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2 Segment information

Changes in segment reporting

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 and corporate customer segments. 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 Ltd (up to now, in some cases within Residential Customers). 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 as follows:

In CHF million   Reported   Adjustment   Restated
             
Net revenue financial year 2019
Residential Customers   5,691   (955)   4,736
Business Customers (former Enterprise Customers)   2,312   928   3,240
Wholesale   968     968
IT, Network & Infrastructure   85     85
Elimination   (493)   37   (456)
Swisscom Switzerland   8,563   10   8,573
Fastweb   2,468     2,468
Other Operating Segments   929   150   1,079
Group Headquarters   1     1
Elimination   (508)   (160)   (668)
Total net revenue   11,453     11,453
             
Segment result financial year 2019
Residential Customers   3,265   (631)   2,634
Business Customers (former Enterprise Customers)   603   673   1,276
Wholesale   524   (14)   510
IT, Network & Infrastructure   (2,642)   (33)   (2,675)
Swisscom Switzerland   1,750   (5)   1,745
Fastweb   155     155
Other Operating Segments   114   (1)   113
Group Headquarters   (74)   6   (68)
Elimination   (77)     (77)
Total segment result   1,868     1,868

General information

WSGE_DP_GR_Swisscom_Segmente

Reporting is divided into the segments “Residential Customers”, “Business Customers”, “Wholesale”, and “IT, Network & Infrastructure”, which are grouped under Swisscom Switzerland, as well as “Fastweb” and “Other Operating Segments”. In addition, “Group Headquarters”, which includes non-allocated costs, is disclosed separately.

Group Headquarters does not charge any management fees to other segments for its financial management services, nor does the IT, Network & Infrastructure segment charge any network costs to other segments. The remaining services between the segments are recharged at market prices. The results of the Residential Customers, Business Customers and Wholesale segments thus correspond to a contribution margin before network costs.

Segment expense encompasses the direct and indirect costs, which include personnel expense, other operating costs less capitalised costs of self-constructed assets, and other income. Pension cost includes ordinary employer contributions. The difference between the ordinary employer contributions and the pension cost as provided for under IAS 19 is reported in the column “Eliminations”. In the first half of 2020, an expense of CHF 31 million is disclosed under “Eliminations” as a pension cost reconciliation item in accordance with IAS 19 (prior year: CHF 29 million).

Leases between the segments are not recognised in the balance sheet in accordance with IFRS 16. The reported lease expense of the segments comprises depreciation and interest on leases excluding depreciation of indefeasible rights of use (IRU) of CHF 12 million (prior year: CHF 14 million), impairment losses on right-of-use assets of CHF 7 million (prior year: none) and the accounting for the rental of buildings between segments. The lease expense of assets of low value is reported as direct costs.

Capital expenditure consists of the purchase of property, plant and equipment and intangible assets and payments for indefeasible rights of use (IRU). In general, IRUs are paid in full at the beginning of the use and are classified as leases under IFRS 16. From an economic point of view, IRU payments will be considered as capital expenditure in the segment information. Capital expenditure in the first six months of 2020 includes IRU payments of CHF 6 million (prior year: CHF 27 million).

Swisscom Switzerland sells some mobile handsets on a subsidised basis in a bundled offering with a mobile communications contract. As a result of the reallocation of revenue over the pre-delivered components (mobile handset), revenue is recognised earlier than the date of invoicing. This results in contract assets deriving from this business being recognised. In the segment reporting of Swisscom Switzerland, the recognition and dissolution of these contract assets is reported as other revenue. The amounts invoiced are reported under revenue from telecommunications services or merchandise.

Segment information 2020


2020, in CHF million
 
Swisscom
Switzerland
 

Fastweb
  Other
Operating
Segments
 
Group
Headquarters
 

Elimination
 

Total
Residential Customers   2,200   599         2,799
Enterprise Customers   1,531   464   215       2,210
Wholesale customers   322   112         434
Net revenue from external customers   4,053   1,175   215       5,443
Net revenue from other segments   43   4   275     (322)  
Net revenue   4,096   1,179   490     (322)   5,443
Direct costs   (806)   (429)   (32)     17   (1,250)
Indirect costs   (1,476)   (361)   (376)   (33)   261   (1,985)
Segment result before depreciation and amortisation   1,814   389   82   (33)   (44)   2,208
Lease expense   (116)   (27)   (6)   (1)     (150)
Depreciation, amortisation and impairment losses   (767)   (305)   (29)     4   (1,097)
Segment result   931   57   47   (34)   (40)   961
Interest expense on lease liabilities                       22
Operating income                       983
Financial income and financial expense, net                       (104)
Result of equity-accounted investees                       3
Income before income taxes                       882
Income tax expense                       (146)
Net income                       736
                         
