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Good morning, ladies and gentlemen, and welcome to the third quarter results 2018 presented by Urs Schaeppi, Mario Rossi and Louis Schmid.Louis, please the floor is yours.
Good morning, ladies and gentlemen, and welcome to Swisscom's Q3 results presentation. My name is Louis Schmid, Head of IR. And with me are our CEO, Urs Schaeppi; and Mario Rossi, our Chief Financial Officer.The first part of today's analyst and investor presentation hosted by our CEO consists of 3 chapters: a quick overview of the highlights, operational performance and financial results of Q3 and the first 9 months; an update on our activities and performance in Switzerland; and finally, some explanations on the Fastweb's results. In the second part of the presentation, Mario runs you through the financials and the unchanged full year guidance.With that, I would like to hand over to Urs to start his part of the presentation. Urs?
Good morning, ladies and gentlemen. I would like to start with Page 4, the highlights. So our financials are as expected, and we are also on our guidance, so we confirm our guidance for 2018. If you look to the Q3 EBITDA, you can see that the margins are slightly up on a year-on-year comparison, and also Fastweb is on track. Industrial-wise, we have an EBITDA growth of 5%.In the market, we are successful with our bundle offers. InOne, we have 2.1 million customers on our quadruple-play or triple-play offer. And also with TV, we have a solid momentum. So overall, the trends are the same as in the previous quarter, with stable market performance, stable market share and good churn figures. I will come later to it. On the regulatory side, we have the Telecommunication Act, which is under revision. So now it will go to the 2nd Chamber and we expect decisions at the end of this year, in December.So if you go on Slide 5, you see our operational performance. A solid RGU momentum in Switzerland, with a small growth on broadband, but also on TV and postpaid, and also a slightly declining -- reduction of voice line, which is a substitution business by mobile and IP.Fastweb, we have a net -- positive net adds in broadband. And also mobile, the Q3 mobile was slightly weak. But if I look to the October figures, we see much better figures on mobile because we made readjustment of our products in mobile. So overall, a good and successful customer base management and a growth in Italy.If you go on Slide 6, the key financial figures, you see that we were able to have a slight growth on our net revenue, up by CHF 85 million. Dynamics are as in the previous quarter: in Switzerland, a reduction of CHF 140 million, mainly driven by price -- price pressure and substitution, fixed to mobile substitution; and in Fastweb, a positive revenue increase by over CHF 100 million.On the EBITDA level, if you look to the EBITDA organic in the first 9 months, you can see that our EBITDA is stable. And in Switzerland, we have a declining EBITDA by CHF 77 million, driven by this voice line declines, some convergence discounts, and B2B price pressure, but then better indirect costs and some positive dynamics on IT products. So overall, if you take out the one-off, a stable EBITDA. And Fastweb has been increasing EBITDA by CHF 26 million.If you go on Slide 8, you see our priorities in Switzerland. Those priorities are customer base management, so a clear focus on value, a value focus; then further increase in our networks to have this high-quality networks in mobile and broadband; a push in the bundle migration to increase the customer lifetime value; and in the B2B market to leverage our strong customer base, that means share of wallet in the B2B market. Beside this, as already mentioned in the last quarters, efficiency programs, where we are on track to achieve our targets.If you go on Slide 9, you see the situation in the Swiss market, how the market is a mature market. You see that on mobile, we have high figures or quite high figures on retention, 191,000 retention offers. We have a postpaid customer share of 71%. And I think that's important to say, we have stable postpaid churn figures or even slightly decreasing churn figures. Also, in the B2B market, we don't have an acceleration of the churn. If I look to our churn figures or to our market share in the B2B market, we have a stable condition. We lose some customers, but we are also making win backs.If I go to the broadband, in the middle of the chart, you see also stable churn figures at 9%, which shows that we are successful with our customer base management. And on the fixed mobile bundles, at the bottom of the chart, you see the churn figures. So we have churn figures of -- in the region of 5% if you are in inOne in a converged bundle. So strong and good momentum on customer base management.On Slide 10, you see our activities on the networks upgrade, as planned. You see that we have -- 61% of our network is now in speeds over 80 megabits per second. And this is - the target is that we will have 90% in '21. So we are there on track to -- with the rollout of ultra-broadband coverage. And also on mobile, we are on track to have an excellent network. We also made pilots with standardized 5G networks in some cities. So there I'm also