   881   4.8%
Segment expenses   (212)   (237)   –10.5%   (520)   (546)   –4.8%
Segment result before depreciation and amortisation (EBITDA)   258   204   26.5%   403   335   20.3%
Margin as % of net revenue   54.9   46.3       43.7   38.0    
   
Capital expenditure   147   132   11.4%   302   286   5.6%
Full-time equivalent employees at end of period               2,494   2,422   3.0%
Broadband access lines in thousand               2,411   2,257   6.8%
Mobile access lines in thousand               880   606   45.2%

Fastweb’s net revenue rose year-on-year by EUR 42 million or 4.8% to EUR 923 million (+6.6% in the second quarter). Despite a difficult market environment, Fastweb’s broadband customer base grew year-on-year by 154,000 or 6.8% to 2.4 million (+11,000 in the second quarter). Fastweb is also growing in mobile telephony. Compared to the previous year, the number of mobile access lines increased by 274,000 or 45.2% to 880,000 (+117,000 in the second quarter) due to the launch of new mobile offerings. Fierce competition reduced average revenue per residential broadband customer by almost 4% over the prior year. Nevertheless, this decline was outweighed by customer growth, revenue from residential customers rose accordingly by EUR 20 million or 4.4% to EUR 470 million in comparison with the previous year (+4.8% in the second quarter). Despite the high level of competition, Fastweb held its strong position in the market for business customers. Revenue from business customers was down EUR 7 million or 2.0%, at EUR 341 million (–2.3% in the second quarter). Revenue from the wholesale business increased by EUR 29 million or 36.7% to EUR 108 million following a cooperation agreement with Telecom Italia in relation to the expansion of the ultra-fast broadband network.

The segment result before depreciation and amortisation totalled EUR 403 million, equivalent to a year-on-year increase of EUR 68 million or 20.3% (+26.5% in the second quarter), and includes one-off income from legal disputes amounting to EUR 95 million (prior year: EUR 55 million). Adjusted for these effects, EBITDA rose by EUR 28 million or 10.0% (+9.4% in the second quarter). This increase was mainly the result of higher revenue and improved regulatory conditions. Adjusted EBITDA margin rose by 1.6 percentage points to 33.4% Capital expenditure rose by EUR 16 million or 5.6% to EUR 302 million primarily as a result of higher customer-driven investment. The expansion of Italy’s broadband network is continuing as planned. The ratio of capital expenditure to net revenue was 32.7% (prior year: 32.5%). Headcount at Fastweb rose by 72 FTEs or 3.0% to 2,494 FTEs, driven partially by the appointment of external employees in the technical areas.

Other Operating Segments


In CHF million, except where indicated
  2. quarter
2017
  2. quarter
2016
 
Change
  1st half-year
2017
  1st half-year
2016
 
Change
Revenue from external customers   129   131   –1.5%   251   251  
Intersegment revenue   81   64   26.6%   146   114   28.1%
Net revenue   210   195   7.7%   397   365   8.8%
Segment expenses   (170)   (149)   14.1%   (317)   (285)   11.2%
Segment result before depreciation and amortisation (EBITDA)   40   46   –13.0%   80   80  
Margin as % of net revenue   19.0   23.6       20.2   21.9    
   
Capital expenditure   13   10   30.0%   24   17   41.2%
Full-time equivalent employees at end of period               2,585   2,491   3.8%

Net revenue of Other Operating Segments rose year-on-year by CHF 32 million or 8.8% to CHF 397 million (+7.7% in the second quarter). The increase was mainly due to higher revenue from construction services rendered by cablex for Swisscom Switzerland. The segment result before depreciation and amortisation remained steady at the year-earlier level of CHF 80 million (–13.0% in the second quarter). This corresponds to a profit margin of 20.2% Headcount rose by 94 FTEs to 2,585 FTEs, driven primarily by the appointment of new employees at cablex.

Group Headquarters and reconciliation of pension cost

Operating income before depreciation and amortisation improved year-on-year by CHF 10 million or 17.5% to CHF –47 million. Headcount fell year-on-year by 10.7% to 276 FTEs.

An expense of CHF 47 million (prior year: CHF 35 million) is recognised as a pension cost reconciliation item under IAS 19 for the first six months of 2017.