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Good morning, ladies and gentlemen. Welcome to the third quarter results of 2019 hosted and presented by Urs Schaeppi, Mario Rossi and Louis Schmid. Louis, the floor is yours.
Good morning, ladies and gentlemen, and also welcome to Swisscom's Q3 '19 results presentation from my side. My name is Louis Schmid, Head of Investor Relations, and with me are our CEO, Urs Schaeppi and Mario Rossi, our CFO.The first part of today's presentation hosted by our CEO consist of 2 chapters. First, a quick overview of the highlights, operational performance and financial results of the first 9 months. And second, an update on our activities, performances in Switzerland and some explanations on Fastweb's doing and 9 month results. In the second part of the presentation, Mario runs you through the chapter three, the financials and 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. So if I look through our Q3 in a nutshell, I would say, we have a solid commercial execution and we are financially on track to achieve our full year guidance. We have a good momentum with our mobile products, the inOne mobile. After several months, we have already 890,000 subscription on this new project. We were successful in winning some network tests as an example Ookla, on 5G we were the first provider which is offering 5G roaming. And in [indiscernible] in Italy, firmly we made progress on executing our mobile strategy. We have the authorization to be an MNO in Italy, and we also had the approval from the regulator on the contract with Wind Tre. So overall, we are progressing as planned and financially. As on our cost savings, we are on track.If you go to Slide 4, you can see that we have a solid market performance. In Switzerland, a small goal on TV and broadband and also on postpaid mobile and less decrease on fixed voice. So overall, a solid performance, and then we'll come later to also the churn figures, and you can see that we have a good and strong market performance in Switzerland. Fastweb was growing on broadband and mobile, on mobile with 130,000 in Q3. So overall, growth in all segments in Italy.If you go on Slide 5, to our financial performance, you can see that the EBITDA on an underlying level is stable. And we are on track, as already mentioned, with our full year guidance. On the right side of the chart, you can see on a comparable basis, in the red square that Switzerland, it is losing in the third quarter, in the first 3 quarters, minus CHF 42 million. On Fastweb, we are able to grow by CHF 38 million. So overall, we have a stable EBITDA on an underlying level. And you see also that the operating free cash flow with CHF 1.32 billion is solid. So overall, a stable financial performance.If you go on Slide 6. Only 1 or 2 remarks to our market activities. So our strategy is to focus ourselves on our customer base to have the customer base stable to have a stable ARPU. And on a temporary base, we are doing some promotions with inOne home with our cheap -- with our -- as I say, our cheaper pay offer.So the activities in the whole Swiss market happened in Q2, it's very promotional driven. And there is also a kind of, let's say, a washing machine on the enterprise sensitive part of the market.If you go on Slide 7, you see the -- some figures to our postpaid subscription in the B2C market. So netbacks are fine, are good and also on inOne, you can see that we are able to increase the penetration on our new product inOne. I think importantly to look to the right side of the chart. There, you see the fixed mobile converged penetration. So we are actually at 41.2% of customers we try in a quadruple play offer. That's important because this will also stabilize our customer base.You see on the bottom line of the chart, our churn and ARPU figures. So we have a churn on postpaid of 7.7%, stable low churn on postpaid and on the ARPU side, you see that we have a blended ARPU of 40 and on postpaid, 58, where we have a small pressure on the ARPU by CHF 4. And how do we explain this CHF 4? CHF 2 are coming from the hard work coming from fixed mobile converged discounts because we are pushing our quadruple play offer. And CHF 2 are coming from the RTO mix and this is mainly as a result of some rite gradings, but also second and third brand penetration, which is increasing. But overall, good KPI figures for postpaid.If you go on Slide 8, you see some fixed to our fixed business in the retail market. Also there is some net add growth on broadband and TV. And also there is a penetration, fixed mobile converged penetration is at 40.3%; it increased by 3 percentage points on a year on year level. Churn figures are lower than previous -- the previous call, so we are at 9.1% on churn broadband. And the broadband RTO is stable. So I think that's a good performance in this competitive promotion oriented business. If you go on Slide 9, some explanation to our B2B business. So we are facing still some pressure on the connectivity side. On the other side, we have a very solid and strong positioning in the B2B market. So we are a full ICT provider. We have a strong partner network and the broad -- unique project portfolio. But we are facing with some top line pressure on the telecommunication projects, and there are different effects. 