Earnings call transcript: Swisscom Q2 2025 sees stable Italy performance

Swisscom’s second-quarter earnings call for 2025 highlighted a mixed financial performance with a decline in group revenue and EBITDA, but stability in the Italian market. The $37.7 billion market cap telecom giant, which maintains a "GOOD" InvestingPro Financial Health score, confirmed its full-year guidance, expecting revenue at the lower end of its projected range.

Key Takeaways

• Swisscom’s group revenue decreased by CHF 173 million in the first half of 2025.
• The company launched BEAM, a new B2B connectivity portfolio.
• Swisscom is continuing its 5G and fiber network expansions.
• The copper line phase-out is progressing, with significant future savings expected.

Company Performance

Swisscom reported a decline in group revenue and EBITDA for the first half of 2025, though its trailing twelve-month revenue showed 9.7% growth to $13.7 billion, with EBITDA reaching $4.3 billion. Despite these decreases, the company maintained its market leadership in Switzerland and experienced stability in its Italian operations. The telecom market in both countries is shifting towards value over volume, which Swisscom is embracing as part of its strategy. For deeper insights into Swisscom’s financial performance, InvestingPro subscribers can access 12+ additional ProTips.

Financial Highlights

• Group revenue: Down CHF 173 million in the first half of 2025.
• Group EBITDA: Down CHF 144 million.
• Switzerland revenue: Decreased by CHF 77 million.
• Italy revenue: Slightly decreased by CHF 13 million.

Outlook & Guidance

Swisscom confirmed its full-year EBITDA guidance and expects revenue to be at the lower end of the 15 to 15.2 billion CHF range. The company, which offers an attractive 3.8% dividend yield and maintains a defensive beta of 0.29, anticipates an acceleration in IT service revenue in the second half of the year and continues to expand its 5G and fiber networks, targeting 75-80% FTTH coverage by the first quarter of 2030.

Executive Commentary

CEO Christoph Esteemann emphasized the company’s strategic shift from a volume to a value strategy, noting, "Integration is progressing as planned." He also highlighted the long-term savings expected from the copper network phase-out.

Risks and Challenges

• Market saturation in the Swiss telecom industry could hinder growth.
• Economic uncertainties in Europe may affect consumer spending.
• The transition to a value strategy may temporarily impact market share.

Swisscom’s Q2 2025 earnings call underscores its strategic initiatives and market positioning, with a focus on long-term growth and efficiency improvements. Trading at a P/E ratio of 20.7, the stock currently appears slightly overvalued according to InvestingPro’s Fair Value model. For comprehensive analysis, including detailed financial metrics and expert insights, access the full Pro Research Report available to subscribers.

Full transcript - Swisscom AG (SCMN) Q2 2025:

Conference Moderator: Good morning, ladies and gentlemen. Thank you for joining the Swisscom Q2 twenty twenty five results conference call hosted by Christoph Ascherman, Eugensternnet and Louis Schmead. Louis, the floor is yours.

Louis Schmid, Head of Investor Relations, Swisscom: Good morning, ladies and gentlemen, and welcome to Siscom’s q two twenty five results presentation. My name is Louis Schmid, Head of Investor Relations. And with me are our CEO, Christoph Esteemann and Sergei Schemmitz, our Chief Financial Officer. Let’s now move to page two with the agenda for today. As you can see, our CEO starts presentation with chapter one and a quick overview on the highlights, the operational and financial performances of the second quarter.

Then in Chapter two, Christoph presents a business update for Switzerland and Italy. And then in the second part of today’s results presentation, Erwin runs you through Chapter three with the second quarter financials, including the confirmation of our full year guidance. With that, I would like to

Christoph Esteemann, CEO, Swisscom: hand over to Christoph to start his part. Christoph? Thank you, Louis, and welcome to the Q2 twenty twenty five call from my side. I will directly move to slide number four, highlighting the successes of the last quarter. As you can see, we’ve been nominated again as strongest telco brand in Switzerland, and we were able to win another connect test on the mobile hotline with a new record score of 490 out of 500, which demonstrates our outstanding customer service that we provide in Switzerland.

I’m also extremely pleased with the launch of Beam, our new convergent b to b, connectivity portfolio, which unites connectivity with security for our b to b customers, and we will talk a bit more about this later on in the presentation. I’m also very happy with the progress we are doing in Italy. Integration is going exactly as planned. Synergy ramp up is as planned. Integration costs are as planned, and we are on track to deliver our full year targets for the second half year.

We also make big progress on integrating Faster and Vodafone on the the offering side. We launched or expanded the Energia offer to the Vodafone customer base and have extended our AI offerings as you will see a bit later on. And overall, after q two, we are confirming our full year guidance with revenue being at the lower end of the guidance of 15 to 15.2, so rather at the lower end. But overall, we confirm the guidance

Louis Schmid, Head of Investor Relations, Swisscom: for this full year.

Christoph Esteemann, CEO, Swisscom: Now moving on to slide number five, we can see that the keyword is stability. We have a stable RGU base overall in Switzerland and Italy, and we have very similar trends in the second quarter as we had in the first quarter. So on the one hand side, you can see that we have a growing postpaid mobile base in Switzerland, roughly in line with q one, and a stable mobile base in Italy, mainly driven or we have growing b to b side compensating the losses that we have on the b to c side. On the broadband wholesale side, it’s also quite a similar picture. We have slightly lower growth in the wholesale business, both in Italy and in Switzerland, but on the other side compensated by lower losses on the broadband side both in Switzerland and in Italy.

