Segment revenue and results

Reporting is broken down into the segments ­Swisscom Switzerland, Fastweb and Other operating segments. Group Headquarters is disclosed separately.

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Swisscom Switzerland

In CHF million, except where indicated20142013Change
Net revenue and results
Residential Customers5,3265,1453.5%
Small and Medium-Sized Enterprises1,1591,1510.7%
Corporate Business1,7881,7870.1%
Wholesale929966–3.8%
Elimination(571)(600)–4.8%
Net revenue8,6318,4492.2%
Residential Customers2,9512,8981.8%
Small and Medium-Sized Enterprises856864–0.9%
Corporate Business900907–0.8%
Wholesale381384–0.8%
Network & IT(1,512)(1,506)0.4%
Segment result before depreciation and amortisation (EBITDA)3,5763,5470.8%
Margin as % of net revenue41.442.0
Depreciation, amortisation and impairment losses(1,173)(1,104)6.3%
Segment result2,4032,443–1.6%
Capital expenditure and headcount
Capital expenditure in property, plant and equipment and other intangible assets1,5711,5163.6%
Full-time equivalent employees at end of year13,28512,4636.6%

Swisscom Switzerland’s net revenue grew year-on-year by CHF 182 million or 2.2% to CHF 8,631 million, while operating income before depreciation and amortisation (EBITDA) was CHF 29 million or 0.8% higher at CHF 3,576 million. Adjusted for corporate acquisitions and non-recurring costs for restructuring, revenue increased by 1.4% and EBITDA by 0.3%. Price erosion of some CHF 360 million (of which CHF 170 million resulted from reductions in roaming fees) was more than offset by customer and volume growth. At CHF 1,571 million, capital expenditure was CHF 55 million or 3.6% higher than in the previous year due to higher spending on network infrastructure. Headcount increased by 822 FTEs or 6.6% year-on-year to 13,285 FTEs. Adjusted for company acquisitions, the increase amounted to 336 FTEs, mainly as a consequence of measures to strengthen customer service operations and the insourcing of external staff.

The trend towards bundled offerings and new pricing models such as flat-rate tariffs continues unabated. Natel infinity mobile subscriptions, which offer customers unlimited calls and SMS messages to all Swiss networks as well as unlimited web browsing, remain very popular. The customer base grew year-on-year by 0.4 million to around 2.1 million. By the end of 2014, 1.2 million customers were subscribing to packages such as the Vivo range of offerings which combine fixed-line access with telephony, Internet and TV or also include a mobile line. This corresponds to an increase of 208,000 customers or 20.8% versus the prior year. Revenue from contracts for bundled offerings rose by CHF 368 million or 23.7% to CHF 1,921 million.

Swisscom Switzerland/net revenue
In CHF million, except where indicated20142013Change
Revenue by services
Revenue mobile single subscriptions2,7762,782–0.2%
Revenue fixed-line single subscriptions1,9672,215–11.2%
Revenue bundles1,9211,55323.7%
Revenue wholesale570588–3.1%
Other net revenue1,3371,2516.9%
Revenue from external customers8,5718,3892.2%
Operational data at end of period in thousand
Fixed access lines2,7782,879–3.5%
Broadband access lines retail1,8901,8114.4%
Swisscom TV access lines1,1651,00016.5%
Mobile access lines6,5406,4072.1%
Bundles1,2091,00120.8%
Unbundled fixed access lines180256–29.7%
Broadband access lines wholesale26221521.9%
Revenue generating units (RGU)12,37312,0972.3%

Revenue from external customers increased year-on-year by CHF 182 million or 2.2% to CHF 8,571 million. The decrease of CHF 190 million due to price erosion and the price reductions for roaming amounting to CHF 170 million were more than offset by customer and volume growth. ­Swisscom Switzerland’s revenue also increased thanks to the acquisition of LTV Yellow Pages Ltd in September 2014, and to the majority stake in Cinetrade acquired in the prior year. The number of revenue generating units (RGU) with end customers grew by 276,000 or 2.3% to 12.4 million. Natel infinity mobile subscriptions, which offer customers unlimited phone calls and SMS messages to all Swiss networks as well as surfing, continue to grow in popularity. At the end of 2014, 2.1 million customers, or 63% of the customer base (excluding corporate customers), were using the Natel infinity offerings. Figures from recent quarters show that customers switching to Natel infinity continue to generate higher revenues (ARPU). The number of postpaid mobile customers grew by 146,000, while the number of prepaid customers dropped by 13,000. In 2014, ­Swisscom sold a total of 1.5 million mobile handsets (–3.6%). The number of smartphone users has further increased, with the share of postpaid subscribers rising from 69% to 74% within the space of a year.