convinced that we are a front leader. There are always a lot of tests. I just mentioned 2 of them where we had the best performance.If you go on Slide 11, some information on the revision of the Telecommunication Act. So the main topic in this Telecommunication Act out of the perspective of Swisscom is the fiber regulation. The 1st Chamber rejected it. So that is a good sign for Swisscom. Now it will go to the 2nd Chamber in December and then we have more clarity. There is still some discussion on net neutrality. I think we should wait for the discussion in the 2nd Chamber. And some discussion on roaming. The law proposed to set some price caps in roaming. So we will no effects on this revision of the Telecommunication Act -- that's been my forecast -- before the second half of 2019. But I think also that we should look quite relaxed to this revision.If I go to Slide 12, you see some activities which we are doing to stimulate the retail market performance. The market is very strong promotion driven in Switzerland. I would say that the acquisitions are primarily promotion driven, not only in the fiber-to-the-home turf, also in other activities. And the liquidity of the market is mainly in the very price sensitive area of the market. That's also the reason why we have so good and stable churn figures, as I mentioned before.Slide 13, you see the performance of inOne. We have 2.1 million inOne customers. We are at the penetration in the region of 50%. So 50% of our customer base is now in this inOne offer. And the impacts on the financials of inOne are as expected. And we have an increasing lifetime value because the churn is in the region of 5%.On Slide 14, the service revenue performance. In the retail market, you see that we have stable ARPUs, or in the bundled products even an increasing revenue per bundle. The revenues on wireline are at CHF 642 million. This is minus CHF 12 million compared to previous year. This is mainly driven by voice, voice substitution. And then on mobile, we have CHF 662 million, which is CHF 26 million below previous year. The main effects here are the converged discount and the roaming. But overall, stable ARPUs and increasing revenues in the bundle area, which shows our strategy.Enterprise business on Page 15. So increasing -- slightly increase revenue generating units in mobile, which shows that we are able to keep our strong market position. Declining subscription in voice. This is driven by IP substitution and All IP migration. And then you see the service revenues, which is slightly down by CHF 17 million to previous year, year-on-year. And there the main effect is general price pressure, price competition and All IP migration.The solution revenue is in the region as we forecasted it the last time, in the region of CHF 250 million. We have stable market share. We have the good win ratio and the good order intake. But the solution revenue is slightly lower than previous years because we have always project impacts, it's a bit a seasonal business. And then we have, as already mentioned the last time, in the banking area some changes also on the accounting level and we lost one customer, but we have a good order intake in the banking segment. So overall, I would say also a good performance in the B2B business, but there is price pressure in this segment.On Page 16, our activities on cost reduction. So we are well on track to achieve this CHF 100 million savings. At the end of Q3, we are at CHF 82 million decrease indirect costs.On Fastweb, some remarks on Page 18. You see here on a high level perspective what is our strategy in the network side. So we are targeting hybrid fixed-wireless technology network with our own network where we have a footprint of 8 million households with FTTx. And then on the mobile side, we have now some spectrum and you can see it on the chart we have this 200 megahertz, 26 gigahertz. And we are on the way to get the spectrum of this 40 megahertz in the 3.5 gigahertz area and this will enable us to get a very selective coverage in hotspots to deliver a good mobile customer experience.So this is a bit our strategy in the network area. So the focus is the fixed network, where we are on the way to migrate much more customer on ultra-broadband.On Page 19, the consumer performance of Fastweb. You see that we have a customer base increase of 4%. Ultra-broadband customers grew by 35%, and so we have now a penetration of 52% of ultra-broadband customers in our customer base. And on mobile, you see that we have 1.3 million mobile customers, so an increase of 34%. And 28% of our mobile -- or we have 28% mobile penetration in our customer base, so converged customers. And there, in this customer base, we have 30% lower churn.If you go on Slide 20, you see the B2B performance and wholesale performance. So increased order book, and important to mention, 31% market share in the B2B market. And I'm convinced that we are also -- here in the B2B market, we have further potential to grow.If you go on Slide 21, you see the financial performance. Net revenue on a comparable base up by 7%, EBITDA on a comparable base up 5%. So a growth on net revenue and EBITDA. Mario will give you some more flavor on it later.Now I would like to hand over to Mario for the financials.
