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Segment results

In CHF million   31.3.2019   31.3.2018   Change
             
Net revenue
Swisscom Switzerland   2,163   2,204   –1.9%
Fastweb   581   574   1.2%
Other Operating Segments   225   198   13.6%
Intersegment elimination   (109)   (91)   19.8%
Net revenue   2,860   2,885   –0.9%
             
Operating income before depreciation and amortisation (EBITDA)
Swisscom Switzerland   929   935   –0.6%
Fastweb   177   172   2.9%
Other Operating Segments   50   41   22.0%
Group Headquarters   (18)   (21)   –14.3%
Reconciliation pension cost 1   (14)   (15)   –6.7%
Reconciliation lease expense according to IAS 17 2     (52)    
Intersegment elimination   (5)   (2)   150.0%
Operating income before depreciation and amortisation (EBITDA)   1,119   1,058   5.8%
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.
2 Swisscom has been applying IFRS 16 "Leases" since 1 January 2019. The operating result before depreciation and amortisation (EBITDA) of the segments for 2018 does not include any expenses for operating leases in accordance with IAS 17. The 2018 expense for operating leases in accordance with IAS 17 is shown as a reconciliation item.

Swisscom Switzerland

In CHF million, except where indicated   31.3.2019   31.3.2018   Change
             
Net revenue and results
Telecom services   1,506   1,558   –3.3%
Solution business   251   264   –4.9%
Merchandise   196   174   12.6%
Wholesale   158   141   12.1%
Other revenue   32   49   –34.7%
Revenue from external customers   2,143   2,186   –2.0%
Intersegment revenue   20   18   11.1%
Net revenue   2,163   2,204   –1.9%
Direct costs   (461)   (460)   0.2%
Indirect costs   (773)   (809)   –4.4%
Segment expenses   (1,234)   (1,269)   –2.8%
Segment result before depreciation and amortisation (EBITDA)   929   935   –0.6%
Margin as % of net revenue   42.9   42.4    
Lease expense   (56)   (56) 1  
Depreciation and amortisation of property, plant and equipment and intangible assets   (381)   (370)   3.0%
Segment result   492   509   –3.3%
             
Operational data at end of period in thousand
Fixed telephony access lines   1,737   1,977   –12.1%
Broadband access lines retail   2,030   2,025   0.2%
Swisscom TV access lines   1,523   1,492   2.1%
Mobile access lines   6,378   6,451   –1.1%
Revenue generating units (RGU)   11,668   11,945   –2.3%
Unbundled fixed access lines   83   100   –17.0%
Broadband access lines wholesale   492   449   9.6%
             
Capital expenditure and headcount
Capital expenditure in property, plant and equipment and intangible assets   353   311   13.5%
Full-time equivalent employees at end of period (number)   14,340   15,014   –4.5%
1 Includes expenses for operating and finance leases in accordance with IAS 17.

Net revenue for Swisscom Switzerland fell by CHF 41 million or 1.9% to CHF 2,163 million as a result of continuing price pressure and the decline in the number of connections in fixed-line telephony. Revenue from telecommunications services decreased by CHF 52 million or 3.3% to CHF 1,506 million. Of this decline, CHF 30 million (–2.3%) was attributable to the Residential Customers segment and CHF 22 million (–8.5%) to the Enterprise Customers segment. In spite of stable demand, revenue from the solutions business within Enterprise Customers contracted on the back of price pressure and lower volumes in the banking sector. This decrease was offset by higher revenue from merchandise. Revenue from solutions business and merchandise at Enterprise Customers increased by CHF 5 million or 1.6% overall. The number of inOne customers continues to grow. Swisscom Switzerland had a total of 2.48 million inOne customers at the end of March 2019, with the latest mobile offering inOne mobile registering over 250,000 customers in its first five weeks since launch. In the Residential Customers segment inOne accounts for 57% of postpaid mobile lines and 60% of broadband connections. The market is showing signs of saturation in the area of mobile communications and fixed-network services. The mobile subscriber base contracted by 73,000 (–1.1%) year-on-year to 6.38 million (+0.1% in the first quarter of 2019). The number of postpaid lines grew by 61,000 year-on-year, while the number of prepaid lines fell by 134,000. Broadband connections were up 5,000 (+0.2%) on the previous year, but down 3,000 to 2.03 million in the first quarter. The number of TV connections increased year-on-year by 31,000 or 2.1% to 1.52 million (+4,000 in the first quarter of 2019). The downtrend is slowing in fixed-line telephony, with the number of fixed-network access lines falling by 240,000 or 12.1% to 1.74 million compared with the previous year (–51,000 in the first quarter of 2019).