So overall, a very stable picture and similar to last quarter. Now I move on to slide number six. Q two revenues were slightly lower than in q one, or the decrease was slightly bigger than in q one. On the EBITDA side, the second quarter EBITDA was slightly better than in q one. And overall, we are posting revenues for the first half year of 7,440,000,000.00 Swiss francs, down minus 2.3%, and an EBITDA of 2,470,000,000, down 5.5%, mainly driven, as you can see in the bridge on the right hand side, by the EBITDA decrease in Italy due to all the integration work and the work we’re doing bringing together Vodafone and Italy with minus 65,000,000 in the first half year, and overall stability in Switzerland with minus 3,000,000 in q two, bringing the overall EBITDA to minus 6,000,000 in the first half of the year.

Or, again, we’ll, as usual, dive more into the deep the detailed financial numbers later on in the call. Now I’m moving on to the business update in Switzerland and in Italy. We can jump directly to page number eight to recap our priorities and the road map for 2025. It’s quite easy. We have three priorities per country.

In Switzerland, we are managing the telco top line, making sure that the service revenue erosion is as low as possible. We continue to execute on the cost saving side and are working hard to achieve profitable IT growth, which faces some challenges at the moment that you will see later on. On the Italian side, we have similar but slightly different priorities. The first and biggest priority is integrating Vodafone Italia and Fastweb to capture the synergy potential, and at the same time, turning around the b to c mobile business to stabilize the telco top line, accelerating the growth on the energy energy side. And on the b to b, we want to scale up further the IT business and stabilize the wholesale business so that we have stability on that front.

Now I’m moving or diving a bit deeper into the Swiss business. We will start with b to c on page number nine. On the b to c side, the main goal at the moment is to drive differentiation further to effectively defend our RGU base. We can say that overall the market is slightly less promotional. We can see that clearly SUNRISE, is sticking to what they, announced in their q one call being less promotional, while salt is still very aggressive in the market.

But overall, we see that the market a bit calmer and are hopeful that it continues in this way for the the second half of the year as well. On our side, we are reinforcing our brand awareness, so we launched a new branding campaign and sort of reworked a bit the the Swisscom branding, with a new claim, discover your possibilities that we launched, in the second quarter. The campaign is very well received, and we are pleased with the feedback we we are getting and really working hard to further, position Swisscom as a premium brand that helps customers achieve what they want to do in their life. We’re also working on the value of our subscriptions with the VR family proposition. We’ve updated roaming propositions for the summer and the extended BlueKids offering.

So we do a lot of sort of targeted work on the product portfolio to make sure that customers get enough value for the the price they they pay, And at the same time, we continue to drive the second brands, especially, increasing sales presence with sort of a new, low cost type pop up stores, which allows us to drive further drive sales on the second and the third brands. Overall, you can see that the shift to second brand continues. So we have about thirty five percent second, third brand customer base now. It is up 3%. It is also the main driver of the ARPU decline that you see on the the next page of minus one Swiss franc.

Penetration rates of blue have increased slightly by 3% on mobile and plus one on the blue side, which is a good news, meaning that most of the customers are now in our in market blue portfolios and on the higher value subscriptions, and FMC is roughly stable overall at the customer base. Now on slide number 10, you can you can see the the ARPU evolution. I already mentioned mobile is slightly declining due to the ongoing shift to second brand, whereas the wireline is roughly stable, slightly increasing as we manage to upsell customers into higher value bundles, higher value TV products, extending value added services. And at the same time, we are really heavily investing in our customer service to make sure that we continuously deliver the best customer experience. And as I mentioned at the beginning, we managed to win another connect hotline test, and, and this then materializes in NPS leadership.

So you can see that we are now we managed to slightly increase our NPS regarding to the last measurement, mainly driven by the Swisscom benefits and loyalty program, which had a positive impact on customer satisfaction, also leading now to a lower churn both on the wireline and mobile side. So you can see overall, I think, very pleasing picture on the b two c side managing to create value, position Swisscom as a premium brand, and at the same time defend the customer base overall to make sure that we maximize revenues on the b to c business. Now on slide 11, we are moving to the b to b business. On the left hand side, you see telco. On the right hand side, IT.

The the main objective is really to innovate both on the telco side and on the cloud security and AI side on for IT and delivering new products to make sure that we can drive revenues in the coming year. But overall, first, maybe we can say that you can see ARPUs are still declining overall, so the pricing pressure, especially in corporate but also on the SME side, is still very strong on the b to b market, which is driving mainly the loss in service revenue. As I said before, we launched the new BEAM product portfolio, the new convergent connectivity solution. We did this in May. It was very well received by the market.

We had a very big media response. And at the same time, also the sales numbers we see so far are very pleasing. They’re in line with our expectations, and we already managed to sell several thousands of subscriptions, which is, I think, excellent news. And we will see now over the coming quarters, if we are able to scale the sales of BEAM as we are expecting. At the same time, we are continuously launching new features.

