A year of innovations in a challenging market environment
In 2019, Swisscom made impressive use of the opportunities that are opening up for all of us thanks to digitisation. Our response to the ongoing challenging environment was, and will remain, new offerings and the expansion of our networks. Swisscom impressed the market with innovations in the TV and mobile communications segments and in subscriptions. Swisscom achieved a solid financial result. Group sales declined in line with expectations, while consolidated operating income before depreciation and amortisation (EBITDA) remained at the previous year’s level. Our Italian subsidiary, Fastweb, continued to grow, making gains among both residential and business customers.
Financial targets met
Swisscom generated net revenue of CHF 11,453 million in 2019. Consolidated operating income before depreciation and amortisation (EBITDA) was CHF 4,358 million and thus above the previous year; on an adjusted basis, EBITDA remained stable. Net income was CHF 1,669 million.
Swisscom is investing today in the networks of tomorrow
The Swiss market is saturated in the mobile communications and TV segments, while the number of broadband connections is remaining constant due to high market penetration. At the same time, data growth continues unabated. In mobile communications alone, the use of mobile data services has increased 40-fold in the last seven years. What is more, security requirements are constantly growing. We are meeting these challenges by consistently expanding and continuously developing our networks.
Swisscom makes over two thirds of the investments in the Swiss telecommunications infrastructure. In 2019, it invested around CHF 2.4 billion in network expansion, of which around CHF 1.8 billion in Switzerland.
As at the end of 2019, Swisscom had established 3.9 million ultra-fast broadband service connections with speeds in excess of 80 Mbps. Swisscom will continue to invest massively in its infrastructure in the coming years, to ensure the best experiences for its customers.
Investing in Swiss infrastructure is paying off. This is demonstrated by Swisscom’s top ranking in all relevant network tests. For example, in 2019, Swisscom won connect magazine’s mobile network test for the tenth time, achieving the rating of “outstanding”. Swisscom prevailed in the CHIP test for the fourth time in a row. Swisscom also took first place in Ookla’s speed test for the fastest mobile network and the best coverage.
The future of mobile communications
In February 2019, Swisscom successfully took part in the 5G frequencies auction. In April, Swisscom was the first provider in Europe to commercially launch the new mobile communication standard. At the end of 2019, Swisscom reached the next milestone: basic 5G coverage has since been extended to 90% of the Swiss population. However, in order for data to be transmitted up to 1,000 times more efficiently, and thus in a more energy-saving manner, the full version of 5G is needed. To draw an analogy: expansion of the 5G network is like adding more lanes on the data highway. To ensure that data traffic flows unhindered and to avoid data tailbacks and jams happening in future, it is essential to have new antenna locations or to convert the existing installations. However, some segments of the population have concerns about 5G. Swisscom is all the more aware of its responsibility in this regard and is actively engaging in the social debate on mobile communications and the environment. Naturally, all mobile communications installations operated by Swisscom comply at all times with Switzerland’s rigorous limits, which are exemplary in their strictness.
Swisscom TV – more than just television
The new Swisscom Box not only offers the best TV experience, but also networks smart home objects such as lamps. Just like the television, these items can be controlled with the integrated voice assistant. A total of 1.56 million customers use Swisscom TV, which corresponds to a market share of 36%. This means that Swisscom TV is still Switzerland’s most popular TV offering. Swisscom subsidiary Teleclub has reached an important milestone by securing the rights to the UEFA Champions League from the 2021/2022 season. Teleclub will continue to show all the football matches on an exclusive basis.
New addition to the inOne family
The inOne combined package, introduced in 2017, continues to be extremely successful. inOne flexibly combines mobile, broadband, TV and fixed-line telephony products. Launched in April 2019, the new inOne mobile package allows unlimited phone calls, surfing and texting in 39 countries within Europe. By the end of 2019, around 1.15 million customers had opted for this new subscription. In total, Swisscom has 2.75 million inOne customers.
Tough competition in corporate business
The corporate customer market is fiercely contested, and the pressure on pricing remains high. Compared to the previous year, revenue from telecommunications services fell by 10.9% or CHF 112 million, to CHF 919 million. Swisscom holds a strong position as full service provider. It’s offerings meet customers’ needs, and customer satisfaction is consistently high. Demand for cloud, security and IoT solutions has continued to grow. In addition, Swisscom again succeeded in renewing contracts with many existing customers in 2019. Revenue in the solutions business remained virtually stable at EUR 1,021 million (–0.6%).
