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Segment results

In CHF million   31.03.2021   31.03.2020   Change
             
Net revenue
Residential Customers   1,149   1,137   1.1%
Business Customers   778   779   –0.1%
Wholesale 1   243   225   8.0%
Infrastructure & Support Functions   19   21   –9.5%
Intersegment elimination   (109)   (97)   12.4%
Swisscom Switzerland   2,080   2,065   0.7%
Fastweb   634   580   9.3%
Other Operating Segments   240   241   –0.4%
Intersegment elimination   (151)   (149)   1.3%
Revenue from external customers   2,803   2,737   2.4%
             
Operating income before depreciation and amortisation (EBITDA)
Residential Customers   699   703   –0.6%
Business Customers   338   337   0.3%
Wholesale   138   132   4.5%
Infrastructure & Support Functions   (259)   (262)   –1.1%
Intersegment elimination     (1)    
Swisscom Switzerland   916   909   0.8%
Fastweb   195   181   7.7%
Other Operating Segments   34   42   –19.0%
Reconciliation pension cost 2   (13)   (15)   –13.3%
Intersegment elimination   (8)   (6)   33.3%
Operating income before depreciation and amortisation (EBITDA)   1,124   1,111   1.2%
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 2021, Swisscom amended its organisational structure in Switzerland and the segment formerly known as IT, Network & Infrastructure was renamed Infrastructure & Support Functions. The departments with overlapping functions were merged organisationally at Swisscom Switzerland. As a result, Group Headquarters is no longer reported separately in the segment reporting. In addition, Swisscom has transferred various areas among the segments of Swisscom Switzerland and the Other Operating Segments as of 1 January 2021. The prior-year figures were restated accordingly. Further information can be found in Note 2 in the notes to the consolidated interim financial statements.

Reporting is divided into the segments Residential Customers, Business Customers, Wholesale, and IT, Infrastructure & Support Functions, which are grouped under Swisscom Switzerland, as well as Fastweb and Other Operating Segments. The Infrastructure & Support Functions segment does not charge network costs or management fees to other segments. Any other services between the segments are charged at market prices. The results of the Residential Customers, Business Customers and Wholesale segments thus correspond to a contribution margin before network costs.

Swisscom Switzerland

In CHF million, except where indicated   31.03.2021   31.03.2020   Change
             
Net revenue and results            
Telecom services   1,388   1,439   –3.5%
Solutions business   273   267   2.2%
Merchandise   212   175   21.1%
Wholesale   173   164   5.5%
Revenue other   21   5   320.0%
Revenue from external customers   2,067   2,050   0.8%
Intersegment revenue   13   15   –13.3%
Net revenue   2,080   2,065   0.7%
Direct costs   (447)   (412)   8.5%
Indirect costs   (717)   (744)   –3.6%
Segment expenses   (1,164)   (1,156)   0.7%
Segment result before depreciation and amortisation (EBITDA)   916   909   0.8%
Margin as % of net revenue   44.0   44.0    
Lease expense   (58)   (59)   –1.7%
Depreciation and amortisation   (374)   (377)   –0.8%
Segment result   484   473   2.3%
             
Operating free cash flow proxy            
Segment result before depreciation and amortisation (EBITDA)   916   909   0.8%
Lease expense   (58)   (59)   –1.7%
EBITDA after lease expense (EBITDA AL)   858   850   0.9%
Capital expenditure   (371)   (367)   1.1%
Operating free cash flow proxy   487   483   0.8%
             
Operational data in thousand and headcount            
Fixed telephony access lines   1,491   1,582   –5.8%
Broadband access lines retail   2,028   2,053   –1.2%
TV access lines   1,581   1,586   –0.3%
Mobile access lines   6,177   6,299   –1.9%
Revenue generating units (RGU)   11,277   11,520   –2.1%
Broadband access lines wholesale   567   525   8.0%
Full-time equivalent employees   12,830   13,056   –1.7%

Swisscom Switzerland’s net revenue increased by 0.7% or CHF 15 million to CHF 2,080 million. The increase was mainly due to a rise in sales of smartphones. However, ongoing competitive and price pressure continued to cause a decline in revenue from telecom services. This decreased by 3.5% or CHF 51 million to CHF 1,388 million. Of this decline, CHF 34 million (–3.4%) was attributable to the Residential Customers segment and CHF 17 million (–3.9%) to the Business Customers segment. On the other hand, sales from the solutions business rose by 2.2% or CHF 6 million to CHF 273 million. The increase in sales of merchandise by 21.1% or CHF 37 million to CHF 212 million is attributable to the rise in sales of smartphones. The market is showing signs of saturation and competitive pressure in the area of mobile communications and fixed-network services. The mobile subscriber base declined by 1.9% or 122,000 to 6.18 million compared with the previous year. Part of the decline was due to the announced gradual decommissioning of the ageing 2G mobile technology. The number of postpaid lines grew by 80,000 year on year, while the number of prepaid lines fell by 202,000. The number of broadband connections fell by 1.2% or 25,000 to 2.03 million within the space of a year. However, the number of inOne customers continues to increase. Swisscom Switzerland had a total of 2.47 million inOne customers in the Residential Customers segment at the end of March 2021. In this segment, inOne accounted for 68% of postpaid mobile lines and 79% of broadband connections. The number of TV connections decreased year on year by 0.3% or 5,000 to 1.58 million, while the number of fixed-network access lines fell year on year by 5.8% or 91,000 to 1.49 million.