So this is also maybe a novelty in the telco world, so it’s not like a one time big bang. But every month, we are launching new services. We brought out new apps. We will bring new features August, and then continuously over q four also deliver new enhanced features, which allows us to continuously upsell the customer base towards the future. I think we are very proud of this world’s first.

I think it’s really changing the way, we look at b to b connectivity, really combining security and connectivity in our core network. And I think, we can be proud of what we delivered here together with our teams delivering many worlds first in the in the telco space. On the IT side, we expanded our product offerings, also in cyber, but also in sovereign cloud. We expanded our AI offering, which should deliver incremental IT service revenue in the future. You see that in the q two, we were able to grow organically by plus 2,000,000.

It’s slightly lower what we see usually and also what we expected overall when we planned for the year. But looking at the current macro situation in Switzerland and the tariff situation, which is impacting quite a lot of our customers, especially on the manufacturing side, We are still pleased with the results. As many b two b customers are now into went into cost saving mode or delaying or redimensioning IT investments, it makes it a bit harder to grow on the IT side, and we do expect this to remain like this for the full year. As you’ve seen, that the Trump tariffs are now in effect since this morning, 6AM, and it also led to a slightly lower contribution of minus 4,000,000 because we are underutilizing our consulting capacity due to also these missing sales that I just referred to. But overall, still, I would say a good result.

Margin on the IP side is roughly stable at around 6%, APTL. So, I think not not a bad situation, but let’s say less positive than we hoped for due to the macro current macro challenges. Now I will go to slide 12, network and wholesale. So we again pushed further our network coverage both on the mobile and the fixed side. So mobile coverage is up by plus 4% on the five g side.

We are now covering 87% with five g plus, so the new five g 3.6 gigahertz frequencies. Also, three g phase out is completely on track. We will shut off the network end of the year and migrate customers onto our four g five g network over the next next month. On the FTTH side, we are the rollout is progressing very nicely, also up by 5% year on year, and we now cover 54% of the country with FTTH, and in Switzerland, FTTH means 10 gigs connectivity, so we have excellent connectivity coverage and continue to roll out as we planned to hit our target of 75 to 80% coverage by 02/1930. We also continuously invest in network quality and resilience, and you can see that these investments are paying off.

We have record high network stability scores both mobile and on the on the wireline, demonstrating the quality that we deliver on both networks. This also helps to grow further our wholesale business. So you see that the FTTH penetration in our wholesale business has increased by 5.5%. So now 47% of all wholesale lines are FTTH lines, and I expect to hit the the 50% number by maybe still this year, but the latest early next year, we will probably have more fiber lines in our wholesale business than copper lines, which is excellent news for the future, meaning that we can monetize really the the fiber rollout, and you can also see it drives our access service revenue plus 9% to 49,000,000, and we do expect this access revenue access service revenue to continue to grow over the coming years as we are rolling out more fiber across the the country. Now one last slide on Switzerland, slide 13, telco cost savings.

I think we can keep it short. It’s the key message is on track. For full year delivery, we stand at plus 31. Please don’t extrapolate this to year end. We confirmed the 50,000,000.

We are slightly ahead in our savings, but we don’t expect much more than 50,000,000 for the full year. So I think it’s good if you stick to the plus 50,000,000 number for the the the full year, but it’s obviously a good good news that we already managed to bring in over half of the planned savings. I think one of the topics I would like to highlight is the copper phase out associated obviously with the fiber rollout. So you can see on the slide that we already managed to phase out 300,000 copper lines. If you compare it to our peak copper estate that we had in 2023, about 2,000,000 lines, so we already turned off about 15% of all copper lines, and we are on track to achieve our targets for full copper phase out in 2035.

So I think I’m quite happy with the progress on that side as both b to c, b to b, and wholesale are phasing out copper lines on on their side, and this will continuously help us to generate some savings over the next years. Okay. This was it for Switzerland. So overall, very stable. Good news on track with our strategic project strategic initiative execution.

And I will now move on to Italy with page 14. I think the key word here is also integration is progressing as planned, and we are on track for synergy ramp up in the second half of the year. So the most important topic, as you know, in Italy is the migration of our mobile customers from the old or the mobile Fastweb customers from the Win3 and TIM network onto the Vodafone network. So the migration of these SIEMs is progressing exactly as scheduled. We’re making good progress, and we are confident to finalize the migration by year end so that we can deliver the cost synergies for this year, but also, and even more importantly, deliver the roughly 200,000,000 mobile COC synergies for next year in 2026.

We completed the organization integration. The design is done. All the management positions are nominated, so now we have a completely integrated and functioning organization so that we can really focus on executing our business tasks, and also all the other integration tasks are on track. We have already first optimizations that we were able to do from carving out the Vodafone Group Services, and we will continue to work on all these topics in the coming months. Next to the synergy realization, which is, I think, going exactly according to plan.

Another important topic is the turnaround of the b to c mobile business, which is the main driver of the service revenue erosion in Italy. And if you look at the numbers and also the guidance at the earliest year, we guided 100 to 200,000,000 service revenue erosion. We will most likely end up at the very high end of this guidance, and it’s obviously more than we had hoped for, anticipated for. So this topic is really of key importance that we continue to execute on changing the b to c strategy. So early in the year, we decided to shift from a volume strategy or the historic volume strategy that Vodafone pursued to a value strategy, focusing really on higher ARPUs, managing the customer base, and especially getting down lowering churn to decrease the ARPU outflow, increasing NPS, and then having lower inflows, but the inflows we have at higher ARPUs.

