Swisscom AG

SIX:SCMN

Earnings Call Transcript 2020-Q3

[Operator]

Good morning, ladies and gentlemen. Welcome to the Swisscom Third Quarter Results 2020, presented by Urs Schaeppi, Mario Rossi and Louis Schmid. Louis, the floor is yours.

[Louis Schmid, Head of Investor Relations]

Good morning, ladies and gentlemen, and welcome to Swisscom's Q3 results presentation. My name is Louis Schmid, Head of Investor Relations. And with me are our CEO, Urs Schaeppi; and Mario Rossi, our Chief Financial Officer. First part of today's presentation hosted by our CEO consists of 2 chapters: first, a brief overview with some highlights, the operational performance and financial results of Q3 and the first 9 months; second, an update on our activities, operational results in Switzerland and some explanations on Fastweb initiatives to the company, infra-based OTT player, and the 9 months financials. In the second part of the presentation, Mario runs you through chapter 3, the financials and unchanged full year guidance. With that, I would like to hand over to Urs to start his part. Urs?

[Urs Schaeppi, CEO, Head of Swisscom]

Yes, good morning, ladies and gentlemen, and I would like to start with Slide 4. So our Q3 results in a nutshell, we have financially positive results and are slightly ahead expectations. Also on the indirect cost savings side, we have a solid result. On the operational level, we have a good quarter. So also, if I look to all our awards, which we get on the mobile networks, we won all the tests. We won also the test for the fastest mobile network. And on the commercial side, we launched a new entertainment proposition. blue, I will come later to it. In Italy, we made from M&A -- smaller M&A transactions to strengthen our positioning in the B2B market with a security company and a cloud company. And you can also see that we ranked on ESG in France #1 on the 197 in telcos. It was always a part of the strategy of Swisscom to be sustainable. And that leads to a confirmed guidance as it was before. So overall, a good Q3 results. If we go on Slide 5, some information about the market performance and market share performance. So positive, overall, stable broadband net adds, which are, let's say, I would say, flat. And on postpaid, plus 83,000 postpaid subscription and also some growth on the revenue-generating unit of wholesale. And the growth in Italy on the RGU units on mobile is plus 59,000, and on mobile plus -- and on broadband plus 12,000. So overall, a solid performance on net adds in Q3. If you go on Slide 4 -- Slide 6, you see our financial performance. The revenue -- now I will explain you later about a bit decrease in the revenue by 3%. This is mainly driven by price and some COVID effects like roaming. On the EBITDA level, you see that we have a strong result, an increased EBITDA by CHF 27 million. And this is driven by an increased EBITDA of CHF 8 million in Switzerland and CHF 10 million of Fastweb. And a solid -- also a solid operating free cash flow of CHF 515 million free cash flow proxy. So overall, solid financial performance. Some remarks to our business and strategy on Slide 8. You see our key success factor 2020. And I would say, we are all the way en route to deliver another successful business year. So in Switzerland, the main priority is to maximize our core business in Switzerland, that means having leading networks, investing in the networks, in the improvement of our network, then drive innovation and use the advantages which we have on the converged value proposition. And then the fourth important topic is to transform our B2B basis. And if you look to the figures, you can also see that we had a solid performance in our B2B business, also on the margin side. And in Italy, it's important to bring Fastweb to the next growth level through this, I'll come later to it, infrastructure-based OTT. If you go on Slide 9, you see what we are doing on the network side. So important to mention here is that we have the target to prove or to double our footprint of Fiber to the Home by 2025. So that means that in 2025, we will have approximately 60% of Switzerland, which is covered with Fiber to the Home. We made also field trials, field tests, and we were able to get gigabit per second speed, download speed on NG.PON technology. This is, I would say, a kind of world record in the field and shows the potential of this new technology. On the right side of the chart, you see that we are the lead -- the network leader. You see the different figures and awards. If you go on Slide 10, here, some information about the B2C market dynamics, so that the competitive environment overall is unchanged. We have still this strong promotion-oriented market dynamics in Switzerland. And our strategy is to defend the market share through a superior value proposition and converged offers. You see also that we accelerated a bit our B2C activities. We made a bit more pre to postpaid migration. We have strong competition in the Fiber to the Home turf. So there is more local campaigns are becoming important. Wingo is performing well. That's our third -- our second brand is performing well. We also improved a bit our value proposition for young customers. And as already mentioned, we launched blue very successfully. We launched the new entertainment proposition blue, which you can find on Slide 11. So the main idea of this proposition is to be a unique entertainment brand where our customers can use their beloved content anytime and anywhere. So there is a more converged proposition between the TV platform, the content and then also our news portal Bluewin and then the cinemas. This is also a converging business and there we made a good approach, and this is the