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Segment results

In CHF million   31.3.2018   31.3.2017   Change
             
Net revenue
Swisscom Switzerland   2,206   2,246   –1.8%
Fastweb   574   484   18.6%
Other Operating segments   197   187   5.3%
Intersegment elimination   (92)   (86)   7.0%
Net revenue   2,885   2,831   1.9%
             
Operating income before depreciation and amortisation (EBITDA)
Swisscom Switzerland   892   928   –3.9%
Fastweb   167   155   7.7%
Other Operating segments   39   40   –2.5%
Group Headquarters   (22)   (26)   –15.4%
Reconciliation to pension cost 2   (15)   (20)   –25.0%
Intersegment elimination   (3)   (4)   –25.0%
Operating income before depreciation and amortisation (EBITDA)   1,058   1,073   –1.4%
1 Since 1 January 2018, Swisscom has applied IFRS 15 “Revenue from Contracts with Customers”. The prior year’s figures have not been adjusted. Without the application of IFRS 15, net revenue would have been CHF 4 million higher (Swisscom Switzerland CHF 1 million and Fastweb CHF 3 million) and EBITDA would have been CHF 20 million higher (Swisscom Switzerland CHF 9 million and Fastweb CHF 11 million) in the first quarter of 2018.
2 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.

Swisscom Switzerland

In CHF million, except where indicated   31.3.2018   31.3.2017   Change
             
Net revenue and results
Telecom services   1,558   1,632   –4.5%
Solution business   268   261   2.7%
Merchandise   170   147   15.6%
Wholesale   141   138   2.2%
Other revenue   49   49  
Revenue from external customers   2,186   2,227   –1.8%
Intersegment revenue   20   19   5.3%
Net revenue   2,206   2,246   –1.8%
Direct costs   (459)   (440)   4.3%
Indirect costs   (855)   (878)   –2.6%
Segment expenses   (1,314)   (1,318)   –0.3%
Segment result before depreciation and amortisation (EBITDA)   892   928   –3.9%
Margin as % of net revenue   40.4   41.3    
Depreciation, amortisation and impairment losses   (378)   (367)   3.0%
Segment result   514   561   –8.4%
             
Operational data at end of period in thousand
Fixed telephony access lines   1,977   2,297   –13.9%
Broadband access lines retail   2,025   1,988   1.9%
Swisscom TV access lines   1,492   1,438   3.8%
Mobile access lines   6,632   6,601   0.5%
Revenue generating units (RGU)   12,126   12,324   –1.6%
Unbundled fixed access lines   100   120   –16.7%
Broadband access lines wholesale   449   385   16.6%
             
Capital expenditure and headcount
Capital expenditure in property, plant and equipment and intangible assets   311   357   –12.9%
Full-time equivalent employees at end of period (number)   15,031   15,719   –4.4%
1 Since 1 January 2018, Swisscom has applied IFRS 15 “Revenue from Contracts with Customers”. The prior year’s figures have not been adjusted. Without the application of IFRS 15, net revenue would have been CHF 1 million higher and EBITDA would have been CHF 9 million higher in the first quarter of 2018.

Net revenue for Swisscom Switzerland fell by CHF 40 million or 1.8% to CHF 2,206 million as a result of the continuing decline in traditional fixed-line telephony, lower income from roaming and price pressure. Revenue from telecommunications services decreased by CHF 74 million or 4.5% to CHF 1,558 million. Of this decline, CHF 55 million (–2.7%) was attributable to the Residential Customers segment and CHF 19 million (–6.8%) to the Enterprise Customers segment. At Enterprise Customers, revenue from the solution business rose by CHF 7 million or 2.7% to CHF 268 million. The number of fixed-line telephony connections fell by 320,000 or 13.9% year-on-year to 1.98 million (–70,000 in the first quarter of 2018). In the saturated market, subscriber numbers in mobile telecommunications remained flat. Swisscom saw slight growth in postpaid offerings in the first quarter of 2018 (+4,000), while the number of prepaid customers fell (–9,000). The number of broadband connections increased by 11,000 compared to the end of 2017 to 2.03 million, while the number of TV connections rose by 25,000 to 1.49 million in the first quarter of 2018. Demand for bundled offerings continues to rise. As at the end of March 2018, the bundled offering inOne had over 1.59 million customers (+250,000 in the first quarter of 2018).