So we believe that this is a much more sustainable strategy for the long term. It will also help the Italian market to become less promotional and less price driven if all the operators focus on value and the customer base rather than chasing another, 1,000 new SIMs and driving down further the the price in the market. So I think we can already see the first signs that this strategy is working. We can also see that the market is becoming much more rational and and slowing down. But overall, as you know, telco is quite a slow moving business, so we also need to be patient as this work requires sometimes, and I do expect this to to last until, you know, way into 2026.

But we can already see the first positive signs as you can see on slide 16. So on slide 16, you see the the mobile business evolution, so net adds are still or net add losses are still stable, so we slowed down the the sales side with for higher ARPU inflows. At the same time, we managed to massively decrease the churn. As you can see on the right hand side, churn has decreased from nearly 24 to 18% in second quarter, so this is an excellent sign, mainly driven by a different handling of the customer base, a different handling of the call center. So we invest more in the customer base.

We provide more value to our customers and and improved customer service at the touch point, mainly driving NPS up, and at the same time, releasing churn. And you can see the ARPU is still slightly going down overall, but it substantially slowed down and is very close to to stable evolution. One other important aspect of this was aligning the front book prices between Fastenb and and Vodafone, which has been done to a large extent. And the next step is now the launch of a completely integrated product portfolio, which we will launch in September, so that we have completely aligned prices for one single price point between Fastrove and Vodafone. And we will do this after the summer in in Italy to to be ready to launch this for our new customer base.

At the same time, we are also moving into a multi brand positioning. Clearly, repositioning fast wave Vodafone as a premium brand and HO mobile as a second brand for sort of the value seekers or smart shoppers. And, we will as we similar to the strategy we are executing in Switzerland with, the main brands Swisscom and Vingo, and we will execute a similar strategy in Italy to make sure that we have the higher value customers on the main brand. And then for the people who are chasing the lowest prices, we will use the the whole brand, and we expand the the sales footprint of the whole brand to make it to make sure that we can sell it more touchpoint. On slide 17, you can see the same picture for the wireline business in B two C.

Here as well, you can see that churn is going down from 20 to roughly 18.4%. NPS is also going up, and ARPU is already stable. As we have aligned also the new front book prices between Vodafone and Fastweb, we’ve already already managed align or stabilize the ARPU, whereas broadband losses are still there with minus 52,000 in the last quarter, but also slowing down as the churn is going down overall. So you can see that, overall, the strategy seems to start to take effect. But as you know, overall, until you really see this in the numbers fully, it will take several quarters still to come.

So we need to be impatient on this side. But we are confident that we are on the right track to minimize the service revenue erosion in Italy. Another important piece on the wireline side is also the energy offer that we continue to push. So we opened it up, to all the sales channels on the Vodafone side in the second quarter, and we’re able to double the sales speed, with this move, And we are confident that we can continue to scale up this offer. This will also generate new service revenues compensating some of the losses that we still have on the wireline or the the mobile side.

Now moving on to b two b on page number 18. As for Switzerland, you can see telco on the left hand side and IT on the right hand side. Telco is still growing quite heavily on the mobile side at plus 11%, mainly driven by the TM nine government agreement, while the broadband sign broadband side is roughly stable overall. We’re also cross selling energy for the SME customers, which is driving new service revenues on the b to b side and launched a new product portfolio on the private MPN side where we did a contract with the University of Palermo. On the IT side, similar to Switzerland, we also launched new offerings on the AI space with the Fastweb AI suite for SMEs, enterprises, and public administration.

This is a full platform allowing for AI infrastructure, but also agents, Fastweb AI for work, really helping both private customers, but especially SMEs and enterprises to use AI in a sovereign way in Italy, and we, we are quite confident that this will be a positive move in the IT space in Italy. On page number 19, you can see the achievement on the network side. So I will first start with the network rollout. We also continued to roll out five g plus in Italy. And due to the move from the WinTray and TIM network on the Duvodafone network, we managed to increase our five gs plus coverage by 14 percentage points, and we now stand at eighty seven percent five gs plus coverage in Italy.

And, also, the FTTH expansion continues with FiberCop and Open Fiber building out more fiber, and our FTTH coverage is up by plus 14% with now 53% of the cut recovered by FTTH overall. And I would say, really, one of the highlights of the quarter in Italy is the surpassing of 1,000,000 UBB lines on the wholesale side. So we now have 1,018,000 lines sold to wholesale customers in Italy, which is plus 31%. So I think really an outstanding achievement of the Italian team. And also the core Voce customer is my steadily onboarding new customers onto our mobile network, and this is going also as planned.

And you can see that the wholesale revenues are up by 9% to 173,000,000 revenues. This was it from the Italian piece. So overall, I would say Italy with some challenges that we need to tackle, but we are on track. We have a strategy, clear plan, and overall synergies and integration work going according to plan. I will now hand over to Eugen for the financials.