first chapter, so we will continue to develop this entertainment brand. We also implemented an OTT proposition for smart TVs, blue TV. That's the name. And so also on other screens, you can now use the TV proposition of Swisscom. If you go on Slide 12, you see the operational KPIs of B2C. So unchanged ARPU dynamics, that would be a bit summary, stable ARPU in wireline, eroding ARPU in wireless and mainly on postpaid. In the middle of the chart, we see the postpaid ARPU. So it's CHF 52, minus CHF 5 and the mix of this decline of CHF 5 is, CHF 1 is coming from roaming, less roaming because of this COVID effect. Then fixed mobile converged, is CHF 1. Then the decoupling of our offer is CHF 1. And then CHF 2 is driven by the RGU mix in the postpaid customer base. The blended ARPU for mobile is a CHF 37 or minus CHF 1. And then you see, as already mentioned, a stable blended wireline ARPU of CHF 37. Important to mention is that we have a sticky customer base, our churn figures are low in the region of 8% for single play and converged offers at 6.7%. The fixed mobile penetration, also interesting to mention, is in the region of 40% to 46% on postpaid and broadband. So overall, good churn figures and increasing penetration on fixed mobile converged. On Page 13, some information about our SME business. So we have this leading and strong market position in the SME market. Our strategy is to extend our ICT offer in the SME markets. Cloud-based products portfolio is an opportunity you see on the chart, what kind of functionality, isn't it? And the strategy is to be a one-stop provider for our SME customers in this digitalized world. So that means a converged offer between connectivity products and then ICT, horizontal ICT offers. On Page 14, some information to our B2B business. So the solution business is slightly growing. Interesting or good is to see that we have stable margins in a very competitive market. We have stable margins in EBITDA margins in the B2B business. It's driven also by cost reduction. So the organization made a good job on efficiency. And yes, on the bottom of the slide, on the right side, you see the evolution of our Solutions business. We have a good momentum on cloud and security product. That's also important to mention. On Slide 15, our financial performance of Switzerland, Swisscom Switzerland. So easily said, we were able to compensate the top line decline on the service revenue through cost savings and our operational free cash flow, free cash flow proxy is in line with the expectations. So in the first 9 months, we created an operating free cash flow of CHF 1.36 billion. On the service revenue, maybe some information on the service revenue. You see that we have a decline of the service revenue of CHF 226 million in the first 9 months. And out of this is -- CHF 47 million is coming from outbound roaming, and this is mainly driven by COVID. But overall, good financial figures in Switzerland. To Fastweb on Page 16. So the strategy of Fastweb is to become an infrastructure-OTT. And what is an infrastructure-OTT, you see on the bottom of the chart, that means it's combination of a very strong network and then with an OTT platform to deliver ultra-broadband services to our customers. And besides, all packed in, in a secure environment. So security solutions, which are embedded in the network, which are also embedded in the products. And to strengthen our positioning in this market and to enhance the strategy to become an infrastructure-based OTT you see what kind of initiatives we made in the last months. So one example is that we acquired Cutaway, that's a cloud-based company in Italy. We have more activities on 5G fixed wireless access for White Areas. And then also, we made an M&A transaction with 7Layers, which is a security company, a smaller security company in Italy. On FiberCop, that's the network company in Italy, very fast. We have a stake in it you see some information about it. So important is that the JV is on the way. And there are now other discussions or discussions ongoing if CDP will also come to this joint venture and some discussion about FiberCop and Open Fiber. On Page 18, some information to our acquisition for 7Layers, that's the security company. I don't want to go deeper in it, but it will certainly enhance our proposition and our effectiveness in the B2B market, which is a very important market for Fastweb. It's also important to mention. On the consumer portfolio on Slide 19. So we have solid figures. We have an increase of our ultra-broadband penetration by 9% year-on-year. That's important because the customers which are on ultra broadband have lower churn and the better ARPU. On mobile, you see also our momentum, we get this 59,000 net adds in Q3. And on the right side of the chart, you see the benefits of a fixed mobile converged offer. So in ARPU, we have an ARPU uplift of 24% and the churn benefit of 21%. And Net Promoter Score, on the bottom right side, you see that we have a very compelling and high Net Promoter Scores. So we are a leader in the Net Promoter Score, which is important for the loyalty of our customers. 20 -- Page 20, B2B performance in -- for Fastweb. So positive momentum in the enterprise market, you see 5% revenue growth. And also on wholesale, you see that we were able to have a growth in core wholesale offers by 23%, strong 23%. Financial performance on Fastweb on Page 21. So the performance is in line with our guidance. You see that we were able to grow by 6% on the net revenue. EBITDA growth of 5%. And we have an operating free cash flow proxy in the first 9 months of CHF 119 million, and this is a change of plus CHF 57 million. With this, I would like to hand over to our CFO, Mario.