Segment expense fell by CHF 35 million or 2.8% to CHF 1,234 million, while direct costs remained stable (+0.2%). Higher costs to purchase merchandise were offset by lower costs for subscriber acquisition and retention. Indirect costs were down 4.4% or CHF 36 million to CHF 773 million, driven chiefly by the declining headcount and lower costs for external staff. Headcount fell year-on-year as a result of efficiency measures by 674 FTEs or 4.5% to 14,340, including 108 FTEs in the first quarter of 2019. The segment result before depreciation and amortisation was CHF 6 million or 0.6% lower at CHF 929 million as a result of lower revenue, but was largely offset by the ongoing cost-cutting measures. Capital expenditure rose on the back of higher capital expenditure for the expansion of broadband networks by CHF 42 million or 13.5% to CHF 353 million. As at end-March 2019, 66% of all households and businesses were connected with ultra-fast broadband exceeding 80 Mbps, while 37% of all households and businesses benefited from connections with superior bandwidths of more than 200 Mbps.

Fastweb

In EUR million, except where indicated   31.3.2019   31.3.2018   Change
Residential Customers   269   257   4.7%
Corporate Business   202   180   12.2%
Wholesale   42   53   –20.8%
Revenue from external customers   513   490   4.7%
Intersegment revenue   1   2   –50.0%
Net revenue   514   492   4.5%
Segment expenses   (357)   (344)   3.8%
Segment result before depreciation and amortisation (EBITDA)   157   148   6.1%
Margin as % of net revenue   30.5   30.1    
Lease expense   (6)   (4) 1   50.0%
Depreciation and amortisation of property, plant and equipment and intangible assets   (140)   (127)   10.2%
Segment result   11   17   –35.3%
     
Capital expenditure in property, plant and equipment and intangible assets   143   159   –10.1%
Full-time equivalent employees at end of period (number)   2,458   2,510   –2.1%
Broadband access lines in thousand   2,575   2,483   3.7%
Mobile access lines in thousand   1,517   1,185   28.0%
1 Includes expenses for operating and finance leases in accordance with IAS 17.

Fastweb’s net revenue rose by EUR 22 million or 4.5% year-on-year to EUR 514 million. Despite difficult market conditions, Fastweb’s broadband customer base grew by 92,000 or 3.7% versus the previous year to 2.58 million (+28,000 in the first quarter of 2019). Fastweb is also growing in the fiercely competitive mobile market. Compared to the previous year, the number of mobile access lines increased by 332,000 or 28.0% to 1.52 million (+85,000 in the first quarter of 2019). 31% of subscribers use a bundled offering combining fixed network and mobile. Residential customer revenue rose by EUR 12 million or 4.7% to EUR 269 million as a result of customer growth. Fastweb held its strong position in the market for business customers, with revenue from business customers up EUR 22 million or 12.2% to EUR 202 million as a result of higher revenue with public administrations. Revenue from wholesale business, by contrast, decreased by EUR 11 million or 20.8% to EUR 42 million.

The segment result before depreciation and amortisation was EUR 9 million or 6.1% higher at EUR 157 million on the back of the growth in revenue. Capital expenditure decreased by EUR 16 million or 10.1% year-on-year to EUR 143 million due to lower investment in network infrastructure. Fastweb’s headcount was down slightly on the previous year at 2,458 FTEs.

Other Operating Segments

In CHF million, except where indicated   31.3.2019   31.3.2018   Change
Revenue from external customers   138   127   8.7%
Intersegment revenue   87   71   22.5%
Net revenue   225   198   13.6%
Segment expenses   (175)   (157)   11.5%
Segment result before depreciation and amortisation (EBITDA)   50   41   22.0%
Margin as % of net revenue   22.2   20.7    
Lease expense   (3)   (3) 1  
Depreciation and amortisation of property, plant and equipment and intangible assets   (18)   (15)   20.0%
Segment result   29   23   26.1%
     
Capital expenditure in property, plant and equipment and intangible assets   8   8  
Full-time equivalent employees at end of period   2,699   2,540   6.3%
1 Includes expenses for operating and finance leases in accordance with IAS 17.

The net revenue of the Other Operating Segments rose year-on-year by CHF 27 million or 13.6% to CHF 225 million. The increase was mainly due to higher revenue from construction services rendered by cablex. The segment result before depreciation and amortisation improved year-on-year by CHF 9 million or 22.0% to CHF 50 million. This corresponds to a profit margin of 22.2%. Headcount rose by 159 FTEs or 6.3% to 2,699 FTEs, driven primarily by the hiring of new employees at cablex to cope with higher order volumes.

Group Headquarters and reconciliation

In CHF million, except where indicated   31.3.2019   31.3.2018 1   Change
Group Headquarters   (18)   (21)   –14.3%
Reconciliation pension cost   (14)   (15)   –6.7%
Intersegment elimination   (5)   (2)   150.0%
Operating income before depreciation and amortisation (EBITDA)   (37)   (38)   –2.6%
1 Excluding reconciliation of lease expense according to IAS 17.

The net costs not allocated to the operating segments, which comprise Group Headquarters, pension cost reconciliation and intersegment eliminations, declined by CHF 1 million to CHF 37 million.