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Segment results


In CHF million
  2. quarter
2018
  2. quarter
2017
 
Change
  1st half-year
2018
  1st half-year
2017
 
Change
                         
Net revenue
Swisscom Switzerland   2,194   2,241   –2.1%   4,400   4,487   –1.9%
Fastweb   606   511   18.6%   1,180   995   18.6%
Other Operating segments   228   210   8.6%   425   397   7.1%
Group Headquarters   1   1     1   1  
Intersegment elimination   (109)   (104)   4.8%   (201)   (190)   5.8%
Net revenue   2,920   2,859   2.1%   5,805   5,690   2.0%
                         
Operating income before depreciation and amortisation (EBITDA)
Swisscom Switzerland   894   924   –3.2%   1,786   1,852   –3.6%
Fastweb   195   279 3   –30.1%   362   434 3   –16.6%
Other Operating segments   47   40   17.5%   86   80   7.5%
Group Headquarters   (31)   (21)   47.6%   (53)   (47)   12.8%
Reconciliation to pension cost 2   (14)   (27)   –48.1%   (29)   (47)   –38.3%
Intersegment elimination   (6)   (8)   –25.0%   (9)   (12)   –25.0%
Operating income before depreciation and amortisation (EBITDA)   1,085   1,187   –8.6%   2,143   2,260   –5.2%
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 2 million higher (Swisscom Switzerland CHF 1 million and Fastweb CHF 1 million) and EBITDA would have been CHF 33 million higher (Swisscom Switzerland CHF 18 million and Fastweb CHF 15 million) in the first half year 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.
3 Including income from legal disputes amounting to CHF 102 million (EUR 95 million).

Swisscom Switzerland


In CHF million, except where indicated
  2. quarter
2018
  2. quarter
2017
 
Change
  1st half-year
2018
  1st half-year
2017
 
Change
                         
Net revenue and results
Telecom services   1,571   1,621   –3.1%   3,129   3,253   –3.8%
Solution business   252   271   –7.0%   520   532   –2.3%
Merchandise   163   145   12.4%   333   292   14.0%
Wholesale   145   135   7.4%   286   273   4.8%
Other revenue   43   50   –14.0%   92   99   –7.1%
Revenue from external customers   2,174   2,222   –2.2%   4,360   4,449   –2.0%
Intersegment revenue   20   19   5.3%   40   38   5.3%
Net revenue   2,194   2,241   –2.1%   4,400   4,487   –1.9%
Direct costs   (455)   (436)   4.4%   (914)   (876)   4.3%
Indirect costs   (845)   (881)   –4.1%   (1,700)   (1,759)   –3.4%
Segment expenses   (1,300)   (1,317)   –1.3%   (2,614)   (2,635)   –0.8%
Segment result before depreciation and amortisation (EBITDA)   894   924   –3.2%   1,786   1,852   –3.6%
Margin as % of net revenue   40.7   41.2       40.6   41.3    
Depreciation, amortisation and impairment losses   (384)   (379)   1.3%   (762)   (746)   2.1%
Segment result   510   545   –6.4%   1,024   1,106   –7.4%
                         
Operational data at end of period in thousand
Fixed telephony access lines               1,906   2,208   –13.7%
Broadband access lines retail               2,028   1,989   2.0%
Swisscom TV access lines               1,501   1,447   3.7%
Mobile access lines               6,615   6,593   0.3%
Revenue generating units (RGU)               12,050   12,237   –1.5%
Unbundled fixed access lines               95   116   –18.1%
Broadband access lines wholesale               462   402   14.9%
                         
Capital expenditure and headcount
Capital expenditure in property, plant and equipment and intangible assets               711   719   –1.1%
Full-time equivalent employees at end of period (number)               14,587   15,420   –5.4%
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 18 million higher in the first half year of 2018.

Net revenue for Swisscom Switzerland fell by CHF 87 million or 1.9% to CHF 4,400 million in the first half of 2018 as a result of the continuing decline in traditional fixed-line telephony and price pressure. Revenue from tele­communications services was down CHF 124 million or 3.8% to CHF 3,129 million. Of this decline, CHF 95 million (–3.5%) was attributable to the Residential Customers segment and CHF 29 million (–5.2%) to the Enterprise Customers segment. Compared to the previous year, the number of fixed-line telephony connections decreased by 302,000 or 13.7% to 1.91 million. In the saturated market, subscriber numbers in mobile telecommunications remained flat. Swisscom saw slight growth in postpaid offerings in the first half of 2018 (+7,000), while the number of prepaid customers fell (–29,000). The trend towards the bundled offering inOne is set to continue. As at the end of June 2018, the bundled offering inOne had over 1.89 million customers (+550,000 in the first half of 2018). In addition, the number of broadband connections grew by 39,000 compared to the previous year to 2.03 million. The number of TV connections increased year-on-year by 54,000 to over 1.5 million.