Thank you, and also good morning from my side. We start on Page 23 with some additional information on the financials. As was mentioned, on the top line on a like-for-like basis we are cumulative -- we can show flat development. But in Q3, other than the first 2 quarters, Fastweb -- or growth Fastweb is not sufficient to compensate for the revenue decline of the Swiss business.A few remarks on the segments. In retail customers, we lose CHF 38 million in Q3. That's a similar amount like in Q2. And also the drivers behind that decline are the same, that's convergence, decrease of access lines and there's a much lower amount of roaming. I will give you some details later on before the guidance.Also, in enterprise, a similar evolution like in Q2, in both, in service revenue and in the solution business. And again, as was mentioned, we have the same effects in Q3 as in Q2. We lost one banking client and we had some new customer requirements, which result in lower revenues.Maybe a few remarks on the segment. Also, I saw some remarks this -- some notes this morning on revenue, the CHF 25 million, this cumulative number for 9 months. And the main reason for the increase of revenue comes from our subsidiary cablex, where we have a huge contract in the installation business for the Swiss Railways. That's more or less the full effect of this CHF 25 million.A few words on Fastweb's evolution of Q3. So in consumer, they were able to grow revenues by 4.3% compared to a cumulated growth of 8.6%. The reason for the lower growth is we don't see anymore the effect of the 4-weeks billing because we implemented Fastweb in Q2 2017.On enterprise, we have a steady growth of the revenues, of north of 7% in all 3 quarters. And in wholesale, we post revenues of CHF 52 million in Q3 2018 compared to CHF 62 million in 2018. The reason is, there you have some seasonality and we had a very strong Q3 back in 2017. And if I look at our expectations for Q4 on the revenue side of Fastweb, we do expect same growth in Q4 as in Q3 for both segments, enterprise and consumers, but we expect a very strong Q4 in wholesale.A few remarks on Page 24 on OpEx. Maybe on acquisition and retention costs. We have in Q3, CHF 11 million less subsidized internet routers and the TV boxes. The reason is we had last year the All IP migration, where we replaced a lot of devices for free. And then we have CHF 70 million less acquisition and retention cost in mobile in Q3.On the outpayments, we have lower outpayments for outbound roaming because of price decreases. I think these are the main effects on the direct costs. On indirect costs, as was mentioned, we are well on track to reach our CHF 100 million savings on indirect costs. The main part comes from workforce, close to CHF 60 million. But also on other cost elements like external workforce, IP marketing we are able to reduce our expenses.Next Page on EBITDA by segment. Can say on retail we have more or less a flat Q3 compared to the prior year. But here we have to take -- we have 2 main effects. We have CHF 20 million less acquisition and retention cost in Q3 and we have CHF 50 million less outpayments, which I mentioned before.On enterprise, a similar development in Q3 as in Q2. So we were able to absorb a part of the price pressure on the top line on the cost side. On wholesale, IT and network, first we have here the impact of the cost reductions and then Q3 wholesale revenue was impacted by lower inbound revenue of CHF 30 million. That's the reason why we here a negative impact of CHF 8 million.On Fastweb, in all 3 quarters we have a comparable EBITDA growth of around -- of exactly 5%. Here again a few words on other. Again, the CHF 45 million, are cumulated numbers. So totaled around CHF 50 million. And there are 2 reasons. One reason is we had some margin on the revenue growth I mentioned before on the top line. But the main reason is the IFRS reconciliation. In the operating segment, we show the cash payments to pension fund. The reason is that we have a more comparable situation along the quarters and the years.And in the reconciliation in this segment other, we have the difference between the payments and the contribution and the payments and the calculation according to IFRS 19. Again in this segment, contribution and payments, and in other we have, let's say, the calculation according to the IFRS rules. And in 2017, we had higher payments because we had a lot of early retirement cases and that gives us this positive impact. But on a quarterly basis, the difference of this effect is around CHF 10 million. So I think that's -- it's an accounting issue at the end.On net income, below the EBITDA, I think there's nothing special to mention. We had one refinancing in Q3, CHF 150 million. And you find the debt portfolio and the maturity profile on Page 50.On the next Page, CapEx. Switzerland, we are at prior year level more or less. Fiber rollout is performing well. We invested in Q3 CHF 120 million in fiber and the pace is accelerating. And then cumulative basis on mobile, we invested in 3 quarters CHF 250 million. Fastweb in local currency is 2% below prior year and the CapEx -- the main CapEx drivers in general are customer driven CapEx.Under operating free cash flow, you see this negative change in net working capital. It's relatively a high amount. But that's due to seasonality. On the full year basis, I expect an impact of minus CHF 80 million to CHF 100 million coming from change in net working capital.That brings me to the underlying EBITDA trend 2018 of the Swiss business. You see here the quarterly evolution in the retail business of fixed line -- voice line losses, outbound roaming and the convergence discounts. I think on fixed-line and convergence discounts, we will be a bit higher -- the impact will be a bit higher than we guided. We guided for fixed-line CHF 60 million. This time now at CHF 50 million. Convergence we guided CHF 80 million. We stand now at CHF 65 million.The B2B segment, we guided for a margin loss of CHF 40 million. We stand now at CHF 56 million. But the B2B business is able to compensate part of it in the line indirect cost savings.So I would say overall after 9 months we have from these structural effects a negative impact of CHF 77 million, and for the full year we expected CHF 100 million less EBITDA. And I think we are well on track to deliver this guidance.And then that brings me to the last slide. As Louis mentioned in introduction, of course, we confirm after 9 months the full year guidance.And with that, I hand over to the operator.