1 effect is the final migration to all IP and where we see some cancellation or substitution to IP voice over IP. Then some digital consolidation, also driven by IP products and then general price competition, mainly in the mobile market. So the ARPU in mobile B2B is on a euro level. And I think we will have [ Virgin ] competition in the B2B segment. But overall, if you look to the market shares, they are plus/minus stable. On the right side of the chart, you see also our service revenue or revenue mix, you can see that our solution revenues are higher than the telecommunication revenues.On Slide 10, some remarks to our operational excellence. So we are on track. We are delivering the decrease of indirect costs in the first 9 months, we were able to decrease our indirect costs by CHF 107 million, and this is a combination of different, these transactions, simplification of the product, increasing the stability of our products and being a bit leaner and as you see the benefit at the end. And I think that's the good performance, we were able to reduce the service requests for the sales force intention because we have a much more stable product portfolio and the same good product portfolio than years ago.If you go on Slide 11, you see some more details to the financial performance of Swisscom Switzerland. So we were able in Switzerland to mostly compensate the top line pressure through cost savings. And so operating free cash flow is at CHF 1.25 billion, and the main effect why it is lower is the spectrum CapEx from the beginning of this year in the reach of CHF 200 million. So overall, also a stable situation.You see on the left side of the chart, the net revenue development. You see erosion on the service revenue and the increase of retail revenue. On -- in the middle -- on the bottom, you see the main drivers for our EBITDA. So overall, the EBITDA after lead plant expenses went down by CHF 44 million. And there are different dynamics. One is still the decline of the fixed voice lines by CHF 32 million, then fixed mobile conversion prepay by CHF 47 million, and then the revenue generating mix in wireless which has an impact of CHF 32 million. On the other side, the erosion has explained on B2B. And then the positive impacts from costs and others. So overall, this leads to this minus CHF 44 million EBITDA impact on Swisscom Switzerland.If you go on Slide 12 from remarks to Fastweb. And first, an update on our 5G co investment partnership with Wind Tre. So we are progressing as planned, so we get regulatory approvals on the M&O side, that's 1 point important set. The last week, we get also approval to our contract with Wind Tre. So we have the clearance from the Italian regulator, and we are progressing as planned on the 4 industrial stream. So on mobile, wholesale, we plan to get 4G roaming on the Wind Tre network in the first quarter 2020. We will have ready for service on ultra broadband wholesale area for Wind Tre in the second quarter, and we are beginning to deploy sites, 5G sites also in the beginning or in Q1 2020.On the fiber backhauling, we are starting to deliver a fiber connection to the marketplace. So overall, progressing as planned on our partnership with Wind Tre.If you go on Slide 13. Some remarks to our commercial performance in the consumer market. So overall, despite the tough environment, market environment in Italy, good results. So increased subscription based on growth and by 4%. And important to say that you are able to upgrade our customer base to also broadband. So we are now at 62% penetration. And on a yearly basis, we have an increase of 19 percent points. That's important because if we have customers on ultra broadband, we get also better joint figures and slightly better ARPU mix.Mobile is performing well, so 130,000 net adds. And you can also see that we were able to decrease churn, quite sustainable and on 35% lower churn fixed on mobile, so more stable business in mobile.Our converged penetration is at 34%, it went up by 26 percent point on a year on year basis. And you see also on the bottom of the chart the benefit of these converged projects, lower churn and better all in all [ work ]. So this is working in Italy this transition.If you go on Slide 14, some remarks to our B2B performance, but we have a strong performance in B2B plus 12% revenue growth, 2 digit growth in the public administration segment, 1 digit growth in private segment and medium segments. So good momentum in the B2B market and also on the core services of wholesale, we were able to grow by 8%.The financial performance are faster on Slide 15. So you see that our revenues went up by 5%. And the EBITDA by 7% and EBITDA after some expenses went up by 5%. So a growth and in line also with our expectation and the full year guidance.So I would like now to hand over to Mario for financial details.