Demand remains high for bundled offerings such as the Vivo range, which combines fixed-line access with telephony, Internet and TV or also includes a mobile line. The number of customers using bundled offerings rose year-on year by 208,000 or 20.8% to 1.21 million. Revenue from contracts for bundled offerings rose by CHF 368 million or 23.7% to CHF 1,921 million. The number of ­Swisscom TV connections increased by 165,000 or 16.5% to 1.17 million, of which 1.06 million subscribed to the basic packages. ­Swisscom TV 2.0, which offers additional functions, was launched at the beginning of April 2014 and by the end of 2014 had already attracted 306,000 customers, most of whom had upgraded from a previous ­Swisscom offering to a higher-quality bundled offering. 2014 saw a decline of the number of fixed lines for voice telephony by 101,000 or 3.5% to 2.78 million, due primarily to the number of customers migrating to cable network providers or switching from fixed to other forms of connectivity such as mobile. Retail broadband access lines grew year-on-year by 79,000 or 4.4% to 1.89 million, while the number of unbundled subscriber access lines fell by 76,000 or 29.7% to 180,000. The number of wholesale broadband access lines rose by 47,000 or 21.9% year-on-year to 262,000.

Swisscom Switzerland/operating expenses and segment result
In CHF million, except where indicated20142013Change
Segment expenses by nature of cost
Traffic fees(424)(449)–5.6%
Subscriber acquisition and retention costs(520)(463)12.3%
Other direct costs(925)(892)3.7%
Direct costs(1,869)(1,804)3.6%
Personnel expense(1,765)(1,691)4.4%
Other indirect costs(1,590)(1,581)0.6%
Capitalised self-constructed assets and other income169174–2.9%
Indirect costs(3,186)(3,098)2.8%
Segment expenses(5,055)(4,902)3.1%
Segment result
Segment result before depreciation and amortisation (EBITDA)3,5763,5470.8%
Margin as % of net revenue41.442.0
Depreciation, amortisation and impairment losses(1,173)(1,104)6.3%
Segment result2,4032,443–1.6%
Capital expenditure and headcount
Capital expenditure in property, plant and equipment and other intangible assets1,5711,5163.6%
Full-time equivalent employees at end of year13,28512,4636.6%

Segment expense rose by CHF 153 million or 3.1% to CHF 5,055 million. At CHF 1,869 million, direct costs were CHF 65 million or 3.6% higher year-on-year. The higher subscriber acquisition and retention costs as well as additional costs related to corporate acquisitions were partly offset by the reduction in mobile termination rates and outbound roaming fees. Indirect costs increased by CHF 88 million or 2.8% to CHF 3,186 million. Adjusted for company acquisitions and restructuring costs, indirect costs rose by 1.2%. The higher personnel expense as a result of the increase in headcount was partly offset by savings on other operating costs. Personnel expense increased by CHF 74 million or 4.4% to CHF 1,765 million, adjusted personnel expense was 2.4% higher. Headcount rose by 822 FTEs or 6.6% to 13,285 FTEs as a result of acquisitions, the insourcing of external personnel and an increase in customer service staff. Adjusted for corporate acquisitions, headcount was 2.7% higher year-on-year. The segment result before depreciation and amortisation was CHF 29 million or 0.8% higher at CHF 3,576 million, resulting in like-for-like growth in EBITDA of 0.3%. The profit margin was down 0.6 percentage points at 41.4%. Depreciation and amortisation increased year-on-year by CHF 69 million or 6.3% to CHF 1,173 million, largely due to the high level of capital expenditure. The segment result ended the year CHF 40 million or 1.6% lower at CHF 2,403 million. Capital expenditure rose year-on-year by CHF 55 million or 3.6% to CHF 1,571 million due to increased investment in the expansion and upgrading of mobile and fixed network infrastructure with the latest technologies.