[Operator Instructions] The first one is coming up from Simon Coles from Barclays Bank.
I have one on Switzerland. So you're still making steady progress on fixed mobile bundling. Do you see any need to accelerate that? Because we've seen a lot of information this summer? I'm guessing you're not seeing much impact from Salt. But any color on how competition has been progressing would also be helpful. And then the second one on Fastweb in Italy. I was just wondering how you feel about MVNO economics now versus owner economics because we're obviously seeing mobile data increase quite substantially and [ privacy ] in that market and recent headlines around potential M&A there.
On the competition or on -- in Switzerland on this converged offer, inOne. So we have a good momentum on inOne. We don't see that we have to change in our -- something. So as you see in the presentation, the penetration is increasing. It will continue. But it will certainly -- the speed of adoption of inOne will decline a bit because we are already now at 50%. But I think we are well positioned with our inOne product and our strategy on this bundled product is to further increase the USP or the advantage on our TV product and ramping up the speed in the ultra-broadband product. So we don't see there actually a need to change the strategy in the bundled offer. Competition is -- as I mentioned, is very promotion oriented, very short-term oriented. Competition is trying to get on -- from customers with aggressive promotion. And the liquidity of the market is mainly in the low end, in the very price-sensitive area. On Fastweb, on the MVNO offer, so we have –- we are certainly not subsidizing the MVNO business because you are talking about margin. So we do our business in a way that we'll have the margin on mobiles. And we are doing a customer base management because then we are able to decrease the churn. So our strategy of customer base management of Fastweb is to bring in more customers on our ultra-broadband network and having a mobile product to get a more converged customer base. That's a bit our strategy. And M&A, so we don't comment too much on M&A, but we think that we can develop Fastweb.
Then I have a next question from Jakob Bluestone from Credit Suisse.
I've got a question looking at Page 6 in your slide, where you used to break out the quarterly development of your revenues, which should be for Switzerland. And one of the things that sort of jumps out is that every quarter the decline in Swisscom Switzerland revenues gets a bit bigger. So you lost CHF 39 million year-on-year in Q1, CHF 47 million in Q2, down CHF 57 million year-on-year in Q3. And I was just wondering, do you think we're sort of at a low point or do you think we should be looking for continued erosion in your Swiss revenues? And then just secondly, can I just follow up? I think you mentioned the weakness in wholesale was to do with lower inbound roaming. Should we basically be sort of expecting wholesale revenues to be shrinking going forward given -- this is I guess annualizing some of the roaming changes last year or is that sort of more seasonally driven? So just any color you can give on the wholesale outlook.
I will take the question on service revenue in Switzerland and Mario will go through the -- to this inbound roaming question. On the service revenue in Switzerland, we will have some pressure on the service revenue in Switzerland. But if you look to the whole dynamic, so the dynamic -- the negative dynamics will flatten out. You see this already today that the impact of roaming is flattening down. Fixed to mobile -- or fixed-line will also flatten out because the majority of All IP migration is done and a lot of customers who made the substitution have done it. So you see it also in the reduction of the lines, fixed voice lines that they are using. Now this impact will be lower. And the converged discount is actually driven by the amount of migration to inOne and this also has a saturation effect. Overall, there will be a less hard dynamic on the service revenue in Switzerland. Our strategy is to work on the customer base, to have a "more for more" approach and keeping the churn low. That's a bit the dynamics which we will have in the service revenue. Mario?
And on the inbound roaming, we will have also in the future lower prices and we will have the further figure decline. You can expect also in Q4 a decline. But don't forget on the other side, we will have lower outpayments because that's a combined business. So the prices for the outpayments will also go down. There you will see the positive impact mainly in the retail segment.
Then the next question is coming from Frederic Boulan from the Bank of America.
Just a few points, first of all on the Telecom Act. If you could explain a little bit the range of outcomes? You seem very confident, but if you could detail a little bit the areas where things could go against you and what could be the impact for the group in the long run? Secondly, on Fastweb, if you could clarify a little bit what actions you have in the pipeline at the cost side? I think to reach your CHF 700 million guidance you need probably about 20% EBITDA growth in Q4. So if you could explain a little bit why we're trending a bit below trends for the time being and what actions do you have in place to achieve the guidance that you are reiterating today?