[Mario Rossi]

Thank you, Urs, and also welcome from my side to my second last earning call. Some remarks on the performance of Q3. On Page 23, the overall dynamic of the service revenue development is unchanged. So we have seen price fall service revenue in Switzerland. A bit less decline than in Q2 and the solid growth of Fastweb in Italy. In -- for Switzerland, the drivers of the service revenue decline we will discuss on Page 25. Of course, we had also impact from roaming in the third quarter. In the service revenue, we have accumulated impact in B2C of CHF 20 million and CHF 27 million in B2B. Inbound roaming came down accumulated by CHF 27 million. That's included in the segment wholesale. Maybe one remark, again, Fastweb, very solid in Q3, growth on revenue in all 3 segments. On Page 24, Urs mentioned it already, I think we did once again a great job in cost management. On the direct costs on acquisition and retention costs, we have this positive impact of CHF 40 million in Q1 because of the lower SAC/SRC because we had in 2019, we had, in January, February, still the mobile offering in the market where we subsidize the mobile handsets. Then on outpayments, we had less outpayments for roaming, CHF 34 million in Q3, the impact is CHF 7 million. And on goods purchased, we have less trading volume in B2B. And then we had less OpEx for sport events in Q3. The reason is because the Champions League and the Swiss Football League started later than prior year. And therefore, we had fewer events, and we book the cost for the events when events take place. On indirect costs, we stand now at CHF 88 million savings for the first 3 quarters. Current full year effect will be north of CHF 100 million, of course. The EBITDA dynamics in the Swiss business, we can say fixed line loss. You see that the minus CHF 4 million per quarter. That's a minimal effect. I think that's over. Also convergence, the convergence impact is coming down as expected. We have still some growing numbers of converged customers, but less at the beginning of the new portfolio. And then the Q3 effect of the RGU mix, this CHF 21 million is better than in Q2. We had a bit less pressure on wireline, but I think it's too early to say that the trend. So it's too early, I think. In B2B, we have an unchanged pressure in the mid-market and the decline in the corporate or in the larger accounts is slightly soft. Then on the right-hand side on the top, you have the bridge of the EBITDA development of Q3. In this block, others, I think there are elements -- nonrecurring elements of approximately CHF 20 million. So we have this -- the impact of the TV rights, which I mentioned, say that's north of CHF 10 million. Then we have lower assurance costs in Q3, approximately CHF 10 million, less outpayments, I mentioned, CHF 7 million, and then we had the better B2B profitability in the IT and Solution basis. So again, approximately CHF 20 million out of the CHF 38 million on nonrecurring. On the next page, the EBITDA dynamics in Switzerland. As discussed, I would say, overall, for the group ongoing service revenue pressure, very strong execution of cost management and solid growth of Fastweb, and that helped to show a flat EBITDA for the first 9 months in 2020. On net income on Page 27, we have no special effect below EBITDA. Despite flat EBITDA and EBIT, we have a small decline of CHF 14 million on net income. The reason is last year, we had benefited from adjustments of deferred taxes because of the change of tax rates in some cantons. I skip the slide on -- Slide 28 because we are well on track on the rollout as we heard from Urs. And free cash flow on 29, I'd say, very resilient cash flow generation. Collection of accounts receivable is unchanged in Italy and Switzerland, so far, no problems on that side. And that in Q2, we have less income taxes paid because of deferral of some payments to Q2, which was allowed by the Swiss government. That brings me already to the guidance, which after Q3, it is no surprise that we confirm the guidance on revenue, EBITDA and CapEx. And with that, I give back to the operator for your questions.