Eugen Sternnet, CFO, Swisscom: Thank you, Christoph, and good morning, everybody, also from my side. Let’s start right away with page 21, group overview. So I’ll start with revenue. Revenue was down €173,000,000 in the first half year, 60,000,000 which is due to currency. So the net effect is really minus 107.

Switzerland contributed minus 77,000,000. If you look at the quarter’s q two, it looks like an acceleration of revenue decline. Actually, this is very much driven by hardware sales without any impact on margin as we shall see. Italy, minus 13, minus eight in the first quarter, minus five in the second quarter, almost stable revenues. EBITDA group overview.

Group EBITDA was down 144,000,000. There is a number of adjustments totaling minus 64,000,000. We have this year, obviously, integration costs. In Italy, we have pension reconciliation, which we put into adjustments. Last year, we had a release of, okay, regulatory provision in Switzerland, etcetera, etcetera.

So there’s quite a number of adjustments in there. So makes absolutely sense to look at the adjusted number first, which is down 80,000,000 compared to prior year. In Switzerland, practically stable EBITDAR with minus six in the first half year and stable development over the quarters. In Italy, 65,000,000 in Swiss francs. This is mainly due to the b to c business as we shall see.

Q two looks a bit better than q one with minus 15 up to minus 50, but part of it is, not recurring. So the minus 15, are certainly not the new run rate of EBITDA evolution in in Italy. All of these on this page very much in line with expectations, and in particular, the EBITDA also in line with our full year guidance. I’ll move on to Page 22. CapEx was below prior year, EUR 127,000,000 positive impacts on operating free cash flow.

This was very much driven by Q1 but both in Switzerland and in Italy, in particular, Vodafone had very high CapEx in Q1 twenty twenty four. Q2 is is a much more normal quarter, as you can see from the numbers. So Switzerland in q two plus 10,000,000. Italy q two zero, so same level as as last year. The first half year numbers are completely driven by what we talked about already in q one.

If you look at operating free cash flow, adjusted plus 17,000,000, in Switzerland, plus 26, so as a result of stable EBITDA and lower CapEx. So not only stable free cash flows from Switzerland, but in the first half year, even improving free cash flows from Switzerland. Italy, minus 7,000,000, almost stable operating free cash flow, but very much driven by the lower CapEx that I talked about in in q one. Let’s dive into Switzerland, page 23, starting with revenue. So as I said, revenue is down 77,000,000 in Switzerland.

If you look at the individual segments, b to c minus 18, not much news, small and and steady service revenue decline. We’ll talk about service revenue on the next page. B to b minus 68,000,000, down from from prior year. In the second quarter, minus 43. So that requires an explanation.

It’s exactly here that you see the impact of the lower hardware software revenue. B to B had about minus 40,000,000 hardware software revenue compared to prior year. This is part of a strategy that we implemented in q one to focus on high margin business rather than sometimes very low margin hardware deals. So that’s very much intended and does not have an impact or certainly not a negative impact on the bottom line. If you look at EBITDA, the adjusted number is almost stable at minus six split between the segments b to c, small decline, even stable in q two, which is obviously very good.

So the service revenue decline, in b to c that there is could be compensated by lower subscriber acquisition costs and indirect costs. That’s excellent. B to B, minus 31,000,000. That’s almost exactly the telco service revenue decline, and as I mentioned, no impact from lower revenues that we see above. And finally, wholesale, very small and steady growth both on revenue and EBITDA, which is obviously due to the growing wireline business that Christoph already alluded to.

Move page on to Page 24, the deep dive into the Swiss P and L, a very busy slide. Let’s look first at the bottom left corner with the service revenue evolution over the last couple of quarters, a very steady picture, as Christoph already explained. So we had minus 31,000,000 in the second quarter after minus 26,000,000 in the first quarter. This is all very much within the usual range of ups and downs that we have seen over this year and last, so not much of a trend to be seen there. Rather no news is good news.

The drivers of service revenue decline in the second quarters are the one the ones we know quite well on the b two c side. Wireless, we do increase our subscriber numbers, but ARPU is being diluted by the second brand share that goes up. On the wireline side, we have the fixed broadband losses and also some limited broadband losses, but ARPU is holding up nicely due to all the measures that Christoph mentioned before. Also, p two b, not much not much news. ARPU, by and large, that is certainly on the wireline side, a slight decline on the wireless side.

This is here ARPU effects driven by postpaid value only. So the ARPU number is a bit different from the one that Christoph mentioned before. The major impact on B2B is is some customer losses in wireless, mostly in the SME segment. And in wireline, we had some corporate customers migrating sites away, actually a bit faster than in the prior year, which shows up in the wireline RGU number. Overall, we confirm our service revenue guidance of about minus 100,000,000 for the full year.

So that’s the service revenue. Two or three other things to note on this slide. On the top left corner, you see the telco p and l, and you see the cost savings. So in the first half year, we had plus 31,000,000 in the books, 22,000,000 of which in the second quarter. As Christoph already explained, not necessarily the run rate to expect per quarter, so the guidance remains about 50,000,000 plus for the full year.

And finally, top right, you see the P and L for the IT business. And there, you can see the minus €38,000,000 which is the hardware revenue that are lower than previous year or as intended and without impact on the margin. With that, I move on to page 25. CapEx, a bit lower than previous year. We had a bit higher fiber CapEx in the first half year with full year still as expected.