Segment expense fell by CHF 4 million or 0.3% to CHF 1,314 million, with direct costs increasing and indirect costs decreasing versus the prior year. The rise of CHF 19 million or 4.3% in direct costs to CHF 459 million is due to the higher costs of purchasing merchandise. Indirect costs fell by CHF 23 million or 2.6% to CHF 855 million, driven by the declining headcount and lower costs for external staff. Headcount fell year-on-year as a result of efficiency measuresby 688 FTEs or 4.4% to 15,031, including 126 FTEs in the first quarter of 2018. The segment result before depreciationand amortisation was CHF 36 million or 3.9% lower at CHF 892 million. In spite of the decrease in capital expenditure as a result of delayed investments by CHF 46 million or 12.9% to CHF 311 million, progress continues to be made on expanding the broadband network. At the end of March 2018, Swisscom had connected over 3.95 million households and businesses in Switzerland with ultra-fast broadband (with speeds of more than 50 Mbps), around 2.6 million of which benefit from speeds of more than 100 Mbps.

Fastweb

In EUR million, except where indicated   31.3.2018   31.3.2017   Change
Residential Customers   257   232   10.8%
Corporate Business   180   168   7.1%
Wholesale   53   51   3.9%
Revenue from external customers   490   451   8.6%
Intersegment revenue   2   2  
Net revenue   492   453   8.6%
Segment expenses   (348)   (308)   13.0%
Segment result before depreciation and amortisation (EBITDA)   144   145   –0.7%
Margin as % of net revenue   29.3   32.0    
Depreciation, amortisation and impairment losses   (129)   (131)   –1.5%
Segment result   15   14   7.1%
     
Capital expenditure in property, plant and equipment and intangible assets   159   155   2.6%
Full-time equivalent employees at end of period (number)   2,510   2,503   0.3%
Broadband access lines in thousand   2,483   2,400   3.5%
Mobile access lines in thousand   1,185   763   55.3%
1 Since 1 January 2018, Swisscom has applied IFRS 15 “Revenue from Contracts with Customers”. The prior year’s figures have not been adjusted. Without the application of IFRS 15, net revenue would have been EUR 3 million higher and EBITDA would have been EUR 8 million higher in the first quarter of 2018.

Fastweb’s net revenue in the first quarter of 2018 was EUR 492 million (+9.3% on a like-for-like basis). Despite difficult market conditions, Fastweb’s broadband customer base grew by 83,000 or 3.5% year-on-year to 2.5 million (+32,000 in the first quarter of 2018). Fastweb is also growing in mobile telephony. Compared to the previous year, the number of mobile access lines increased by 422,000 or 55.3% to 1.19 million (+120,000 in the first quarter of 2018). Although competition in the Residential Customers segment remains strong, the average revenue per broadband customer was stabilised versus the prior year. Revenue from residential customers rose on the back of customer growth by EUR 25 million or 10.8% year-on-year to EUR 257 million. Despite the high level of competition, Fastweb held its strong position in the market for business customers. Revenue from corporate business increased by EUR 12 million or 7.1% to EUR 180 million, while wholesale business revenue was up by EUR 2 million or 3.9% to EUR 53 million.

EBITDA amounted to EUR 144 million (+4.8% on a like-for-like basis). The increase as a result of the higher revenue was partially offset by a non-recurring item resulting from changes to regulatory conditions in the previous year coupled with higher subscriber acquisition costs. The EBITDA margin declined by 1.3 percentage points to 30.7% on a like-for-like basis. The expansion of Italy’s fibre-optic broadband network is continuing as planned. Capital expenditure remains at a high level, totalling EUR 159 million. The increase in capital expenditure versus the prior year of EUR 4 million or 2.6% is attributable to higher customer-driven investments. Fastweb’s headcount was nearly unchanged year-on-year at 2,510 FTEs.

Other Operating Segments

The net revenue of the Other Operating Segments rose year-on-year by CHF 10 million or 5.3% to CHF 197 million. The increase was mainly due to increased production output on the third-party market at cablex and higher revenue from construction services rendered by cablex for Swisscom Switzerland. The segment result before depreciation and amortisation was practically unchanged year-on-year at CHF 39 million (–2.5%). This corresponds to a profit margin of 19.8%. Headcount declined by 52 FTEs to 2,523 FTEs, driven by the sale of foreign Group companies following the restructuring of the portfolio.