For SMEs, Swisscom has had Managed Security and Managed Backup in its portfolio since spring. These two new product modules are designed to protect companies from attacks in the network and data loss and to relieve them of their workload for security tasks. In order to provide all business customers a customer experience tailored to their needs, Swisscom merged the SME segment and the corporate customer segment.
Fastweb continues successful path in Italy
Fastweb grew again in 2019 and made gains among both residential and business customers. In the fixed-network business, the number of customers rose to 2.64 million broadband customers. In mobile communications, Fastweb posted an increase in customers of 26.1% to 1.81 million in total. Fastweb also entered into a strategic partnership with WindTre for the construction of a nationwide 5G network. The two operators are keen to work together to accelerate the development of a nationwide ultramodern 5G network. For this reason, Fastweb is placing a stronger focus on convergence: 34% of subscribers already use a bundled offering combining fixed network and mobile services. The business customer segment also continued to develop positively, with revenue growth of EUR 82 million (+10.5%). Overall, Fastweb increased its revenues to EUR 2,218 million (+5.4%). Operating income before interest, taxes, depreciation and amortisation (EBITDA) rose to EUR 750 million (+5.2% on an adjusted basis).
A simple way to make use of opportunities
Our environment is changing rapidly. So, standing still is not an option for Swisscom. Instead, we are sticking to our promise of enabling our customers to make simple use of the opportunities of a networked future. What’s more, our employees and the company itself continue to develop steadily in line with our values of being committed, trustworthy and inquisitive. That is why we have pooled our efforts in Customer Field Service. Around 1,000 employees began working at the subsidiary cablex in January 2020. Thanks to this merger, customers are now served on site for installations, maintenance and troubleshooting, for example, by just one party. Also, as of 2020, we amalgamated Sales & Services with Products & Marketing to form the new Residential Customers unit. Together, we will focus on our three strategic ambitions on which we are working hard with our colleagues.
Offering the best experiences
We want to inspire our customers by providing them with the best service at all times, wherever they are, for example in our shops. For this reason, we have been testing a new shop concept since the end of 2019. In Uster and Thun, we advise residential and business customers in a cosy living room atmosphere, inspire them with technological innovations and address their issues at the service bar.
Our industry is being transformed dramatically by digitisation. At the same time, Swisscom faces tough competition from global, Internet-based companies that benefit from low costs. We are responding to this development with rigorous cost management. In 2019, we exceeded the goal we announced in 2016 of reducing our cost base by CHF 100 million annually. For the years 2020 to 2022, we are planning further cost reductions of CHF 100 million annually.
Swisscom is keen to grow in its core business and related areas, such as entertainment, cloud services, the Internet of Things, wholesale and digital security. In selected areas, Swisscom is launching new digital services, which in part are based on novel web-based business models. Here the focus is on digital services for SMEs, digital marketing services as well as Swisscom Blockchain Ltd and the fintech segment.
Fastweb plays a key role. Therefore, Swisscom wants to maintain its growth course in Italy and further develop the company profitably.
Swisscom pursues a payout policy with a stable dividend. In 2019, Swisscom paid an ordinary dividend of CHF 22 per share. The Swiss Market Index (SMI) rose by 26% compared with the previous year; the Swisscom share price increased by 9.1% to CHF 512.60.
For 2020, Swisscom expects net revenue of around CHF 11.1 billion, EBITDA of around CHF 4.3 billion and capital expenditure of around CHF 2.3 billion. Subject to achieving its targets, Swisscom will propose payment of an unchanged, attractive dividend of CHF 22 per share for the 2020 financial year at the 2021 Annual General Meeting.
Shaping the future as the market leader means constantly developing and taking advantage of the opportunities that present themselves. Together with our colleagues, we have had a successful year and have achieved a lot. For this, we would like to thank our employees. It is thanks to their commitment, knowledge and motivation that Swisscom has become what it is today: a reliable partner for our customers, a sound investment for our shareholders and a pioneer in the networking of a modern Switzerland. We would also like to thank you, our valued shareholders, for the trust and confidence you have in our company.
Chairman of the Board of Directors
CEO Swisscom Ltd