[Operator]

[Operator Instructions] So we have the first question from Ulrich Rathe from Jefferies.

[Ulrich Rathe, Senior European Telecommunications Analyst]

I have two questions, if that's okay. Could you comment on the -- some of the counterintuitive improvement of the wireless service revenue trend? I mean you're highlighting the pressures, that I understand. There's a roaming pressure and ARPU pressure and competition. But when you simply look at the year-on-year growth, that was minus 12% last quarter and minus 9% this quarter. So the -- even though the roaming pressures are presumably up in the third quarter, the underlying trends seem to -- or the reported trends seem to improve. So could you just shed a bit of light on that? And the second question I had is in your cost discussion that you put out, the big trend change, so to speak, versus the second quarter seemed to be the direct cost in particular. And you mentioned some of the factors, the assurance cost, the sports events. It's a bit difficult for me to disaggregate what is nonrecurring or what is -- not nonrecurring, it's a wrong word, but what is related to COVID, it might just come back in what is underlying change on the direct cost picture. Could you also comment on that, there was like a CHF 41 million, I think, from memory now, CHF 41 million improvement in the third quarter. And how much of that is sort of just an unusual situation and how much of that is sustainable?

[Mario Rossi]

So on the cost side, I mentioned them on Slide 25. So out of the CHF 38 million others, about CHF 20 million are nonrecurring. So the TV rights, I mentioned, is the impact of the TV sport rights are north of CHF 10 million because of fewer events in Q3. If all these events will take place in Q4, you will see that in Q4. And then, say, from the assurance costs, they were very low in Q3, let's say, close to CHF 10 million are nonrecurring. And the impact on the outpayments for roaming, the direct cost in Q1 was CHF 6 million, in Q2, CHF 21 million, in Q3, CHF 7 million, and that's hard to predict now for Q4 because it's a COVID situation, you really don't know the behavior of our clients in terms of revenue.

[Urs Schaeppi, CEO, Head of Swisscom]

Good. And then to the second question, let's say, the dynamic on the wireless or the trends or if there is some improvements, I think as Mario mentioned, it's a bit too early to say what is really a sustainable trend. But if you go on Slide 25, you see actually a better dynamic of the different elements. And you see also that there is an impact on COVID. So all -- which is correlated with roaming is driven by COVID. And then if you take these 2 topics together, it's quite a substantial part of it. What we see is that we have a bit less -- or a bit better evolution in the B2B business on mobile. But this can change. This is a bit also driven by different renegotiations of contracts. So the -- to summarize it, the whole dynamic on service revenue, we will have a further pressure on the service revenue on mobile. Converging elements are -- the impact of convergence will go down. That's for sure, because of the penetration. The RGU mix element will stay, roaming will disappear when COVID disappears. So that's a bit summary.