Thank you, and also good morning from my side. Just a few additional remarks on the financials. They show unchanged trends on service revenue, slightly more price coming from promotion and seasonal effects in the residential segment. And again, as you saw, very strong progress on cost cutting and also in our operations in Italy.On Slide 16, on revenue, the retail -- retail customers decreased, service revenue decreased by CHF 54 million in Q3. We see the main evidence, CHF 24 million is coming from [ RGU ] mix and the right grading of our customers, CHF 14 million from conversion discounts and CHF 10 million from the voice line loss. In enterprise, we have the same trend as in the first 2 quarters, decline of CHF 29 million on service revenue, 50% coming from fixed, picking up safety from mobile and in safety, let's say, half of the pressure comes from price pressure and the rest is the effect of the migration to all IP. The all IP migration will also come in this segment to an end, by end of this year.On wholesale, we see an increase of revenue of CHF 25 million in Q3, CHF 8 million comes from higher broadband connectivity and infrastructure services. Another CHF 8 million comes from the MNO revenues. So that's the impact of the UPC, MVNO activities we have in our network. And the CHF 9 million, with the impact of higher inbound roaming, obviously another effect on the cost side, it's more or less neutral on medicated. As Urs explained, Fastweb is growing in all core segments in revenues.Just a few remarks on OpEx direct costs, we have the lower acquisition and retention costs. That's a result of the decoupling of the same and subscriptions, which we started in February this year. I think this business case works, costs are coming down, the churn rates are very stable and net debts are satisfying.On the outpayments, we have higher outpayments in Q3. CHF 60 million, and that is a seasonal effect because of the higher roaming activities of our cost -- of our customers. And as we've mentioned, a very strong outperformance on the cost side, savings coming from both workforce reduction and also reduction of other expenses. That plays on slide 18 to the EBITDA development. In the retail segment, as I mentioned, we have some higher outpayments for roaming and the impact of rite grading, a stronger impact of the rite grading of our customers in Q3. Fastweb quarter per quarter, more or less the same strong performance on the EBITDA level.That brings me to the Slide 19. Bridge to net income payments on net interest sales are now down at CHF 44 million for 9 months. So we refinanced now all the high coupon bonds at the average cost of our debt is 0.9%. Then we have again this impact on taxes, maybe a few explanations, but the tax expenses of CHF 230 million includes a positive noncash impact of CHF 62 million. In first half, we had CHF 32 million, now we're at CHF 29 million in Q3. A cost of tax reform led to lower tax rates in some cantons, and that's the impact. The deferred tax liabilities had to be adjusted.And in Q4, we expect an additional positive impact of around CHF 200 million. And for 2020, the tax rate for the group will be at around 19.5%. So you can -- that put into your models.On Page 30 (sic) [ 20 ], no additional remarks on CapEx, rollout is going like planned in Switzerland. On free cash flow, the next slide. We have this increase of 20% on free cash flow, excluding the expenses for spectrum, [ so easy ] have a better development of the working capital because we had some extraordinary impacts in 2018. I skip the next slide on finance and the maturity profile and that brings me to Page 23. Of course, we can after Q3 confirm our full year guidance 2019. So I hand over to the operator.
[Operator Instructions] First question, Roman Arbuzov.
I had 2 questions, please. The first one is on the Swiss service revenue. So that's been decelerating and has been relatively weak over the last couple of quarters despite the strong momentum that you've enjoyed on the net adds, and you've touched upon some of the -- some of the drivers of that weakness. But as we think about going forward, is there a hope for improvement? And especially if we look to 2020, I guess, some of the drivers or these negative drivers will be falling away, for example, the all IP migration, which is weighing heavily on B2B, that will be falling away. But can you just give us some sense of when would you expect the improving KPIs that we've seen this quarter to actually feed through to improved service revenue growth? Can we start with this one, please?
Okay. So the main drivers for this decline in the service revenue is -- on the 1 side, driven by B2B. There, we will have a continuing of price pressure also in 2020. The pressure on a fixed voice line, this will certainly becoming smaller. You will both our -- if you compare to different quarters that there we have a change, which is improving. Converge discounts will also become a bit lower because we are on a penetration rate, which is now over 40% of the rate -- the growth trends will decrease, so there will be also a small, small impact. On the revenue generating mix, I think this is strongly related to the promotion competitive environment in the Swiss market. It will reduce. I think we are slightly -- we are fast on having an improvement of the service revenue dynamics. And so it's mainly driven by this competitiveness and promotion activity in the Swiss market. But you see, we are successful on retaining our customer base, we have really good churn figures. And most of the ARPU development is -- yes, I would say, it's a good one, if you compare it to the market activity drop. So I think it's hard to make it also. It's mainly driven by competition, but there is some hope that this service revenue decline is becoming smaller. That competition.
And the second one, I guess, somewhat related, is just on the launch of a digital sub brand by Sunrise called Swipe. And if you look around Europe, there are quite a few operators who are looking at this digital only segment. Typically, the price points of the segment are much lower, but at the same time, the cost to serve are also much lower. So my first question is, when you look at the digital sub brands, and I'm not actually sure whether your sub brands are 100% digital or not. So I'm not sure if it's fully comparable with Swipe. But perhaps, you can provide some general observations. I'm curious whether the cash flow per customer of these digital brands is actually similar to your high end brands? Or are they vastly less profitable and the cost -- the smaller cost to serve don't actually make up for the lower price points? That's the first one. And then secondly, also, when you think about the target demographic for these digital brands, it's not just the price conscious customers who are typically interested in these, at least that's what happens in other parts of Europe, you get highly educated millennials and kind of digital natives as well as some smart shoppers with high income who also take up these products and these offerings. What's the situation in Switzerland and how structurally attractive do you think is this segment? How important it is for you to develop this segment? And how large is the target demographic? Any color here will be extremely helpful.