So the lower CapEx was very much driven by some one off items in the previous year that we already referred to when we talked about it in the first quarter. And finally, in operating free cash flow with stable EBITDA and lower CapEx, Free cash flow from Switzerland, as I mentioned, is not only stable but even slightly growing. Let’s dive into Italy now, page 26, starting with revenue. Revenue is almost stable year over year, minus 13,000,000 in the first half year. The b two c decline was almost compensated by growth in b two b and wholesale.

So b two c down minus 44,000,000. Service revenue decline is higher as we shall see, but there is the growing energy business that compensated part of this. B to b, a plus of 23,000,000. Here, it’s due to the IT business mostly which offsets the telco decline, and the wholesale business with growth of 15,000,000 in the second quarter, very nicely the growth in the UBB business and from the MVNO business showing up in the numbers. EBITDA adjusted number of minus 68,000,000.

So this is the euro number now to the Swiss francs we talked before, minus 68,000,000. As you can see, immediately, almost entirely driven by declining contribution margin in b to c, which is the same in q two as in q one and driven by the same drivers. Service revenue decline on the one hand and also still in the first half of the year prior to the migration of the Fastweb customer onto the Vodafone network, higher mobile cogs out of the existing MVNO agreements for the Fastweb subscribers. Contribution margin b to b, slightly down, minus 12,000,000 despite higher revenue. So this reflects a change in business mix, both IT business replacing the telco business, but also within the telco business, the impact of the public administration t m nine contract, which has very low prices and margins, which then show up in the bridge.

Contribution margin from wholesale, a plus. That’s very good. Indirect costs were a bit lower than previous years, but there is a very big difference that you see between q one and q two with q two plus 20,000,000. Unfortunately, this q two is driven mainly by high costs at Vodafone in q two in the prior year, and it’s more of a one off. So for the moment, at least, a 16,000,000 EBITDA run rate per quarter is is not sustainable in Italy, we stick to our full year guidance of minus 150,000,000 adjusted and 50,000,000 integration costs.

So fully confirm the guidance for the full year. Don’t over extrapolate some of the detailed numbers of this q two. I move on to page 27, deep dive into service revenue on the Italian side. Top left, you can see minus 100,000,000 in the first half year, three quarters of which from b to c, the minus 77,000,000 from b to c. If you look at the quarterly evolution at the bottom of the chart, same same, minus 47,000,000 in the first quarter, minus 53,000,000 in the second quarter.

B to b, stable. B to c, a bit worse in the second quarter than in the first quarter. So while the operating KPIs start to as we implement the volume to value strategy, we do not expect those improved operations to show up in revenue year over year changes before 2026. And so we fully confirm our guidance on service revenue, as Christopher already mentioned, on the upper end of the February January to February for 2025. Drivers of service revenue decline in the second quarter, B to C mostly, as I said, minus 42,000,000, wireless minus 25, wireline minus 17.

On the wireless on the wireless side, there is ongoing ARPU dilution even if the spread between inflow and outflow ARPU is narrowing and the washing machine, as Christof already explained, is is is declining or decreasing. So the exchanges are decreasing as both both sales and churn come down, but there is still actually decline, obviously, also driven by lower acquisition even if compensated by partially by better churn. So for all the operating improvements to show up in the vehicle service revenue year over year numbers will obviously take a bit. On wireline, it’s mostly the impact of the lower customer base ARPUs are, by and large, fortunately stable. I move on to page 28.

CapEx. CapEx, 78,000,000 below prior year, adjusted plus 60,000,000. So that’s mainly because of the very strong q one CapEx at Vodafone in the prior year with a major IT project being completed. We already talked about that. And q two was basically a prior year level.

Q two adjusted CapEx was at prior year level. Operating free cash flow adjusted minus 8,000,000, almost stable. That’s thanks to the q one CapEx effect as explained. On to page 29, synergies and integration costs. So we realized the first synergies in the first half year of 14,000,000.

This is mostly from Vodafone disentanglement. We confirm the full year target. The big ticket this year will obviously be the first tranche of synergies that we see out of the migration of the Fastweb mobile customers onto Vodafone, which will hit the numbers from h two onwards this year mostly in q four, obviously. Integration costs also confirm the full year target. We have 40,000,000 in the books so far, 20,000,000 in OpEx, 20,000,000 in CapEx.

There’s a lot more to come among others in connection with the network expansion cost as we host the faster customers also on the Vodafone network. I’ll now move back to group numbers, page 30, with the free cash flow bridge, which is compared to reported numbers. So far, we talked about comparison to pro form a numbers twenty twenty four. This is compared to reported numbers. Free cash flow is up €143,000,000 compared to prior year, driven mainly by two factors.

One is net working capital. Although we had a negative effect from debt on net working capital as we always have in h one, we had a positive deviation or favorable deviation to the prior year number by 153,000,000. So that is one part of the equation, and the other part is on the negative side, higher interest payments due to the Vodafone acquisition and net net with all the other effects, that’s a plus of 143,000,000 on free cash flow. On net income, page 31. Also, this one is compared to prior year reported figures, so it’s a bit messy this year given that the first time consolidation of Vodafone shows up everywhere, in particular, the additional lease expense that shows up in in in three places at least.