Fastweb

In EUR million, except where indicated20142013Change
Residential Customers7537441.2%
Corporate Business7897712.3%
Wholesale hubbing2845–37.8%
Wholesale other1157847.4%
Revenue from external customers1,6851,6382.9%
Intersegment revenue34–25.0%
Net revenue1,6881,6422.8%
Segment expenses(1,173)(1,137)3.2%
Segment result before depreciation and amortisation5155052.0%
Margin as % of net revenue30.530.8
Capital expenditure in property, plant and equipment and other intangible assets562565–0.5%
Full-time equivalent employees at end of year2,3912,3631.2%
Broadband access lines at end of year in thousand2,0721,9426.7%
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Fastweb’s net revenue grew by EUR 46 million or 2.8% to EUR 1,688 million compared to the previous year. Wholesale revenue from low-margin interconnection services (hubbing) dropped as expected. Excluding hubbing, Fastweb’s revenue was EUR 63 million or 3.9% higher at EUR 1,660 million. Despite difficult market conditions, Fastweb’s broadband customer base grew year-on-year by 130,000 or 6.7% to 2.07 million. In the residential customer segment, fierce competition drove down average revenue per broadband customer by around 6% versus the previous year. This decline was offset by customer growth, with revenue from residential customers rising by EUR 9 million or 1.2% to EUR 753 million. Revenue from business customers increased by EUR 18 million or 2.3% to EUR 789 million, while other wholesale business revenue was EUR 37 million or 47.4% higher at EUR 115 million.

The segment result before depreciation and amortisation totalled EUR 515 million. This corresponds to a year-on-year rise of EUR 10 million or 2.0%, mainly as a result of higher revenues. The profit margin fell year-on-year by 0.3 percentage points to 30.5%.

Headcount at the end of 2014 totalled 2,391 FTEs, representing an increase of 28 FTEs or 1.2% compared to a year earlier. Capital expenditure dropped by EUR 3 million or 0.5% to EUR 562 million due to lower spending on the network infrastructure. The ratio of capital expenditure to net revenue was 33.3% (prior year: 34.4%).

Other operating segments

In CHF million, except where indicated20142013Change
Revenue from external customers1,0881,0325.4%
Intersegment revenue8017871.8%
Net revenue1,8891,8193.8%
Segment expenses(1,528)(1,516)0.8%
Segment result before depreciation and amortisation36130319.1%
Margin as % of net revenue19.116.7
Capital expenditure in property, plant and equipment and other intangible assets2111958.2%
Full-time equivalent employees at end of year5,1324,9643.4%
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At CHF 1,088 million, revenue from external customers was CHF 56 million or 5.4% higher year-on-year, largely due to acquisitions. ­Swisscom’s takeover of the PubliGroupe was completed in September 2014, following which LTV Yellow Pages Ltd was assigned to the ­Swisscom Switzerland segment, while other interests were assigned to Other operating segments. In 2013 ­Swisscom IT Services took over the business platform of Entris Banking and Entris Operations, which is used primarily for processing payment transactions and securities trading for banks. Revenue from external customers generated by ­Swisscom IT Services grew by CHF 38 million or 6.2% to CHF 650 million, largely as a result of acquisitions. Intersegment revenue grew year-on-year by CHF 14 million or 1.8% to CHF 801 million, chiefly due to the higher volume of construction services performed for ­Swisscom Switzerland.

Segment expense rose by CHF 12 million or 0.8% to CHF 1,528 million. The increase is a result of higher costs related to acquisitions and revenue growth and was partially offset by higher gains on the sale of real estate, which in 2014 rose by CHF 50 million year-on-year. The segment result before depreciation and amortisation rose accordingly by CHF 58 million or 19.1% to CHF 361 million. At 5,132 FTEs, headcount at the end of 2014 was 168 FTEs or 3.4% higher than the previous year, due primarily to acquisitions. Capital expenditure rose by CHF 16 million or 8.2% to CHF 211 million as a result of the higher volume of investment by ­Swisscom IT Services in IT infrastructure.

Group Headquarters and reconciliation of pension cost

The segment result before depreciation and amortisation improved by CHF 6 million or 4.7% to CHF –121 million, largely on account of the lower cost of restructuring measures compared to the prior year. At 317 FTEs, headcount was on a par with the prior year.

No expenses are disclosed as a pension cost reconciliation item (prior year: CHF 17 million).