Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Swisscom AG (SCMWY, Financial) reported a 1.8% increase in revenue for Q2 2024, driven by a 7% growth in the Italian market.
- The company confirmed its full-year guidance for 2024, indicating confidence in meeting its financial targets.
- Swisscom AG (SCMWY) successfully launched new AI and cloud offerings, contributing to IT service revenue growth.
- The sale of the FiberCop stake for EUR 439 million was highlighted as a significant financial achievement.
- Fastweb in Italy showed strong performance with a 113,000 net increase in mobile subscribers, achieving over 5% market share.
Negative Points
- EBITDA in Switzerland declined by 1.3%, attributed to softer results on the cost savings side.
- The company experienced a slight decrease in broadband subscribers in Switzerland, with a net loss of 9,000.
- Swisscom AG (SCMWY) faced intense promotional activity in the Swiss market, impacting competitive dynamics.
- The company reported weaker cost savings in Q2 due to seasonal effects and one-off costs.
- Fastweb's EBITDA growth did not keep pace with revenue growth, attributed to a change in revenue mix with lower margins.
Q & A Highlights
Q: Can you discuss the competitive dynamics in the Swiss market, particularly regarding promotional activities and their impact on your business?
A: The Swiss market remains highly promotional, with increased intensity in Q2. For example, Sunrise extended promotional periods from 12 to 24 months, and Salt offered discounts over 70%. We are responding by enhancing our sales strategies, including shop layout and advertising, to stimulate net add intake. The fiber rollout offers upselling potential but also increases competition as Salt enters the market. We expect these effects to balance out, with potential upside in wholesale business.
Q: How significant is the energy business for Fastweb, and what impact does it have on revenues and EBITDA?
A: The energy business is still in its early stages, and its full impact on 2024 guidance is marginal. However, it shows promising potential, especially post-merger with a larger customer base. The business model involves reselling energy with back-to-back contracts, ensuring no exposure to wholesale energy prices. While margins are not as high as telco, they are still attractive, particularly with a large customer base.
Q: What measures are you taking to address ARPU dilution in the Swiss wireless segment, and how do you plan to improve it?
A: We have implemented measures to improve ARPU, particularly in the wireline segment, by phasing out older tariffs. In wireless, the dilution is mainly due to the success of second and third brands. We are focusing on increasing net adds and cross-selling, particularly through these brands. The main brand ARPU remains stable, and we are working to stabilize the main brand customer base to manage the second brand's growth.
Q: Can you provide more details on your AI initiatives and their expected impact on margins compared to traditional telco and IT services?
A: Our AI initiatives, particularly the NVIDIA-based AI compute infrastructure, are in early stages. While it's too soon to discuss margins, traditional cloud compute offerings have shown attractive margins. These offerings could potentially yield low double-digit gross margins, which are more favorable than other IT services. However, we need to generate significant revenue before assessing the full impact.
Q: Regarding the Vodafone Italy acquisition, have you filed with the Italian antitrust authorities, and what is the expected timeline for closing the transaction?
A: We are in full engagement with the Italian Competition Authority, maintaining active exchanges. We expect the transaction to close in the first quarter of 2025. However, we are cautious about providing specific details on the filing process due to its delicate nature.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