Because of the digital sub brand. So our stage to sub brand is Wingo. So that's a brand which is online only and with high performance on the network side and a good price. So what we see is actually that this market is still quite a small market. It's not really a big market, and it's not only the millennials who are going to such a brand. It's also, let's say, mid age people. So I think it's more a question of digital have seen customers over which have the high maturity in this market. And your question is on the cash flow. It's this is a lower price product and the savings on the digital channels are lower than the price decline. So there the margin of such a brand is a bit lower. But on the other side, our strategy to push -- continuing to push Swisscom brand and digital brand. It's just, let's say, a key brand. And I don't think that this will now have a fast growth in the next months or years. I think it will be -- or let's face like this simplicity, convenience, differentiated product is still very important in Switzerland.
Next question, Ghazi Usman.
I've got 2, please. Firstly, on the B2B side. Sorry, excuse me. On the B2B side, where we're seeing this impact of, I guess, rationalization of the traditional lines as customers move to IP. I mean is it that once the all IP migration is done than that revenue headwind just disappears? Or is it that you expect just an ongoing rationalization of the back book for longer than just Q4 '19 that this will be a trend that possibly continues over to 2020 and 2021? So that was the first question. The second question is just coming back to the B2C environment. And I see that the RGU mix effect of CHF 32 million on the EBITDA that you're disclosing that for the first time, is it because this trend -- I'm just wondering, is that just a better disclosure on your part? Or is it that this has had a bigger, more quantifiable impact this quarter than previous quarters? And if that is the case, I mean, is this spin down happening in mobile? So people moving from the higher brands to the low brands? Or if you could just give some color as to how you're calculating this effect?
So I will take the first question on B2B and Mario then on B2C. So in the B2B market, is this IP substitution. So today, we are mainly facing with voice line substitution because they migrate to IP. So the effect will be lower. And -- on the other side, and that's 1 point. And on the other side, the voice revenue in B2B market of Swisscom is already on a low level. So I think that is the impact will be noticed not so being in the future. And in the B2B market, you see much more also tons of offers. So to look only on 1 project, I think, is quite difficult because you get more workplace solution, cloud solution, where we have a baseline on connectivity with IT solutions, which also where we will be able to stabilize the revenue pool of our customers. But IT consolidation or digital consolidation will be a trend also in the B2B market in the future. On the other side, there is also growth in the B2B market because if you have a more digitalized products, everything is connected. And IT Solutions have become more important.
Can I just follow up on that? I mean are you seeing any pressure from SD 1 as a substitute for -- on business connectivity revenues?
Yes. SD 1 will have some pressure on the MPLS networks, you are right. But they are still low.
And your question on the RTO impact. We have decided to disclose this impact because it started in Q2, let's say, distribution of the CHF 32 million and 50% Q1 -- Q2 and 50%, Q3, I expect a similar amount in Q4. And that's driven by promotions. So we mentioned several times that these promotion activities have an impact on our P&L and the second reason is the net debt are coming more on secondary sales plans than on the first brand on the site comprised. And yes, I would say, this impact will continue also into 2020. I don't expect less promotion activities in the market. So right now, we don't see any signs.
Just a follow up on -- I mean would this have an impact on your EBITDA, would suggest that you're seeing a replacement of -- that there is a spin -- that there is either a spin down from your high units to high backward prices to the low front book?
No, it's not a spin down of the existing customer base. It is more what you get on the market. So what new customers you get to market are a, coming from a promotion or b, coming on the second and sell brand. But it's not that. Of course, we have sometimes customers who switch from the Swiss compliance to let's say, to the Wingo or co brands, but this cannibalization effect is negligible. It's really the impact which comes from the market, from the growth.
Next question, George from Citi.
I've got one on Fastweb. And I was just wondering if you can give us a bit of color on how you sort of cost there and that's why it's perhaps lower than you would have expected. But I think you did take some price action. So I was just wondering, is there something in the market that has changed, which will mean slow as well or whether it was a temporary effect? And then my second question is more around the mobile market. And I appreciate some of the comments you just made on the differences between the brands and the mix within that. I just wanted to understand a bit more on that. Obviously, you're also winning a lot of secondary -- a third of your SIM cards on your conversion offers as well. So is more of the ARPU weakness coming because of the success of convergence or because of the change in the mix between the brands? And if you could comment also as to how you think the rest of the market is performing based on this? Because obviously, convergence is perhaps a bit more effective for you than for the others.