So we’ll focus straight on the deviation of the net income versus prior year, which is minus 211,000,000, and it’s basically driven by two factors, minus 211,000,000. One is the amortization of of purchase price allocation assets of minus 123,000,000, which is part of the DNA bucket on this slide. So that’s minus 123. And then there is additional interest expense for the additional debt out of the Vodafone acquisition of 79,000,000. So these two effects basically explain the deviation in net income.

Everything else at the level of EBIT is just minus €20,000,000 so Swiss Switzerland, Italy and others combined. So it’s really those two effects of the drive net income this year. On to page 32. In q two, we successfully issued two bonds at very attractive conditions. So our average interest rate is still very low stands at 1.89%.

The net effect of these bond issuances was a further flattening of our maturity profile, in particular, a reduction of the 2027 maturity that we had in connection with the bank loans that we took on for the Vodafone transaction and the further reduction of interest expense. I’ll move on to page 33, guidance. Very simple. We confirm the guidance with just one comment on Swiss revenue and by implication group revenue. Based on the h one results, in particular, the lower hardware software revenues in b two p IT, we expect full year revenue to come in at the lower end of the guided range, and we may even undershoot the guided range slightly.

But if we do so, we have no impact on EBITDA or on operating free cash flow. And with that comment in mind, we confirm the full set of numbers, including the dividend of 26 Swiss Swiss francs. I hand back to the operator.

Conference Moderator: Thank you, Eileen. To ask questions, please press 14. I repeat, 14 on your keypad. If you wish to withdraw your request to speak, please press 15. Thank you.

I will now open the lines one by one. As soon as your line is open, you will hear a corresponding text on your own line. Please then introduce yourself by name and company before asking your question. So let’s take our first question.

Polo Tang, Analyst, UBS: Hi. It’s Polo Tang from UBS. I just have three questions. The first one is on Switzerland. So on competitive dynamics, you mentioned there were some signs that Sunrise was being rational, but that Salt was still being promotional.

However, the market is gonna focus on value rather than volume. Is Swisscom willing to see some subscriber market share just given your high starting point? It seems like you’re pushing harder with family plans on the Swisscom brand. You’re also pushing harder on secondary brands too. So therefore, how do you think about, the balance, of value versus volume?

And on Switzerland, can I clarify, for Swiss service revenue declines or telco revenue declines, are we still expecting minus CHF 100,000,000? And is there anything to call out in terms of quarterly seasonality? Second question is just in terms of Italy, Telkom Italia was flagging how price rises from last quarter are landing well. If you look at both the Fastweb and Vodafone brands you’ve put through price rises, but can you talk through how these price rises have been received? And what is the average quantum of price rise?

And roughly, what proportion of the subscriber base does it cover? So I’m just gonna try and get a sense of the overall quantum of benefit from the moves that you’ve made, and does this add upside to the minus 200,000,000 of Italian telco revenue declines that you’ve guided towards? My final question is on Italy again. Can you comment on trends in terms of both IT service revenues and wholesale? And is there anything to call out in terms of seasonality, for the rest of the year?

So for example, on wholesale, have you hit full run rate for the co op MVNO and also in IT service revenues? There was a slowdown in q two. So is this the dropping out of EU recovery funds, or is there something else in terms of quarterly seasonality? Thanks.

Christoph Esteemann, CEO, Swisscom: Thank you, Polo. So I will start with question number one on on Switzerland. So on the competitive dynamics, so it’s I I think and your question, if we are willing to give up some market share, so the the answer is clearly yes. So, I mean, you can see the effect of this on page number five, where the where we have the RGU numbers and the the RGU market shares. So you can see that both in broadband and in postpaid, we are actually losing RGU market share.

So we are down 1.2, for example, on the the postpaid side. So although we have a increasing customer base this year, we are still relatively growing slower than the other market participants in in the market, and this is exactly like what we intend to achieve our value strategy focusing really on on ARPU and maintaining value in our customer base and not necessarily, like, driving volume and acquisition. But, of course, we also need to ensure a certain level of, acquisition so that market share doesn’t get declined too rapidly, which wouldn’t be good as well. And as the market is still I mean, you know, we say it is better and more value focused, but it is still very promotional, and you can still see 70% promotions by salt, and this also requires some actions on the on the sales side. So we need to expand a bit our sales footprint because also our competitors are still increasing their sales footprint.

So we have to somehow align with those market developments to make sure that we we don’t lose too much on the RGU market share side. On the service revenue declined full year, so I would say the guidance is still minus 100, but it is also maybe fair to say that, you know, multiplying the decline of the first half year is not not completely wrong. So, of course, there is always some seasonality, but you can see that we are slightly at a slightly higher run rate compared to the full year. So maybe it is safer to just multiply the first year by two, and then you get to somewhere around one ten ten ish for the full year. In in Italy, the so price rises, we we didn’t execute price rises in our customer base yet.