Segment expense fell by CHF 21 million or 0.8% to CHF 2,614 million, with direct costs increasing and indirect costs decreasing versus the prior year. The rise in direct costs of CHF 38 million or 4.3% to CHF 914 million is due to the volume driven higher costs to purchase products. Indirect costs fell by CHF 59 million or 3.4% to CHF 1,700 million, driven by the declining headcount and lower costs for external staff. Headcount fell year-on-year as a result of efficiency measures by 833 FTEs or 5.4% to 14,587, including 570 FTEs in the first half of 2018. The segment result before depreciation and amortisation was CHF 66 million or 3.6% lower at CHF 1,786 million. Capital expenditure remained virtually on a par with the previous year at CHF 711 million (–1.1%). Progress continues to be made on expanding the broadband networks. At the end of June 2018, Swisscom had connected over 4.0 million households and businesses in Switzerland with ultra-fast broadband (with speeds of more than 50 Mbps), around 2.7 million of which benefit from speeds of more than 100 Mbps.

Fastweb


In EUR million, except where indicated
  2. quarter
2018
  2. quarter
2017
 
Change
  1st half-year
2018
  1st half-year
2017
 
Change
Residential Customers   264   238   10.9%   521   470   10.9%
Corporate Business   188   173   8.7%   368   341   7.9%
Wholesale   66   57   15.8%   119   108   10.2%
Revenue from external customers   518   468   10.7%   1,008   919   9.7%
Intersegment revenue   1   2   –50.0%   3   4   –25.0%
Net revenue   519   470   10.4%   1,011   923   9.5%
Segment expenses   (353)   (212) 2   66.5%   (701)   (520) 2   34.8%
Segment result before depreciation and amortisation (EBITDA)   166   258 2   –35.7%   310   403 2   –23.1%
Margin as % of net revenue   32.0   54.9       30.7   43.7    
Depreciation, amortisation and impairment losses   (121)   (130)   –6.9%   (250)   (261)   –4.2%
Segment result   45   128   –64.8%   60   142   –57.7%
           
Capital expenditure in property, plant and equipment and intangible assets               297   302   –1.7%
Full-time equivalent employees at end of period (number)               2,483   2,494   –0.4%
Broadband access lines in thousand               2,500   2,411   3.7%
Mobile access lines in thousand               1,280   880   45.5%
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 1 million higher and EBITDA would have been EUR 13 million higher in the first half year of 2018.
2 Including income from legal disputes amounting to EUR 95 million.

In the first half of 2018, Fastweb posted an increase in net revenue of EUR 88 million or 9.5% to EUR 1,011 million. Despite difficult market conditions, Fastweb’s broadband customer base grew by 89,000 or 3.7% year-on-year to 2.5 million. Fastweb is also growing in mobile telephony. Compared to the previous year, the number of mobile access lines increased by 400,000 or 45.5% to 1.3 million. Although competition in the Residential Customers segment remains strong, the average revenue per broadband customer was stabilised versus the prior year. Residential customer revenue rose year-on-year by EUR 51 million or 10.9% to EUR 521 million, driven by customer growth. Despite the high level of competition, Fastweb held its strong position in the market for business customers. Revenue from business customers was up EUR 27 million or 7.9% to EUR 368 million. Revenue from wholesale business increased by EUR 11 million or 10.2% to EUR 119 million.

The segment result before depreciation and amortisation was CHF 93 million or 23.1% lower at CHF 310 million. In the second quarter of 2017, one-off income from legal disputes amounting to EUR 95 million was received. EBITDA increased by 4.9% 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. The EBITDA margin declined by 1.5 percentage points to 31.9% on a like-for-like basis. The expansion of Italy’s ultra-fast broadband network is continuing as planned. Capital expenditure remains at a high level, totalling EUR 297 million as in the previous year. Fastweb’s headcount was also unchanged year-on-year at 2,483 FTEs.

Other Operating Segments

The net revenue of Other Operating Segments rose year-on-year by CHF 28 million or 7.1% to CHF 425 million. The increase was mainly due to higher revenue from construction services rendered by cablex. The segment result before depreciation and amortisation rose 7.5% compared to the previous year to CHF 86 million. This corresponds to a profit margin of 20.2%. Headcount declined by 22 FTEs to 2,563 FTEs, driven by the sale of foreign Group companies following the restructuring of the portfolio.