All right. I take the question on mobile in Switzerland and Mario can take the one on Fastweb then. This ARPU dynamic, which we have in the Swiss market on postpaid, is driven by -- so this CHF 4 decline is driven by -- CHF 2 are coming from taking on third brands. So more than our product portfolio mix, which brings some dilution to Swiss franc as well as from the second and third brands. And the other 2 are more driven by optimization of our clients in the project portfolio, so it's a factor. And also with the fixed mobile converged discount, which we have there in the Q3 trend. So these are the 2 main factors. And on Italy ...
On Italy, Q3 is always a bit range cost because of [indiscernible]. It's weak, usually it's a weak quarter if you compare it to prior year, and then only 18,000 this year, we have 10,000 MetroWeb, and we expect in general, the market relatively weak net debt. And the important months in the second half are September and October. That has always been the case. It has no -- it's not an impact on any changes on the policy.
Okay. If I could follow up a bit on the question around the mobile market in Switzerland. Basically, what I'm after is, we are seeing revenue weakness as we go through this process. And you mentioned earlier that you are -- you're seeing 40% plus penetration now convergence. The incremental, let's say, penetration will be less dilutive to ARPU. So basically, my question was more around -- if I would simplify, service revenues are worsening. Does it mean now that they're starting -- they will start to stabilize and recover? Or is it still a big migration into second and third quarters, which could last for years? That's basically what I was after.
But you know, there are effects which gives hope that the [indiscernible] decline it will be better. That's the topical voice at the topic of the penetration of fixed mobile conversion, and these are positive things. And I also don't think that second and third brands will really accelerate very strongly. So the main problem is -- or the main impact factor will be the competitive dynamic on the promotion side in Switzerland. I think this is what actually will guide our service revenue in the future. And the question is how aggressive these promotion activities will be in the next month or years, I can't tell you. But on the other side, if I look to our churn figures, if I look to the whole market dynamics, I think if the market behaves rational, the promotion activities should come down. But we know, we hope. I can't tell you.
Next question is Simon Coles, Barclays.
My first one is just on the cost cutting slide, Slide 10. You've obviously done a very good job, and you've delivered CHF 107 million so far this year. But the part of full year '19 says approximately CHF 100 million again. So it would seem that we're already there. So does that mean you're not planning to deliver any more for the rest of the year? Or are you keeping some back to be able to reinvest in the market? We know 4Q is obviously, 1 of the more competitive quarters each year. So I'm just wondering how you want us to interpret that slide? And then secondly, I know you're going to reach about 9/10 of the country with 80 megabyte speeds by 2021 and 75% with 200 megabytes speeds, but we're seeing one of your competitors up their network to offer gigabyte speeds across their whole network. So I'm just wondering, does that change your thinking around how you move forward with fiber to the home? Or are you quite happy with where you stand compared to your competitors?
So Mario will take the question on costs, and I will take the question on the fiber networks, ultra broadband networks.
On the cost side, the idea on this program 2018 to 2020, we've been able at least CHF 100 million per year. If you mention you're doing a good job this year, and of course, if you deliver also cost cutting in Q4, I'd expect a similar amount as we had in Q2, Q3, I would say. And looking forward into 2020, that will then be part of our guidance, which we will disclose in February, but we are only talking '18 to '20, that means also for trends you can expect how we make the metrics.
The second question on our network traffic achieved in the fixed market, the Internet ready market. So we will have in 2021 beat the speed profile on our fixed networks, where we have 75% of the coverage in Switzerland will have a speed above 200 megabits per second. That tells you that we will have, in 2021, really a performing network and 90% of the households will have speeds above 80 megabits up to 1 giga to 10 gigabits. So I think from a customer demand side, we have a performing network. The customization is often not only driven by speed, it's driven by the bundle. And our strategy and where we are performing is to delivering the best TV products. And with this in combination with the network, which has speed about 100 megabits, we think that we will be competitive in the future. But that doesn't mean that we will stop to invest in fiber networks. Already today, we are investing in our fiber to the home network, but this will be a long term project there. And that doesn't mean that CapEx will now -- would explode. I think competition on the marketing side will be getting more speed in the next months. But our main strategy here is to act in combination with an excellent TV project to be -- to perform in the market. And there, I'm quite confident.
Okay. So just to be clear, if your superior TV product can help -- you expect to help you offset some of the marketing from the other guys that might be advertising very, very fast speeds, even if customers don't actually need them today?
Yes, because if you look to the market, actually, the speed which you really need, if you are in a house, a 4 person household, where you keep using Internet, where you have a TV, even then actually, with 80 megabits per second, you have enough speed. So it's selling 1 giga or 10 giga today, it's more something about marketing. And therefore, from the customer experience, it's important to deliver an excellent product. On the other side, we will continue to ramp up speed on our network. And already now, with the strategy we have today, we have 75% of customers which have speed above 200 megabits per second. So I think we are -- we are here in a good situation. But speed will be a marketing game.
