Swisscom sees no less competition after UPC-Sunrise exit

Competition will remain tough, with or without the merger of UPC and Sunrise, Schaeppi said in a conference call on Thursday. The cancellation of the takeover of UPC by Sunrise does not fundamentally change this.

Last week, Sunrise had called off the purchase of Switzerland's largest cable network operator for CHF 6.3 billion at the last minute (Werbewoche.ch reported). The reason for the failure was the opposition of Sunrise's major shareholders, who found the deal too expensive, among other things. The purchase would have made Sunrise a more powerful competitor for top dog Swisscom.

Nevertheless, the trend of falling prices will continue even after the largest takeover in Swiss telecom history has collapsed, Schaeppi explained: Customers will get more for the same money.

Swiss surf more on vacation than at home

In mobile communications, data volumes abroad have more than doubled since the launch of the inOne bundled subscription in April, which includes roaming. Customers use their smartphones very intensively in other European countries and surf more during their vacations there than at home in Switzerland.

"We have 40 times more data usage on mobile networks than seven years ago," Schaeppi said. That's why Swisscom needs to expand its networks, he added. Any non-expansion would lead to congestion sooner or later. With the new 5G mobile communications generation, Swisscom has opened up 160 communities with 230 antennas, he said. Swisscom is thus lagging behind its competitor Sunrise. The second largest Swiss telecom group offers 5G in more than 310 communities. Nevertheless, Swisscom wants to reach nine out of ten Swiss people with the new, much faster mobile technology in the near future. "We are sticking to our goal of 5G coverage of 90 percent of the population by the end of the year," Schaeppi said. However, he said, in many communities the rollout of the mobile network is being delayed by moratoriums and objections. This does not only affect 5G. How many communities this is is difficult to say, Schaeppi explained. It's constantly changing, he said. "If this goes on for a long time, it will cause problems for all providers."

Swisscom wants to score with TV

In the fixed network speed race, where cable network operators UPC and Quickline are currently stepping on the gas with an increase in peak speed to 1 gigabit per second (Gbit/s) and Salt is even advertising 10 Gbit/s, Swisscom cannot keep up with its copper network. It is trying to keep up by pulling the optical fibers closer to the houses up to the street shaft, which shortens the length of the copper line.

By the end of 2021, 90 percent of households should have speeds of more than 80 megabits per second (Mbps) and 75 percent of households should have speeds of more than 200 Mbps, Schaeppi said. Speed is not often the decisive factor in customer choice, but the bundled offer, he said. And this is where Swisscom is competitive: "We have the best TV offer," Schaeppi said.

Even for a household with four people, 80 Mbit/s would be sufficient. Competitors' advertisements with speeds of 1 or even 10 Gbit/s are primarily marketing.

Sales and profit shrunk

In the first nine months, Swisscom was able to cushion competitive pressure in Switzerland through cost-cutting measures and the growth of subsidiary Fastweb in Italy. Revenue shrank by 2.7 percent to CHF 8.46 billion. Operating profit before depreciation and amortization (EBITDA) stagnated on a comparable basis.

On balance, net profit fell by 2.6 percent to CHF 1.18 billion. Swisscom thus performed at the upper end of analysts' expectations. On the weaker Swiss stock exchange, the share gained 0.4 percent until shortly after midday.

Swisscom's management is sticking to its previous outlook for the full year 2019: Revenue is expected to reach around CHF 11.4 billion, compared with CHF 11.7 billion in the previous year. Swisscom continues to expect EBITDA to exceed CHF 4.3 billion. (SDA)