[Ulrich Rathe, Senior European Telecommunications Analyst]

That makes sense. Can I just ask for clarification? Thank you for the -- particularly for the answer on the cost. So on Slide 25, the CHF 38 million there, that is more or less the CHF 41 million on slide, what is it, the cost slide, I guess it's 24. that is sort of the item that's being explained there, I mean give and take.

[Mario Rossi]

It's approximately that amount, exactly.

[Operator]

Next question is from Matthijs Van Leijenhorst from Kepler.

[Matthijs Van Leijenhorst, Analyst]

The first question is on your cost savings and related to that on the dividend. So far, you have been doing quite a good job on the cost-cutting front. But where -- looking in a year ahead, where do you see further savings coming from? And related to that, for this year, it is likely that you will distribute the CHF 22 in dividends. But looking ahead, given that we see ongoing pressure on service revenues, how confident are you that you will be able to keep the dividend at the same level? What kind of levers do you believe you still have, you can pull to keep the dividend safe in the years ahead?

[Urs Schaeppi, CEO, Head of Swisscom]

Good. So we are convinced that we have further potential to decrease our costs. And how or what are the levels to decrease costs that this is digitalization is reducing volume. That means less calls, less interventions. So on this area, we think that we have further potential. We have also some potential to increase our CapEx efficiency midterm. And then you should see that we have -- if you go forward, CapEx -- there is a potential that CapEx is coming down in some years because now we are in the push to Fiber to the Home. We are in the push for Fiber to the Street. Fiber to the Street will be done in 2021. So you see that we have elements to save our free cash flow. And then Fastweb, Fastweb has a positive momentum, which brings us a positive free cash flow proxy.

[Operator]

Next question, Andreas Müller from ZKB.

[Andreas Müller, Research Analyst]

I have actually two questions. I was wondering, in the enterprise side, this is the Solution business which is probably lower margin than the service business. I mean is the margin gap there, in any extent, decreasing versus last year? And what's the trend there, Solutions versus service margins. And then on the -- I was wondering in Italy, what is the impact of this Huawei ban on 5G? Is there any impact for you anyway, given the partnerships? Or what do you expect there?

[Urs Schaeppi, CEO, Head of Swisscom]

So on the on the margin side, if you compare Solution businesses with the telecommunication business or service business, that's right, the margin of Solutions business are lower. But we have good Solution business margins and overall stable. Otherwise, we wouldn't have a stable EBITDA in the B2B business. So that shows you that we were able to manage this Solution business margins. But you're right, they are below the service business, but on a good level for solution and IT business. On Fastweb Italy, this Golden Power rule of the government. So for us, we have alternative to do it. So for us, it's not a big impact. There are other providers who can deliver us some infrastructure. And so the overall impact for Fastweb is neglectable.

[Operator]

Next question is from Stephen Malcolm from Redburn.

[Stephen Paul Malcolm, Research Analyst]

I had a couple of questions. I just want to come back to the point you made on programming costs. I understand that you've got a sort of temporary reduction given the late timing of sports events. But can you just give us the sort of net EBITDA impact? I mean are you billing your customers -- the Q3 numbers reflect a full quarter of billings for these premium sports events? Or are you light on the revenues as well there? So just an idea of the sort of match of revenues and costs in Q3 and how to think about that going forward? And just coming back to Huawei. Can you just tell us how much Huawei you have in your Swiss fixed line network? And what the implications of a more draconian position from the Swiss government would be if you were forced to swap it out on a sort of 5, 6, 7 year basis? It'd be interesting to say that.