I'll take the question of Telecommunication Act and Mario the cost question of Fastweb. The Telecommunication Act is actually -- for Swisscom the major discussion is on this fiber regulation. And the Telecommunication Act what it is in discussion, that we get a technology neutrality. That would mean that Swisscom would be regulated also on the fiber networks. Today we are only regulated on the copper networks. And that's the main discussion. And the 1st Chamber of the parliament exactly rejected this proposal of fiber regulation. So that's -- the 1st Chamber actually made a decision which is good for Swisscom. And I think we have strong arguments why this fiber regulation would be not good for the Swiss market at the end because this would reduce the investments dynamic in Switzerland and I think the parliament is very aware of this. So we have to wait until December, then I think we know much more about it. And then the other thing is more a question on net neutrality. There the discussion is still going on. In our industry in Switzerland, we have a codec for net neutrality and we don't have violation of net neutrality in Switzerland. So I think -- yes, I don't know the result of the parliament, but I'm not afraid now too much about this net neutrality topic. And also on roaming, on roaming I would say the impact on roaming will not only be on Swisscom. And I would say Swisscom on the roaming side is the one who had the strongest roaming prices. We made the most of the roaming migration -- or the migration is sustainable. Roaming business we actually made. So I would say we would be the one who is suffering the least if there would be a roaming migration. And I think that's also a good sign that roaming regulation wouldn't be a too strong one, but that's speculation.
And on Fastweb, so the organic EBITDA without the IFR 15 impact is then now at -- after 9 months it's EUR 502 million. And as you mentioned, Fred, yes, we expect -- we still expect 700 million EBITDA on a full year basis. And the main drivers for Q4 to reach this guidance I mentioned. So we have -- or we expect a similar growth on consumer and corporate in Q4 as we had in Q3. And we expect quite strong wholesale Q4 and this business has some seasonality. And in the wholesale business, you see there, high margin, wholesale revenues from the infrastructure business in Q4. On the cost side you mentioned, there is nothing special. So we think we can reach this guidance with flat indirect costs in Q4 compared to Q3. So that's more or less how we see the evolution of the last quarter in 2018.
Then I have a next question coming up from Matthijs Van Leijenhorst.
Matthijs Van Leijenhorst, Kepler Cheuvreux. First question is on the competitive environment. What I understood is that in Q3 you mainly saw competition at the low end of the market. I was wondering is this still the case in Q4. And the second question is regarding Fastweb. During the Q2 call, you provided some guidance for the Swiss domestic business, but I was wondering could you also provide some CapEx guidance for Fastweb, because if I look at the cash conversion for the Italian business, it's still quite limited. So could you give some more color on that?
Okay. I take the question on competition in Switzerland and Mario, Fastweb guidance. The competition in Q4 in Switzerland will be -- will stay approximately the same. There will be the Christmas business, so competition will certainly do some nice promotions. But I think that Swisscom has the right strategy to be resilient against it. We will also do certainly some promotions to get a good positioning in the -- also in the low-end market. We have to compete in the low-end market. We have also our second and third brand product portfolio and they are actually performing well. But it's the fact that in Switzerland the competition is trying to run against net adds on the low-end market, just on volume side. I think it's important in the future to compare not the subscription market share. It's more important to compare the revenue market share to judge the dynamic in the whole market. And on Fastweb, Mario?
Yes, on the -- you're right that the cash conversion of Fastweb is still quite low, but we expect for the full year CapEx of CHF 600 million. And it's still driven -- a material part of the CapEx still comes from the next-generation network rollout where we still have rollout in specific cities. And this business case works. So we have less outpayments towards Telecom Italia. That means we have a higher margin. And I would say full year basis in 2018 this NGN CapEx close to CHF 100 million I would say. And then you know it's -- then another part of the CapEx is driven by the success of the B2B business. So you have some CapEx if you acquire -- if you have some new customers, you have some customer-specific CapEx on your books. But I think -- I would say let's [ raise ] them as so-called good CapEx because that generates future revenue and margin.
In my model, I should assume that CapEx for Fastweb should increase or -- it will definitely not decrease...
I would differ for -- I would keep them flat. And the detail guidance you receive in February 2019.
Then the next question is coming from Oliver Griffiths from Jefferies.
My first question is, you're mentioning sort of passing 5G in 2020. Could you talk about what form of 5G sort of would come first towards Swisscom? Is it more on the mobile broadband side or is it industry verticals or is it IoT? Or do you have anything to sort of indicate on that already? And the second question is a bit more on clarification in this other item that Mario sort of discussed already. What is notable is that the EBITDA contribution from other is actually increasing quarter by quarter by quarter, so it's a bit difficult to sort to see the -- how this sort of proceeds because you're highlighting here, in particular, there's some contract from -- contract work for the railways. Just wondering, could you give me more color how this unfolds from here? Is this a multi-year contract and is it currently ramping or is it now at the run rate or whatever you could say about this? And related to this, I wasn't entirely sure when you discussed the IFRS 15 effect in other, the exceptionals item -- the footnote of the exceptionals item says that the IFRS 15 adjustments are actually in the exceptionals, but you seem to say that the IFRS 15 adjustments are actually in others. So could you clarify that as well in this context?
