Swisscom AG (ADR) ((SCMWY)) has held its Q2 earnings call. Read on for the main highlights of the call.
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Swisscom AG’s recent earnings call presented a mixed sentiment, highlighting both achievements and challenges. The company has maintained a strong brand presence in Switzerland and launched successful products. However, these positive aspects were overshadowed by revenue declines and integration costs, particularly in Italy, and challenges in the Italian B2C mobile market. While there are positive signals, such as network expansion and wholesale growth, the overall sentiment is weighed down by financial declines and ongoing integration challenges.
Strongest Telco Brand in Switzerland
Swisscom has once again been recognized as the strongest telco brand in Switzerland, winning another Connect Test on the mobile hotline with a new record score of 490 out of 500. This accolade underscores the company’s commitment to outstanding customer service and brand strength in its home market.
Launch of beem Portfolio
Swisscom introduced ‘beem,’ a new convergent B2B connectivity portfolio that combines connectivity with security for business customers. The market response has been positive, with encouraging sales numbers, indicating a successful product launch.
Stable Revenue and Subscriber Base
The company reported a stable revenue-generating unit (RGU) base in both Switzerland and Italy. In Switzerland, there is a growing postpaid mobile base, while the mobile base in Italy remains stable, reflecting resilience in subscriber numbers despite market challenges.
Network Expansion in Switzerland
Swisscom has expanded its 5G+ mobile coverage to 87% and FTTH to 54% in Switzerland, with ambitious plans to increase this to 75%-80% by 2030. This network expansion is a key part of Swisscom’s strategy to enhance its service offerings and infrastructure.
Italian Wholesale Business Growth
In Italy, Swisscom’s wholesale revenues grew by 9%, driven by the surpassing of 1 million UBB lines and continued growth in the MVNO business. This growth highlights the strength of Swisscom’s wholesale operations in the Italian market.
Revenue Decline
Swisscom reported revenues for the first half of the year at CHF 7.44 billion, a decline of 2.3%, with EBITDAaL down 5.5% to CHF 2.47 billion. This decline is primarily attributed to integration work in Italy, reflecting the financial challenges faced by the company.
Challenges in Italian B2C Mobile Business
The Italian B2C mobile business is experiencing service revenue erosion, expected to be at the high end of the EUR 100 million to EUR 200 million decline. This is driven by ongoing ARPU dilution and a strategic shift from volume to value.
Integration Costs in Italy
Integration costs with Vodafone Italia and Fastweb have led to a CHF 65 million decrease in EBITDAaL in Italy. These costs are part of the broader integration efforts that Swisscom is undertaking in the Italian market.
Copper Phaseout Costs
The copper phaseout is underway, but savings are currently minimal and outweighed by migration costs. Significant savings are not expected until complete central office shutdowns occur, indicating ongoing financial pressures.
Forward-Looking Guidance
Swisscom’s forward-looking guidance confirms its full-year targets despite challenges. The company projects its revenue to be at the lower end of the CHF 15.0 billion to CHF 15.2 billion range but maintains its guidance for EBITDAaL and operating free cash flow. In Switzerland, efforts to stabilize the telco top line continue, with expected service revenue declines and cost savings on track. In Italy, integration efforts are progressing, with anticipated synergies and a strategic shift in the B2C mobile business. Swisscom remains optimistic about long-term stabilization and has confirmed its dividend of CHF 26 per share.
In conclusion, Swisscom AG’s earnings call reflects a company navigating through both achievements and challenges. While the strong brand presence and successful product launches are commendable, the financial declines and integration challenges, particularly in Italy, weigh heavily on the overall sentiment. The company’s forward-looking guidance suggests cautious optimism, with efforts to stabilize and grow in the long term.