Swisscom gives in to fiber optic dispute and changes rollout method
Swisscom has backed down in its fiber-optic dispute with the Weko: The company will now once again build mostly direct lines from the telephone exchange to individual households, rather than a single line serving multiple households.
Naturally, this will be more expensive because more lines will have to be laid and more roads torn up. Swisscom is therefore trimming its expansion targets: It now wants to achieve coverage of only 50 to 55 percent of the population by the end of 2025. The annual budget for fiber-optic investments of 500 to 600 million Swiss francs remains unchanged.
The "blue giant" actually had the goal of doubling the number of fiber-optic connections from one-third of households and businesses to around 60 percent by the end of 2025. This would be 1.5 million more fiber-optic connections than today. Coverage of 70 to 80 percent is then to be achieved by 2030.
400,000 connections blocked
However, the Federal Competition Commission Weko had stopped the fiber optic rollout because it considers Swisscom's modified network architecture with only one feed line from the telephone exchange to the street shaft to be anti-competitive. The Weko is insisting on a four-fiber rollout.
Swisscom's appeals against the Weko's precautionary measures have so far been unsuccessful. The main proceedings are still ongoing. A formal decision is not expected before the first quarter of 2023, the group said.
The Weko veto has now blocked almost 400,000 fiber-optic connections that Swisscom has built in the meantime but is not allowed to put into operation. And 70,000 more connections would be added every quarter. The fiber-optic partnership with Salt has been on ice for months. This means massive revenue losses.
Now the pressure on the industry leader has become too great: "Business can no longer wait," the Group wrote in the analyst presentation. In order for customers to be able to use the fast fiber-optic connections, Swisscom has decided to build new connections largely in the point-to-point architecture in the network expansion, it said.
And the nearly 400,000 connections that have been blocked so far will be partially converted to the model with direct lines from the connection center to the household. Swisscom explained that talks are underway with Salt to adapt the partnership to the new circumstances, without giving details.
Solid operating business
Swisscom's operating performance was solid: Revenue fell slightly by 1.4 percent to CHF 8.2 billion in the first nine months. The slight decline was due to the weak euro, which depressed the results of the Italian broadband subsidiary Fastweb in Swiss francs. Operating profit before depreciation and amortization (EBITDA) fell by 3.6 percent to CHF 3.3 billion.
Net profit, however, dipped by 21 percent to CHF 1.2 billion due to special effects. In the previous year, revaluations from a Fastweb fiber-optic cooperation and the sale of a stake in Belgium had resulted in a one-time gain of CHF 207 million. In addition, there were one-time effects in tax expense.
On the other hand, Swisscom booked a fine of almost CHF 72 million from the Weko this year. Without these special effects, net profit would have increased by 2.5 percent, Swisscom wrote.
Sales target lowered due to euro weakness
In view of the weakness of the euro, Swisscom is now lowering its annual revenue targets slightly to CHF 11.1 billion. Previously, Switzerland's largest telecommunications group had targeted sales of 11.1 to 11.2 billion.
By contrast, the other targets for the full year 2022 remain unchanged. EBITDA is expected to reach around CHF 4.4 billion and capital expenditure around CHF 2.3 billion. If the targets are met, shareholders will also receive an unchanged dividend of CHF 22 for the current year. (SDA)