Good. I take the question on 5G and Mario then the -- this other -- this -- more information about the others. On 5G, the use cases of 5G are actually mobile broadband business. That will be the biggest market on 5G. Then some industrial verticals, as you mentioned it. This will be a business which will come, which will be an important one, but it will also take time. And then IoT is certainly also a part of it, but the value creation for an operator, that's my view, on IoT will be low as always. There will be IoT. There are opportunities for an operator. But the major impacts are coming from mobile broadband and verticals. So therefore, it is important to have a strong positioning in the B2B market, to have solution capabilities to do verticals in the industry segment. And the second topic is how skillful our industry will be to monetize the speed on 5G. And I think our industry should really be skillful on monetizing the speed on 5G. Though I'm not alone if I'm talking about this because also competition will do the prices there. But that could be an opportunity to get better ARPUs.
And on the segment other. Maybe on the IFRS, maybe I didn't explain it well enough. So this reconciliation item belongs to IFRS 19. That's the pension liabilities that is recurring, that comes each quarter. And IFRS 15, the subsidies and revenue recognition that is shown in the exceptionals. And again, to the pension to the IFRS 19, but there we have a quarterly impact of about CHF 15 million. That's more or less -- once at CHF 15 million, once at CHF 14 million, but that's more or less CHF 15 million per quarter. And on the other small items like the -- these are small numbers. And there you have some seasonality. There's project business from our subsidiary cablex. There you have a few millions per quarter. We have a positive impact this year because we had last year loss-making entities, small entities from the takeover of Publigroupe, which we sold meanwhile. So it's -- they're really small numbers. 50% of the impact is coming from this IFRS stuff, that CHF 15 million per quarter. I would model it like that.
And the next question is coming up from Luigi Minerva from HSBC.
I have 2. The first one is on Switzerland. You mentioned achieving fiber coverage by end of 2021 in every Swiss municipality. And I was wondering if you can translate that as a percentage of households, or maybe more useful, as a percentage of premises. And then give us a bit more details about your hybrid approach, so the mix between FTTH, FTTC and other technologies? And then lastly, if all this could happen within the same CapEx level that we are seeing this year? And secondly on Italy. I was wondering how do you see the entrance of Sky as a fixed-line broadband provider next year and what is the impact it can have on Fastweb's market position and commercial activity.
Good. On the -- on our network strategy in Switzerland. So our strategy, as showed on Page 10, is to increase the footprint for households with ultra-broadband to 90% in '21. That means 90% of the households will have speeds above 80 megabits. The majority of them will have speeds somewhere above 100 megabits up to 1 giga. And this is a mix of different technologies. We have approximately a footprint of 30% fiber-to-the-home coverage already today. So this will stay approximately stable or slightly increasing but in the region of this 30%. And then the rest is mainly fiber-to-the-street coverage and there we have speeds up to 500 megabits per second. And then the last 10% -- or 90% we will have on fiber-to-the-street and fiber-to-the-home. And then the last 10% they are mainly on fiber-to-the-curb and there you have speeds in the region of 30 to 80 megabits, but the majority are certainly also above 50 megabits. So that's a bit the strategy. The CapEx will be -- will stay in a -- the whole CapEx of Swisscom Switzerland will stay in the region where they are today. So we will have from now investments in the next years in fiber-to-the-street and then 5G investments are going a bit up. And fiber investments -- the wireline network is strong, so they will stay approximately stable the next years. And then on Sky. The entrance of Sky can also be an opportunity for Fastweb. So we are also in cooperation with Sky. We have some bundles with Sky. And if they now go in the retail market, they need a wholesale partner. And wholesale partners can't only be a fiber -- [ NL ] OpenFiber -- or Telecom Italia -- I think Fastweb is a very agile and competitive wholesale provider, so this can also be an opportunity for Fastweb.
And if I may follow up on this last point. Do you feel that the wholesale opportunity may offset the additional pressure you may see on the retail side?
Yes. It's difficult to judge. But I think the main element of -- for the performance of Fastweb in the wireline market is not driven by Sky. It's more driven by the mobile operators. If they try to push with aggressive promotions, fixed to mobile bundles, this will have a -- would have the bigger impact on the broadband business in Italy. But I think 2018 was a hard year for Italy if you saw the price, competition in Italy. I think there could also be opportunities that the market is becoming more rational also in the wireline market because if you have so much pressure on mobile, you should keep -- you should be also prudent on the wireline market to keep the margins up. I think there could be some less promotion activities, but that's speculation. Overall, I would say if you look to Fastweb, it's important to see that we are doing 50% of the business in the B2B market, that we have 30% market share, that there is potential to grow, that the Italian broadband market is still underpenetrated. I think if you look to the broadband business in Italy, that's still a market with potential.