Next question, Oliver Griffiths, Jefferies.
Three quick questions, please, if that's all right. The first one is on the other sort of unit. I mean, compared to market expectations, that was a bit soft on revenues and EBITDA. You call out in the report a loss of a contract for the collection of national TV license fees. Is there anything else going on? Or is it all that particular contract was my first question? Second question is on this slide where you discuss the success in cutting SACs and SRCs. I mean you're saying the reason is, in particular, the decoupling of mobile device heads. So in other words, what you're not saying is there sort of a benefit from bundling at the lower churn. I'm just wondering why that is? Is it because the incremental funding benefit is now decreasing, given you're also have already or any other reason there? The last one is, the broadband and fixed net adds are quite nice this quarter as several have discussed already on this call. I was wondering, in the quarter itself, is this more effect of higher gross adds or lower churn in the quarter? Are you giving the data only for the first 9 months in the presentation? I was just wondering what happened in the quarter on that count.
On your question on ARPU, on the revenue, we lose CHF 40 million because of the lost contract you mentioned. It was decided, I think about 18 months ago, and then compared quarter to quarter, we had some positive impacts in Q2 coming from our cable construction company, which we'll update in Q3. But the main impact is coming from this contract in the company called [ IloG ]. This impact, we don't have any more in 2000 -- in 2020. Then on the broadband CapEX, we are still stable. Churn rates over the quarter is already coming from the market. And on acquisition and retention costs, accumulate savings on acquisition and retention costs on mobile of CHF 108 million in 9 months. That's partly compensated from the impact of IFRS 15, which is most through the P&L, that impact is CHF 94 million negative. So the net impact of this acquisition, retention in IFRS 15 for 9 months is CHF 34 million. And we didn't do the calculation this presentation, but the impact on the global term of -- the conversion impact is just to give you the costs and revenue elements. Technically, don't know what would have happened with the churn without introducing this new mobile goal.
Matthijs Van Leijenhorst is next.
The first one. You're saying that your paid net adds are a big part...?
Sorry. Can you speak a bit louder because we cannot hear you.
Is this better?
A little bit better. So if you can -- it improves then...
Could you give some color on the net adds in mobile, how many -- as a percentage, how many is actually coming from the second and third brand? Because I believe that in the second quarter it was around 50%. Do you see an increase? And the second one is on the net asset fixed. Another question. From whom are you grabbing these customers? Could you give some more color on the actual competitive environment? Who has been -- you're obviously being more promotional than competition, but if you could give some color on the future.
Good. I will take the one on the fixed mobile -- the one on mobile, the second and third brand. On the fixed costs, the additions which we get that are coming from everywhere. So I would say, the majority is coming from cable operators. That's not only -- that's just not only U P but also the other capital upgrades, the majority is coming from there. But they have also the highest, the market share in this area. But we will also have some customers from our competitors. I think it's the mix of win backs or market shares. The net debt on mobile based in Q3, we saw a slight increase. The first half, we had about 50% coming from second and third brand and slightly higher, close to 60% in Q3 either way.
Jakob Bluestone is next.
I just got a couple of short questions. Firstly, just going back to the Slide 11, the EBITDA after leases bridge that you've kindly shared. You've obviously discussed most of the drivers within that, the lower line loss, lower drag from convergence that gives some guidance on indirect costs in B2B. Can you maybe just comment on the sort of the missing bit, which is the others sort of the combination of the roaming, the CMVNO and a few other items? I mean how recurring do you think that growth is within the sort of rest of the business? Do you think we should continue to see growth given it's, obviously, quite a big positive contributor? So just any thoughts on that last element of the bridge. And then secondly, just very briefly, could you maybe just give us a little bit of guidance on the cash impact from the tax reforms you mentioned? I think you just mentioned the noncash P&L impact, but just any guidance that you can give on that? That would be quite useful.
On the other -- the main elements and then also the high margin elements are coming from the wholesale services access in infrastructure, and that has been CHF 147 million in the first 9 months. That will continue also in Q4. And then in the next year, it depends on, let's say, first, on the market success of our wholesale customers. We had 2 big ones, Sunrise and Salt. And then legal structure business, for example, the connections could weaken. But it's hard to say. Obviously, if we grow also in 2020 for the Q4, we see we can expect the same growth as in the first 9 months. And the growth on inbound roaming, the total revenue in 9 months was around CHF 50 million, it was about 10% growth. In fact, there is no margin impact usually in this business, you also have higher outpaying. That was also the case in the first 9 months so -- of the bigger margin impact. The main impact comes from really the infrastructure of savings. Then on taxes, as I mentioned, the tax rise rate will be 19.5% going forward in 2020. And we long term, tax charge and tax payment been more or less equal, then you have some fluctuations between quarters and yields. And roughly spoke is the impact of this more than CHF 200 million adjustment of [indiscernible] taxes will be around CHF 20 million per year.
