Swisscom AG (ADR) ((SCMWY)) has held its Q4 earnings call. Read on for the main highlights of the call.
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The latest earnings call of Swisscom AG (ADR) unfolded with a blend of strategic victories and looming challenges. The company celebrated significant milestones such as successful acquisitions and product innovations, yet grappled with revenue pressures and fierce competition, particularly noted in the Swiss B2B and Italian mobile sectors.
Swisscom’s Achievements in Switzerland and Italy
Swisscom marked a series of accomplishments in both Switzerland and Italy. In Switzerland, the company excelled by winning all service and network tests, launching innovative products, and notably expanding its Fiber to the Home (FTTH) footprint, now serving over half of the nation. Meanwhile, in Italy, Fastweb emerged as the second-best mobile performer, leading in mobile number portability while enjoying a 7% revenue growth and an increase in EBITDA.
Successful Closing of Vodafone Italy Acquisition
A strategic highlight was the successful acquisition of Vodafone Italy, completed on December 31, 2024. This move is anticipated to bolster Swisscom’s scale and convergence capabilities, promising an impressive €600 million in synergies.
Innovations and AI Advancements
Swisscom and Fastweb made strides in innovation by launching a suite of new products and services. Notably, they introduced energy offerings and advanced AI infrastructure, powered by NVIDIA technology, positioning themselves as leaders in AI solutions.
Fiber and Network Expansion
The company’s network expansion is progressing robustly, with FTTH coverage now at 52% in Switzerland. Swisscom aims to increase this to 57% by 2025, with ambitious plans to reach 90% by 2035, while phasing out the copper network.
Service Revenue Decline in Switzerland
Despite these achievements, Swisscom faced a decline in service revenue within Switzerland, attributed to intense competition and a customer shift towards second and third brands.
Challenges in Italian Mobile Market
In Italy, Vodafone Italia experienced a decline in B2C mobile service revenue. This was due to a reduction in subscriber numbers and a decrease in ARPU, impacted by lowered mobile termination rates.
Integration Costs and Financial Pressures
Swisscom is managing substantial financial pressures, with CHF 227 million incurred in transaction-related costs affecting EBITDA. Moreover, anticipated integration costs are expected to reach €700 million.
Competitive Intensity in Swiss B2B Market
The B2B market in Switzerland is under significant competitive pressure, impacting service revenue and necessitating further cost-saving measures by Swisscom.
Forward-Looking Guidance
Looking ahead, Swisscom provided preliminary guidance for 2025, projecting group revenue between CHF 15 billion and CHF 15.2 billion, and EBITDAal around CHF 5 billion. In Switzerland, expected revenue is between CHF 7.9 billion and CHF 8 billion, with stable free cash flow at CHF 1.7 billion. Italian operations anticipate revenues of approximately €7.3 billion. The company also affirmed its commitment to a CHF 26 per share dividend by 2026, assuming financial targets are met.
In summary, Swisscom’s earnings call depicted a narrative of strategic achievements interwoven with competitive and financial challenges. Through successful acquisitions and innovations, Swisscom is poised for growth, yet must navigate hurdles in revenue and competitive markets to sustain its upward trajectory.