Segment result before depreciation and amortisation   1,814   389   82   (33)   (44)   2,208
Lease expense   (116)   (27)   (6)   (1)     (150)
Capital expenditure   (776)   (294)   (18)     13   (1,075)
Operating free cash flow proxy   922   68   58   (34)   (31)   983

Segment information Swisscom Switzerland 2020


2020, in CHF million
 
Residential
Customers
 
Business
Customers
 

Wholesale
  IT,
Network &
Infrastructure
 

Elimination
  Total
Swisscom
Switzerland
Fixed-line   1,005   453         1,458
Mobile   975   385         1,360
Revenue other     30         30
Telecom services   1,980   868         2,848
Solution business     527         527
Merchandise   228   122         350
Wholesale       322       322
Revenue other   (8)   3     11     6
Net revenue from external customers   2,200   1,520   322   11     4,053
Net revenue from other segments   39   37   127   32   (192)   43
Net revenue   2,239   1,557   449   43   (192)   4,096
Direct costs   (483)   (401)   (184)   (6)   268   (806)
Indirect costs   (369)   (481)   (8)   (543)   (75)   (1,476)
Segment result before depreciation and amortisation   1,387   675   257   (506)   1   1,814
Lease expense   (22)   (17)     (77)     (116)
Depreciation, amortisation and impairment losses   (40)   (38)     (688)   (1)   (767)
Segment result   1,325   620   257   (1,271)     931
                         
Capital expenditure   (12)   (17)     (747)     (776)

Segment information 2019


2019, in CHF million, restated
 
Swisscom
Switzerland
 

Fastweb
  Other
Operating
Segments
 
Group
Headquarters
 

Elimination
 

Total
Residential Customers   2,293   611         2,904
Enterprise Customers   1,605   469   266       2,340
Wholesale customers   320   99         419
Net revenue from external customers   4,218   1,179   266       5,663
Net revenue from other segments   43   4   274     (321)  
Net revenue   4,261   1,183   540     (321)   5,663
Direct costs   (885)   (429)   (27)     2   (1,339)
Indirect costs   (1,540)   (361)   (415)   (37)   269   (2,084)
Segment result before depreciation and amortisation   1,836   393   98   (37)   (50)   2,240
Lease expense   (112)   (27)   (7)   (1)   10   (137)
Depreciation, amortisation and impairment losses   (770)   (309)   (35)     3   (1,111)
Segment result   954   57   56   (38)   (37)   992
Interest expense on lease liabilities                       15
Operating income                       1,007
Financial income and financial expense, net                       (71)
Result of equity-accounted investees                       2
Income before income taxes                       938
Income tax expense                       (158)
Net income                       780
                         
Segment result before depreciation and amortisation   1,836   393   98   (37)   (50)   2,240
Lease expense   (112)   (27)   (7)   (1)   10   (137)
Capital expenditure   (954)   (335)   (19)     11   (1,297)
Operating free cash flow proxy   770   31   72   (38)   (29)   806

Segment information Swisscom Switzerland 2019


2019, in CHF million, restated
 
Residential
Customers
 
Business
Customers
 

Wholesale
  IT,
Network &
Infrastructure
 

Elimination
  Total
Swisscom
Switzerland
Fixed-line   1,031   481         1,512
Mobile   1,031   432         1,463
Revenue other     30         30
Telecom services   2,062   943         3,005
Solution business     513         513
Merchandise   231   134         365
Wholesale       320       320
Revenue other     3     12     15
Net revenue from external customers   2,293   1,593   320   12     4,218
Net revenue from other segments   38   43   144   32   (214)   43
Net revenue   2,331   1,636   464   44   (214)   4,261
Direct costs   (522)   (441)   (201)   (6)   285   (885)
Indirect costs   (390)   (485)   (8)   (585)   (72)   (1,540)
Segment result before depreciation and amortisation   1,419   710   255   (547)   (1)   1,836
Lease expense   (24)   (15)     (73)     (112)
Depreciation, amortisation and impairment losses   (51)   (41)     (679)   1   (770)
Segment result   1,344   654   255   (1,299)     954
                         
Capital expenditure   (11)   (23)     (921)   1   (954)