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Segment results

In CHF million   31.03.2020   31.03.2019   Change
             
Net revenue
Residential Customers   1,138   1,190   –4.4%
Business Customers   779   832   –6.4%
Wholesale 1   225   221   1.8%
IT, Network & Infrastructure   22   23   –4.3%
Intersegment elimination   (93)   (100)   –7.0%
Swisscom Switzerland   2,071   2,166   –4.4%
Fastweb   580   581   –0.2%
Other Operating Segments   243   265   –8.3%
Intersegment elimination   (157)   (152)   3.3%
Revenue from external customers   2,737   2,860   –4.3%
             
Operating income before depreciation and amortisation (EBITDA)
Residential Customers   703   722   –2.6%
Business Customers   336   356   –5.6%
Wholesale   132   126   4.8%
IT, Network & Infrastructure   (247)   (275)   –10.2%
Intersegment elimination   (1)   (1)    
Swisscom Switzerland   923   928   –0.5%
Fastweb   181   182   –0.5%
Other Operating Segments   42   50   –16.0%
Group Headquarters   (14)   (17)   –17.6%
Reconciliation pension cost 2   (15)   (14)   7.1%
Elimination   (6)   (10)   –40.0%
Operating income before depreciation and amortisation (EBITDA)   1,111   1,119   –0.7%
1 Incl. intersegment recharges of services performed by other network providers.
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.

As of 1 January 2020, Swisscom amended its organisational structure in Switzerland and renamed the former “Enterprise Customers” segment “Business Customers”. In order to provide all business customers with a customer experience tailored to their needs, Swisscom merged the SME segment and the corporate customer segment. As a result, the telecommunications and solutions business with small and medium-sized enterprises is now reported in the Business Customers segment (previously Residential Customers) in segment reporting. In addition,Swisscom has bundled its Customer Field Services at its subsidiary cablex with effect from 1 January 2020. This makes it possible to create even more customer experiences and to be even closer to customers. In addition, various areas were transferred between the segments of Swisscom Switzerland and Group Headquarters as of 1 January 2020. The prior-year amounts were restated accordingly. Further information can be found in Note 2 in the notes to the consolidated interim financial statements.

Swisscom Switzerland

In CHF million, except where indicated   31.03.2020   31.03.2019   Change
             
Net revenue and results            
Telecom services   1,439   1,511   –4.8%
Solutions business   267   257   3.9%
Merchandise   175   196   –10.7%
Wholesale   164   158   3.8%
Revenue other   5   21   –76.2%
Revenue from external customers   2,050   2,143   –4.3%
Intersegment revenue   21   23   –8.7%
Net revenue   2,071   2,166   –4.4%
Direct costs   (405)   (462)   –12.3%
Indirect costs   (743)   (776)   –4.3%
Segment expenses   (1,148)   (1,238)   –7.3%
Segment result before depreciation and amortisation (EBITDA)   923   928   –0.5%
Margin as % of net revenue   44.6   42.8    
Lease expense   (58)   (56)   3.6%
Depreciation and amortisation   (377)   (381)   –1.0%
Segment result   488   491   –0.6%
             
Operating free cash flow proxy            
Segment result before depreciation and amortisation (EBITDA)   923   928   –0.5%
Lease expense   (58)   (56)   3.6%
EBITDA after lease expense (EBITDA AL)   865   872   –0.8%
Capital expenditure   (367)   (353)   4.0%
Operating free cash flow proxy   498   519   –4.0%
             
Operational data in thousand and headcount            
Fixed telephony access lines   1,582   1,737   –8.9%
Broadband access lines retail   2,053   2,057   –0.2%
Swisscom TV access lines   1,555   1,523   2.1%
Mobile access lines   6,299   6,378   –1.2%
Revenue generating units (RGU)   11,489   11,695   –1.8%
Broadband access lines wholesale   525   492   6.7%
Full-time equivalent employees   12,813   13,352   –4.0%

Net revenue for Swisscom Switzerland fell by CHF 95 million or 4.4% to CHF 2,071 million as a result of the continuing competition and price pressure. Revenue from telecommunications services decreased by CHF 72 million or 4.8% to CHF 1,439 million. Of this decline, CHF 32 million (–3.1%) was attributable to the Residential Customerssegment and CHF 40 million (–8.4%) to the Business Customers segment. By contrast, revenue from the solutions business rose by 3.9% to CHF 267 million. In the merchandise area, the high volume of the previous year was not matched, with revenue falling by 10.7% to CHF 175 million. The number of inOne customers continues to grow. Swisscom Switzerland had a total of 2.37 million inOne customers in the Residential Customers segment at the end of March 2020. In this segment, inOne accounts for 68% of postpaid mobile lines and 71% 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 79,000 (–1.2%) year-on-year to 6.30 million (–0.5% in the first quarter of 2020). The number of postpaid lines grew by 66,000 year-on-year, while the number of prepaid lines fell by 145,000. Broadband connections fell by 4,000 (–0.2%) year-on-year. The number of TV connections increased year-on-year by 32,000 or 2.1% to 1.56 million, but remained stable in the first quarter of 2020. In fixed-line telephony, the downward trend is slowing as the switch to IP technology has been completed. The number of fixed telephony access lines fell by 155,000 or 8.9% to 1.58 million year-on-year (–12,000 in the first quarter of 2020).