Can I have the next question from Ghazi Usman from Berenberg Bank.
I've got 2 questions please. If I look at the -- if I look at Slide 29, which is the underlying EBITDA trend broken up between fixed voice, outbound roaming, et cetera. If I look at -- if I compare this slide to what was being shown in Q2, I guess in most areas you're on track, except for in B2B, where the full year impact I think -- in B2B, you were estimating at around CHF 60 million and already for 9 months you're at minus CHF 56 million. So is that to suggest that this headwind that we're seeing in B2B on EBITDA will not come through in Q4 or is it that something changed from Q2 which has been below your expectations in B2B? So that was the first question. I hope that's clear. And then the second question was just on mobile broadband as an opportunity for 5G. I guess that really needs millimeter wave spectrum to be made available, and in that respect, are you -- I mean, is there a roadmap to release that spectrum over the next few years in Switzerland?
Well, good. I take the question on 5G and Mario on this Page 29. And I will start with mobile broadband 5G. So we will have this auction in January 2019. And we are now in a process and I can't talk about actually this spectrum auction. But you saw what are the conditions of this spectrum auction. And I think the industry -- and now I'm talking about the whole industry -- with this spectrum auction will have the ability to build good 5G networks. The main actual -- the main hurdle or the main challenge for Switzerland on 5G is the -- are the limits for radiation. This non-ionizing radiation limits in Switzerland, that's the main bottleneck. It will be difficult to ramp-up the 5G network because we have so small limits. That means if we don't get relief on this regulation, we have to build more sites. And to build more sites in Switzerland, this is a very challenging topic. But from the spectrum side, I think the whole industry will be in a situation to make good 5G networks. Mario?
Can I just follow up on that? So you don't think that -- for mobile broadband 5G, you don't necessarily need the very high frequency band, so the 20 to 30 gigahertz, the millimeter wavebands? You don't need that specifically to launch mobile broadband 5G?
In Switzerland, there will be a lot of 3.5 gigahertz spectrum available. So there are 300 megabits, 3.5 gigahertz spectrum available. So that's a big part, much higher than in other countries. So I think with the spectrum which is going to the auction, Switzerland should be in a good position.
And on Slide 29 and your question regarding the B2B performance. So first of all, in B2B it's a bit difficult to compare quarter-by-quarter because you have a lot of project business in the solution business and solution business makes 50% of the overall revenues of the B2B segment. And if you look at the quarterly evolution and -- let's say, where we stand after 9 months compared to the 12 years expectation, yes, the decline of margins is a bit higher than expected, will be a bit higher than expected on a full year basis. But we implemented a lot of cost actions in the B2B business only in the end of Q2, beginning of Q3. So we saw already in Q3 that we were able to compensate a part of the margin decline. And on the Q4, I would expect, thanks to these cost measures, a similar EBITDA contribution as in Q3.
Then I have a question from [ Makiro Khost ] from the Citibank.
Actually, most of my questions have been answered, but I want a clarification on 2 things. Firstly, earlier there was a question around the net neutrality changes. And I just wasn't sure it was whether it has a material change in a specific product or service that you provide now or it's something that could change more -- future evolution of the industry? And then the second element is around Italy. You do own some spectrum and I wanted to understand whether there are any restrictions as to what you can do with the spectrum that you own in terms of selling it to someone or leasing it or using it in the networks or any arrangements you may want to do?
Good. Sorry, the first question I didn't get. What's exactly the first question?
I think earlier there was a question about the telecommunication's law and you said there were 2 elements. One was net neutrality. And you made some comments around what could change there, but I didn't exactly understand whether it has an effect on the services you have now, the changes that may come about with this proposal, or whether it's something that you're monitoring because of future service and how it will impact those?
Okay. So I take this question on net neutrality first. It's not actually -- the proposal of the regulator was actually a very liberal one. So they didn't made a proposal to have a strong regulation on net neutrality. That was the proposal from the regulator. And then in the discussion in the parliament, there came some new ideas. But now they are discussion about this net neutrality in the parliament, so everything is open. But I would be relaxed on this net neutrality topic because our industry in Switzerland have the Codecs and this -- where we actually say that we behave in a net neutral way. And we don't have violation of net neutrality in Switzerland. So I don't think that there will be a -- that there we will have problems on our product portfolio side and all this because we don't have violation on net neutrality. So I think we could be quite relaxed on this discussion. But we know it in December. And then the second thing, if we have some obligation of using our spectrum of Tiscali -- or which we will acquire on Tiscali. No, there are not new -- there is no new obligation on it. It's was like before.