Maybe if...
Also long term, it will calculate at 19.5%, but it's long term the same amount in the P&L like -- in payments.
If I can just ask 1 brief follow up as well. Urs, you mentioned that you were mostly taking broadband subs from cable operators and fairly late in the quarter, we had the launch of the 1 gigabit per second product from UPC. Is your expectation that you will -- that it will perhaps become a little bit tougher to take as much share from cable? Or given the launch of this new product and some other measures? Or do you think it's -- do you expect that to remain fairly stable?
I think what we will have is only larger market in communication on this speed topic, that really will be for sure. There will be some customers, future oriented customers, which will churn. But on the other side, I'm convinced that we will be able to get other customers because our network is improving also on the speed side, and our TV product will improve. So in the next, let's say, the next time, we will try to continue to improve our TV product program, confident that we will be -- we will have a good performance from B2B or broadband.
Next, Frederic Boulan.
Firstly, a question on enterprise. A pretty strong level of revenue reduction, you mentioned some of the drivers. If we could discuss in terms of the next couple of years. You mentioned in the past some broader structural competition in the SCT segment, solution seems to be pretty stable now at CHF 250 million per quarter. Is there scope to grow here? And maybe a question at the flatter level where here the opposite a very strong trend there. So in particular, you called the Poste Italiane contracts. Maybe speculate on the expectations in the medium term. And then second part of the question around -- so a second question on the 5G. If you could discuss both in terms of monetization, you're selling that premium speed at CHF 10, coming broadly on monetizing the prospect, both in retail and B2B, and also for the network side, because of progress in terms of rollout equipment, what's the roadmap from a network perspective?
Good. I will take the question on 5G, and Mario then the one on B2B, which will be faster. So on the -- on 5G. I think monetization, you can do it or different or different elements. The one hand, I think that the most important one is what will be the pricing of mobile broadband in the consumer market, because that's the biggest part. And there, the idea of Swisscom is to charge more for 5G, and that was -- that is our offering. The question is what competition will do? And then if we look back to our industry, maybe our industry is too stupid to monetize this mobile broadband advantages of 5G. But there are other elements to monetize 5G. I think, in the B2B part, we will be able to monetize 5G, to Industry 4.0 application. So we will get more connections, second thing. First thing, I think there also through IoT, there is potential to monetize 5G, and -- so I think that's the bit, the whole dynamic overall 5G will bring us also a differentiation. The most important topic is our sales for our industry will be to monetize the pricing or to set the pricing for 5G in the retail market. And our strategy on 5G is to go for a broad footprint. We believe that this is more important than speed. Because if you have 200, 300, 400 or 1 giga, that's -- see for the next time. And -- but we are still very early on 5G. There is -- the networks have not rolled out. The handsets are actually -- only a few handsets out there. I think the 5G will be more a topic in 2020, more in the second half than the first half. Mario?
And in the B2B segment, in Italy, we have clear targets to continue the growth of faster in the B2B segment because there we are, we are seeing the attack we have very good market share in light of the -- still room for growth there. We also have a better position in this 5G. I think then we have a value proposition for our B2B customers that we certainly bring some additional business in fast. So we are quite confident about our B2B business in Italy. And in Switzerland, it's [ top side]. Around here, we are the incumbent, we are on the attack, mainly on mobile. I think it was discussed in the last earnings call, it's difficult to predict the -- and we have already seen the end of the ARPU decline, it really depends on the competition. And on fixed, I think we discussed the impact also some negatives, maybe some negative impacts from the legacy Intel Networks and solutions business. I mean, we stopped the decline, and I think there is also in the solutions business some room for growth coming from cloud business, security business and also from banking. That's how we see this -- the development in these 2 countries. It's really a different situation in Switzerland compared to Italy because there we are the attacker.
Now Steve Malcolm, Redburn.
I'll just ask 3 if that's possible. First of all, just on Sunrise EPC. I mean you clearly didn't oppose the merger, now that it looks like it's not going to happen, how do you think about that strategically? I mean are you relieved that you're not going to lose the wholesale revenues you might have lost or are you more fearful that it will create a more competitive environment longer term? Second, just coming back to wholesale. You may have told us this, and I might have missed it, but I'm just trying to get a sense of what sort of recurring and the one off revenues that are there. Maybe you can give us a sense of what the underlying growth rates are of both because obviously, you're benefiting from infrastructure sales. You've had a pop from the MVNO contract from UPC. Maybe just give us an underlying sense of the growth rates of those 2 components would be very useful. And then thirdly, I guess a sort of longer term sort of question on fiber. I mean I guess we're trying to figure out -- I agree with you that the 1 gigabit is a marketing tool, but it may be relevant nonetheless. When you look forward to 2030, maybe 10 years out, what do you think fiber coverage and RSCP coverage in Switzerland will be at that point?