So Tim did this in the first half year. We didn’t do we launched the new portfolio. But at the same time, we are also working on the back book to make sure that customers that we have with higher ARPU or in higher ARPU brackets that they actually receive more value than lower ended price lower priced customers to make sure that the churn continues to go down in the back book and everybody gets the the value they they pay for. In terms of service or trends on the IT and wholesale side, so your third question, we do expect some acceleration on the IT side in the second half of the year, but it is quite hard to predict the IT IT revenue overall because sometimes it’s also driven by singular, you know, contracts and and orders. But overall, IT service revenue anyway has doesn’t have a big impact on our APTL guidance and and free cash flow.

So it’s, overall, I think we we expect it to be as guided. And on the wholesale side, it’s similar. So the the corp run rate is not yet at full run rate. So we are still migrating customers onto our network from corp watching. So we will still see further increases from this and also full year effects and carrying into 2026.

Eugen Sternnet, CFO, Swisscom: Thank you.

Conference Moderator: Thank you, Paulo. Next question.

Josh Mills, Analyst, BNP Paribas: Hi, guys. It’s Josh Mills here from BNP Paribas exam. I will stick with one question, please, and it’s related to the copper switch off that you talked about earlier in the presentation. Could you just give us a bit more color on what level of copper savings you’ve seen so far from the lines you have switched off, both in absolute terms and perhaps on a per line basis? And then going forwards, what do you think that copper switch off could result in in terms of overall savings by the time you get to full shutdown?

I know it’s in 2035, but just to get an idea of what that could look like would be very helpful.

Christoph Esteemann, CEO, Swisscom: Thanks. Thank you, Josh. So on the so we we don’t calculate or also communicate per line savings. And overall, the copper savings are unless you really shut down a complete network on in the like, a complete Central. Central office, savings tend to be quite low.

And at the moment, we are shutting down copper lines across the whole of Switzerland. We so far didn’t shut down complete central offices yet. So this will be sort of the the, you know, the next focus ’26 going onwards that we can really then shut off the equipment, which is in the central office, shut off the g dot fast transfer equipment that we have running, which consumes quite a lot of electricity. But so far, we are not yet there because this requires, you know, in one municipality to migrate really the full set copper customers to fiber. So this will take another, you know, one or two years until we are there to be able to shut down really complete municipalities and until then.

So overall, until now, copper savings, I would say limited and smaller pro than the cost of copper shutdown because we also have migration costs, CP costs, etcetera, that we need to replace. So at the at the moment, I would say copper faders is still slightly a a net negative issue. But in the long run, I think we communicated this one or two years ago, we had 100,000,000 run rate cost savings that we do expect from the the full customer shutdown. It’s a combination of energy savings, customer care savings, and lower field service interventions. Clear.

Thank you. Next

Conference Moderator: question.

AJ Sonny, Analyst, JPMorgan: Hello. It’s AJ Sonny from JPMorgan. I’ve got two questions. The first is around Italy. You talked about a more rational market.

So I just wanted to understand what you are seeing here when you say that. And then the second one is from the Italian energy offering. You said your sales I think you said your sales have doubled in the Italian energy. So can you provide some context on what size the revenues are here and what the margins are on the service revenues? Thank you.

Eugen Sternnet, CFO, Swisscom: So I’ll start on the energy question. So far, we haven’t given any haven’t disclosed any numbers, but it’s a solid double digit number already in revenues that is growing quickly, as Christophe mentioned, and we expect to grow further into the next year. And when it takes on a certain certain size, we would also comment on the precise figures as as far as I would go on energy.

Christoph Esteemann, CEO, Swisscom: So so I think on the on your Italian, you know, question, what we see in the market is that both Tim or all the operators seem to be working on back book and front book and trying to make sure that prices are more aligned in the market, and we also see less aggressiveness in acquiring new customers. So, what what we feel is that all the the operators are more in a mode of, okay. We we have a customer base, and how can we, value this customer base in a better way through up and cross selling rather than chasing the next, next customers at the lowest price. So I think this has a very positive effect overall in the market. It also helps us to drive down churn, and driving down churn is inherently positive because it limits the the ARPU outflow because typically customers flowing out are rather the the high ARPU customers rather than the low ARPU customers.

And then this is, I think, for us a positive sign overall in in the market in in Italy. And we will see how it evolves now in the second half of the year, but we are quite confident that the market will remain at the current level. That’s great. Can I just

AJ Sonny, Analyst, JPMorgan: have one follow-up on the energy margin? Maybe if you could just give me an indication whether these margins are dilutive to the segment or not. I understand you don’t want to give too much detail on that.

Eugen Sternnet, CFO, Swisscom: No. It’s a it’s, you know, it’s a healthy margin. Obviously, it’s a reselling business, so you would need to compare it to, say, a reselling business in on the telco side. You can’t compare it with an infrastructure business. But we are quite quite happy with the margins we are seeing.

So it’s clearly accretive to our absolute EBITDA and operating free cash flow numbers, and this is what counts most.

Josh Mills, Analyst, BNP Paribas: Great. Thank you.

Louis Schmid, Head of Investor Relations, Swisscom: Alright. That was the last question. And and with that, I would like to conclude today’s conference call. Thank you. And if you have any further questions, we are available for you.

Thank you,

Josh Mills, Analyst, BNP Paribas: and have a nice day.

Conference Moderator: Dear participant, the conference call has come to an end. Thank you for your participation. Goodbye.

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