And on your question around can you sell it, transfer it. We're currently in the process of closing this transaction and we cannot give any details because we're also in discussions with the ministry around this closing. Sorry for that.
Then I have one question from James Ratzer from the New Street Research.
This is [ David ] actually. I have got a follow up on the competition, on pricing, please. I was just looking at your net adds in Switzerland on the broadband side and they are a bit weak this quarter. Just wanted to know if you can comment a bit more on competition. Is it Salt are getting more traction now that have been - they have launched a product for 6 months on the fixed side? Or is it Sunrise continuing taking shares? Or UPC may be improving their situation? And a similar question on Italy. The mobile datas were a bit weak compared to last year. I was wondering if it's the Iliad impact or if you can comment a bit more on that. And on the pricing, I've noticed that on your low-end 15 megabits per second triple-play product, you increased the price by CHF 5, CHF 6 last month, whereas competition -- Sunrise averages the price and UPC has far more promotion. I was wondering if this gives you more confidence in the fixed outlook or it's just a way of trying to push people up in the middle. And lastly, just a follow up on the previous question. I was just wondering if you can comment on your plans in Italy about the 3.5 gigahertz spectrum, please.
Good. On the competition in Switzerland in the broadband market, as I already mentioned, the market is saturated, fully penetrated. And from -- out of the perspective of Swisscom, we are happy with our performance in the broadband. We have a low churn. And if I look to our net adds in the fiber-to-the-home turf, where the most promotion activities are today, I would say we are quite happy. And I don't know the figures of our competitors still up to now. We will see later what has been the shifts in the market share in broadband. But overall from the view of Swisscom, I think we are -- we can be quite satisfied with the performance in broadband. On this price, slightly price increase in the lower end of the broadband market, what we have done is in an approach "more for more." So that was the main idea. And actually, we were able to do it in a good way. So we were able to do it. That means to increase the price on the lower end. Because also the price positioning in the lower end was revised also by our competitors, so there was a dynamic of increasing prices in the lower end of the market. But that shows a bit the dynamic in the Swiss business. Actually, the business is driven also not only by the listed prices. It's also driven by promotion on a below the line area. And on Fastweb. The use of this 3.5 gigahertz is actually -- if you go to the presentation of Fastweb, 18, you see what will be the idea of using this 3.5 gigahertz. So we would use it in hotspots, in very dense areas, where we can leverage our infrastructure of the fiber-to-the-street/cabinet. So that means mainly in cities in some hot spots to offload MVNO volume. So that's the main idea behind it. And on the one net add performance of Fastweb, as Mario explained it, it was not the strongest one. But if you compare it to the whole market share in Italy, I think we can be satisfied. We don't see it from -- out of the perspective of Iliad. Iliad effect was on the mobile market and I think there is the main dynamic of Iliad. In my view, it's too early to judge how performing they will be in the mobile market. We have the better momentum -- I already explained it before in October -- on mobile. Our strategy is to push to convergence to have more fixed mobile converged products on our broadband customer base. Okay, operator, perhaps a very long question before we close.
I have only one left.
Okay, then it fits perfectly.
It's from Julio from RBC.
You mentioned that the take-up of inOne should decline over time given that there is a 50% penetration. However, inOne fixed mobile convergence's penetration is still below the 30% mark. Can you give us some color on how the penetration of fixed mobile inOne should evolve? And my second question is regarding some of the comments about the radiation limits in Switzerland. You mentioned that if these limits are not changed, basically there will be a requirement of having more sites. Can you give us some color on how should we think about the extra CapEx needed for these extra sites?
I take the inOne question. The overall fixed mobile penetration is 35% and that consists -- majority is in inOne subscription and then you have a part of the old so-called Tutto subscription. And in the future, we'll have 2 developments. So the old Tutto will go to the inOne and the overall penetration -- the overall fixed mobile penetration we would say it will reach around 50%.
And on this radiation limits. So the limits in Switzerland -- the threshold is 10 times more severe than in countries around us. And what is now actually discussed is that we can get some relief on the methods how you measure these emissions. Because if you go to 5G, there is beamforming in it and beamforming is actually -- in the actual measurement methods it's actually even increasing the problem. So I think we can get some relief on this measurement methods and this will give us some time to have a discussion then on the bigger picture of this threshold. And the impact to CapEx if we need more sites, even -- it's independent from this topic of radiation. We will need more sites on 5G because the networks will become more dense. And overall, we will manage the business in a way that our CapEx will stay in the region where they are today.
Thank you, Julio, and thank you to everyone. And with that, I would like to conclude today's conference call. If you should have any further questions, please don't hesitate to contact us from the IR team. Speak to you soon and have a great day. Thank you.
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