Segment expense increased by 0.7% or CHF 8 million to CHF 1,164 million. Direct costs increased by 8.5% or CHF 35 million to CHF 447 million. In addition to higher costs for purchasing goods, costs for acquiring and retaining customers also rose. Indirect costs fell by 3.6% or CHF 27 million to CHF 717 million. This was chiefly due to lower costs for customer service and network maintenance. In addition, capitalised costs increased due to a higher share of self-constructed assets in investments. Headcount fell year on year as a result of efficiency measures by 1.7% or 226 FTEs to 12,830 FTEs. The segment result before depreciation and amortisation increased by 0.8% or CHF 7 million to CHF 916 million. The decline in revenue from telecom services and the higher costs of subscriber acquisition and retention were offset by ongoing cost-saving measures. Capital expenditure rose slightly by 1.1% or CHF 4 million to CHF 371 million. Investments in the expansion of broadband networks increased, while investments in other infrastructure declined. As at the end of March 2021, 84% of all Swiss homes and businesses were connected with ultra-fast broadband exceeding 80 Mbps. Meanwhile, 65% of all homes and offices benefited from fast connections with superior bandwidths of over 200 Mbps. Swisscom intends to make ultra-fast broadband available in every Swiss municipality by the end of 2021, even in remote locations. Swisscom also plans to double FTTH coverage to up to 60% by the end of 2025.

Fastweb

In EUR million, except where indicated   31.03.2021   31.03.2020   Change
             
Net revenue and results            
Residential Customers   286   280   2.1%
Corporate Business   237   211   12.3%
Wholesale   56   50   12.0%
Revenue from external customers   579   541   7.0%
Intersegment revenue   2   2   –%
Net revenue   581   543   7.0%
Segment expenses   (402)   (373)   7.8%
Segment result before depreciation and amortisation (EBITDA)   179   170   5.3%
Margin as % of net revenue   30.8   31.3    
Lease expense   (14)   (13)   7.7%
Depreciation and amortisation   (146)   (144)   1.4%
Segment result   19   13   46.2%
             
Operating free cash flow proxy            
Segment result before depreciation and amortisation (EBITDA)   179   170   5.3%
Lease expense   (14)   (13)   7.7%
EBITDA after lease expense (EBITDA AL)   165   157   5.1%
Capital expenditure   (154)   (138)   11.6%
Operating free cash flow proxy   11   19   –42.1%
             
Operational data in thousand and headcount            
Broadband access lines   2,765   2,659   4.0%
Mobile access lines   2,066   1,779   16.1%
Full-time equivalent employees   2,733   2,515   8.7%

Fastweb's net revenue rose year on year by 7.0% or EUR 38 million to EUR 581 million. Despite persistently challenging market conditions, Fastweb’s broadband customer base grew by 4.0% or 106,000 year on year to 2.77 million. Fastweb is also growing in the fiercely competitive mobile telephony market. The number of mobile access lines increased by 16.1% or 287,000 year on year to 2.07 million. Bundled offers continue to play an important role. 35% of subscribers use a bundled offering combining fixed network and mobile. Residential customer revenue rose by 2.1% or EUR 6 million to EUR 286 million as a result of customer growth. Fastweb is also growing in the area of business customers. Revenue from business customers was up by 12.3% or EUR 26 million to EUR 237 million as a result of higher revenue from public administrations. Revenue from wholesale business increased by 12.0% or EUR 6 million to EUR 56 million.

The segment result before depreciation and amortisation was 5.3% or EUR 9 million higher at EUR 179 million on the back of the growth in revenue. Capital expenditure increased by 11.6% or EUR 16 million year on year to EUR 154 million due to higher customer-driven investments and increased investments in network infrastructure. Fastweb’s headcount increased by 8.7% or 218 FTEs year on year to 2,733 FTEs as a result of acquisitions and the hiring of external staff.

Other Operating Segments

In CHF million, except where indicated   31.03.2021   31.03.2020   Change
             
Net revenue and results            
Revenue from external customers   104   109   –4.6%
Intersegment revenue   136   132   3.0%
Net revenue   240   241   –0.4%
Segment expenses   (206)   (199)   3.5%
Segment result before depreciation and amortisation (EBITDA)   34   42   –19.0%
Margin as % of net revenue   14.2   17.4    
Lease expense   (3)   (3)   –%
Depreciation and amortisation   (13)   (15)   –13.3%
Segment result   18   24   –25.0%
     
Operating free cash flow proxy            
Segment result before depreciation and amortisation (EBITDA)   34   42   –19.0%
Lease expense   (3)   (3)   –%
EBITDA after lease expense (EBITDA AL)   31   39   –20.5%
Capital expenditure   (9)   (7)   28.6%
Operating free cash flow proxy   22   32   –31.3%
             
Headcount            
Full-time equivalent employees   3,514   3,539   –0.7%

Net revenue of the Other Operating Segments was almost unchanged year on year at CHF 240 million (–0.4%). As a result of higher costs, the segment result before depreciation declined by 19.0% or CHF 8 million to CHF 34 million. The profit margin decreased accordingly to 14.2% (prior year: 17.4%). Headcount declined by 0.7% or 25 FTEs to 3,514 FTEs.