Segment expense fell by CHF 90 million or 7.3% to CHF 1,148 million, while direct costs fell by CHF 57 million (–12.3%). In addition to the decline in subscriber acquisition and retention costs, the cost of purchasing merchandise also fell. Indirect costs fell by CHF 33 million or 4.3% to CHF 743 million. This is chiefly due to the lower headcount and lower costs for advertising and customer service. Headcount fell year-on-year as a result of efficiency measures by 539 FTEs or 4.0% to 12,813, including 242 FTEs in the first quarter of 2020. The segment result before depreciation and amortisation was CHF 5 million or 0.5% lower at CHF 923 million as a result of lower revenue, but this was largely offset by the ongoing measures to reduce costs. Owing to higher investment in the expansion of broadband networks, capital expenditure rose by CHF 14 million or 4.0% to CHF 367 million. As at end-March 2020, 76% of all households and businesses in Switzerland were connected with ultra-fast broadband exceeding 80 Mbps. 50% of all homes and offices benefit from fast connections with bandwidths of more than 200 Mbps. Swisscom intends to make ultra-fast broadband available in every Swiss municipality by the end of 2021, including in remote locations. In addition, Swisscom plans to double Fibre to the Home (FTTH) coverage for households and businesses compared with the 2019 level by the end of 2025.

Fastweb

In EUR million, except where indicated   31.03.2020   31.03.2019   Change
             
Net revenue and results            
Residential Customers   280   269   4.1%
Corporate Business   211   202   4.5%
Wholesale   50   42   19.0%
Revenue from external customers   541   513   5.5%
Intersegment revenue   2   1   100.0%
Net revenue   543   514   5.6%
Segment expenses   (373)   (352)   6.0%
Segment result before depreciation and amortisation (EBITDA)   170   162   4.9%
Margin as % of net revenue   31.3   31.5    
Lease expense   (13)   (12)   8.3%
Depreciation and amortisation   (144)   (139)   3.6%
Segment result   13   11   18.2%
             
Operating free cash flow proxy            
Segment result before depreciation and amortisation (EBITDA)   170   162   4.9%
Lease expense   (13)   (12)   8.3%
EBITDA after lease expense (EBITDA AL)   157   150   4.7%
Capital expenditure   (138)   (143)   –3.5%
Operating free cash flow proxy   19   7   171.4%
             
Operational data in thousand and headcount            
Broadband access lines   2,659   2,575   3.3%
Mobile access lines   1,779   1,440   23.5%
Full-time equivalent employees   2,515   2,458   2.3%

Fastweb’s net revenue rose by EUR 29 million or 5.6% year-on-year to EUR 543 million. Despite challenging market conditions, Fastweb’s broadband customer base grew by 84,000 or 3.3% versus the previous year to 2.66 million (+22,000 in the first quarter of 2020). Fastweb is also growing in the fiercely competitive mobile telephony market. Compared to the previous year, the number of mobile access lines increased by 339,000 or 23.5% to 1.78 million (+33,000 in the first quarter of 2020). The focus is increasingly on bundled offerings. 34% of subscribers use a bundled offering combining fixed network and mobile. Residential customer revenue rose by EUR 11 million or 4.1% to EUR 280 million as a result of customer growth. Fastweb held its strong position in the market for business customers, with revenue from corporate business up by EUR 9 million or 4.5% to EUR 211 million as a result of higher revenue with both private companies and public administrations. Revenue from wholesale business also increased, up EUR 8 million or 19.0% to EUR 50 million.

The segment result before depreciation and amortisation rose EUR 8 million or 4.9% to EUR 170 million owing to the growth in revenue. Capital expenditure decreased by EUR 5 million or 3.5% year-on-year to EUR 138 million owing to lower customer-driven investment. Fastweb’s headcount increased by 57 FTEs or 2.3% to 2,515 FTEs year-on-year as a result of hiring external staff.

Other Operating Segments

In CHF million, except where indicated   31.03.2020   31.03.2019   Change
             
Net revenue and results            
Revenue from external customers   109   138   –21.0%
Intersegment revenue   134   127   5.5%
Net revenue   243   265   –8.3%
Segment expenses   (201)   (215)   –6.5%
Segment result before depreciation and amortisation (EBITDA)   42   50   –16.0%
Margin as % of net revenue   17.3   18.9    
Lease expense   (3)   (3)  
Depreciation and amortisation   (15)   (18)   –16.7%
Segment result   24   29   –17.2%
     
Operating free cash flow proxy            
Segment result before depreciation and amortisation (EBITDA)   42   50   –16.0%
Lease expense   (3)   (3)  
EBITDA after lease expense (EBITDA AL)   39   47   –17.0%
Capital expenditure   (7)   (8)   –12.5%
Operating free cash flow proxy   32   39   –17.9%
             
Headcount            
Full-time equivalent employees   3,583   3,694   –3.0%

The net revenue of the Other Operating Segments fell year-on-year by CHF 22 million or 8.3% to CHF 243 million. The decline in revenue from external customers was mainly attributable to the loss of Billag’s mandate to collect national radio and television licence fees and to a drop in revenue at cablex. The segment result before depreciation and amortisation decreased accordingly by CHF 8 million or 16.0% to CHF 42 million, while the profit margin fell to 17.3% (prior year: 18.9%). Headcount fell by 111 FTEs or 3.0% to 3,583 FTEs, driven primarily by the reduction in staff at Billag and a lower headcount at Swisscom Directories Ltd (localsearch).

Group Headquarters and reconciliation

In CHF million   31.03.2020   31.03.2019   Change
Group Headquarters   (14)   (17)   –17.6%
Reconciliation pension cost   (15)   (14)   7.1%
Elimination   (6)   (10)   –40.0%
Operating income before depreciation and amortisation (EBITDA)   (35)   (41)   –14.6%

The net costs not assigned to the operating segments, which comprise Group Headquarters, pension cost reconciliation and intersegment eliminations, declined by CHF 6 million to CHF 35 million.