I will take the first and third question and Mario the second one. On this possible merge done at UPC, it's not on my side to comment on that this deal. Just from a competitive dynamic, I think that the competition will stay high with or without a merge. So I think there is not at the end, such a big difference. For Swisscom, it's important that we continue our way to be a differentiated operator to performing on our strategy. So that's -- so we are executing our strategy and then you obviously, we can't influence, but I don't think that the competition will fundamentally change in one or the other scenario. And Swisscom, it will be still very well positioned. We are even then have the scales, have the capabilities to compete with all these different environments.On fiber, you are right, long, long, long term, fiber to the home will be the technology, but we have actually the possibility to have an incremental upgrade from our fiber to the home as for 5G networks to fiber to the home, with less CapEx. And also, we have the ability to go for a hybrid strategy, so that we can do it in a CapEx efficient way. But long, long, long term, yes, you are right, fiber to the home will be the technology. And then this is only also in the view of Swisscom, but Swisscom will not balk to invest in networks. The question is on which level, on which CapEx level? And this is also driven by competition. And on the wholesale business, so the impact of the -- yes, this is from UPC is approximately 5 million to 6 million performance growth. And that started in Q1 because we had the whole migration from Salt Network to our network. So looking forward, in 2020, this growth will be low, of course. And then I think you mentioned Gold. Gold mobile is our one of our 12 brands that's included in the retail revenue, not in our [indiscernible] revenue.
I was more referring to the infrastructure sales. I mean, where you're selling some of Salt and [indiscernible]. Just curious to know when or even if you think of 147 in the first 9 months. Just trying to understand how we think about those lumpier elements of the wholesale revenue stream going forward, looking into 2020 and beyond?
No, I think I mentioned it before, it depends on the market success of our competitor in the retail area. And I think we will not see the same growth rate that we saw this year in our transition. We see a small growth that we've seen on the core infrastructure wholesale services that we saw as in 2019.
Next question, Luigi Minerva, HSBC.
My 2 questions. The first one is on Italy and it's about your FTTH JV with Telecom Italia, Flash Fiber. I wanted to ask you, how core is that minority stake for you? And whether you would be interested in swapping that stake for a stake in a larger network FTTH company if, for example, there is an agreement between TI and open fiber? And second is just an update on the technology. I think, Fast Club together with Swisscom, more broadly, is probably one of the loudest advocates in European telecom, fixed wireless access. So do you have any update on how the tests are going? And are you still confident that it is a strong and a solid solution?
The JV with Flash Fiber, I think it was good for us to have a fast point development together with Telecom Italia in this dedicated city [indiscernible] fiber. Operationally, it works very well. And we never talk about potential activities, how we would behave in the case of network relative [indiscernible]. I think back to the situation, we are satisfied with both the participation in Flash Fiber and the operational acquisition.
Exactly like Mario said, I think we don't speculate. It's too early to say. I think there is value in Flash Fiber.
Well, the test on that SWA, they're ongoing. And then in some cities, we are doing that with [ Langos ] equipment and so far, the result is satisfying and everything is on plan.
And I think important to this fixed wireless access is, I think you have to look at market by market what is the potential of this technology. And it depends on the performance of the wireline networks, the coverage of the wireline networks. So in our view, you can't compare Italy with Switzerland. So we see more potential for an attack of fixed wireless access in Italy than in Switzerland.
Ghazi, Usman.
I've just got one, please. You mentioned that you've got a -- maybe I'm -- I probably have missed this, but you said that you have a wholesale relationship with Salt on the fixed side. I mean, it was my impression that Salt was really just wholesaling the utility networks, fiber in the urban areas and that they didn't have a nationwide offer on safe [indiscernible] or something. So could you perhaps just indicate what is the nature of the wholesale arrangement that you have with Salt on fixed rate?
Yes. There's always the whole business with Salt, connecting, they're on time now, delivering backhaul. So we have always service revenue -- wholesale revenues we sold.
As you said, this is on the mobile backhauling kind of side of things?
Yes. We don't disclose our contracts with Salt. But on by footprint, they are also sometimes on our network.
That was the last question, Louis.
All right. So thank you, guys. As we said, I would really like to conclude today's conference call. Should you have any further questions, do not hesitate to contact us from the IR team. See you soon, and have a great day. Thank you.