[Mario Rossi]

On the sports right, on the top line, the main part of the revenues are coming from flat subscriptions and the pay per view income is negligible. You don't see it in our top line. This business is -- in fact it is twofold. One is you generate some revenues, but more important, part of this business is still securing the broadband and CD customers. Without the good sport proposition, we wouldn't have such low churn rates in B2B and in TV. But again...

[Stephen Paul Malcolm, Research Analyst]

So your customers are basically -- your customers have been paying for sports that they haven't been getting and you've not had to pay them, but you will pay fully in Q4. Is that fair?

[Mario Rossi]

Yes. They pay on a monthly basis. We gave some discounts during the lockdown because there no events have taken place. But now today, we have events, from the Champions League, from the Swiss Football League, from the EuroLeague. So there's no reason to give a refund right now. So on...

[Stephen Paul Malcolm, Research Analyst]

Okay. Great. So the CHF 10 million of cost reduction -- okay. So the CHF 10 million of cost reduction is effectively an EBITDA benefit this quarter that will come out in Q4 as you build those costs more normally. As you sort of pay them more. Is that fair?

[Mario Rossi]

Yes, exactly.

[Urs Schaeppi, CEO, Head of Swisscom]

Yes. Then on Huawei in Switzerland. So as you mentioned, we don't have Huawei on our mobile proposition. So we have -- our supplier there is Ericsson. We have some infrastructure from Huawei in the wireline business, mainly in the access business, Fiber to the Street. And therefore, I think that our risk profile is low because on access, that's not critical area. And the other exposure is quite limited or manageable. In Switzerland, today, we don't see a dynamic to getting bands of Huawei. And I think also the whole discussion about Huawei is too narrow. If you want to attack an infrastructure, you have to look where is the weakest point in your whole system. And our process is weak. So if you want to get secure networks, we have to have a multi-vendor strategy with a holistic security framework route. And so -- and that's the strategy of Swisscom. So we -- and up today, we don't have evidence that Huawei is actually doing wrong things. So let's say short. We have some exposure in the access business. The other one is manageable. And the access business, I think that the risk is quite low.

[Stephen Paul Malcolm, Research Analyst]

Okay. Do you have some exposure in your core as well?

[Urs Schaeppi, CEO, Head of Swisscom]

Yes. We have some exposure in some elements, in some elements of the core, but that's not -- that's really manageable.

[Stephen Paul Malcolm, Research Analyst]

Okay. But your current expectation is that nothing is going to change in Switzerland and Huawei remain an acceptable supplier for you?

[Urs Schaeppi, CEO, Head of Swisscom]

I don't know, but we will certainly explain ourselves to the government that if you want to have secure networks, you have to work on the -- on a holistic approach and not just only on making a ban of one technical supplier.

[Operator]

Next question from Ulrich Rathe from Jefferies.

[Ulrich Rathe, Senior European Telecommunications Analyst]

I would like to ask about the Liberty, Sunrise deal that seems to be getting closer to coming through. Would you -- from an operating perspective, would you see an opportunity to sort of steal some customers there, to attack the customer base a bit? Because these sorts of integrations are difficult, they create a bit of an internal focus of management usually, and it is an opportunity to maybe have a go at the customers. Is this something you would consider doing in 2021?

[Urs Schaeppi, CEO, Head of Swisscom]

So I didn't know if I get your question right. So if there is an opportunity for Swisscom because of post-merger consolidation, they are not so actually in the market. I would say, our behavior is another one. We always have the thinking that they will be successful, and we have to do our business as good as possible. And for us, it is important to execute our strategy to differentiate ourselves, to invest in networks, to have an excellent customer service. And all the other things is speculation. I don't know how they will manage the company in the future, but you should never underestimate your competitor. So that's why we are executing our strategy, and we don't do speculation about our competitors.

[Operator]

Next question from Ghazi Usman from Berenberg.

[Usman Ghazi, Analyst]

I've got two, please. The first question, which is going back to the slide, which is showing the B2B price pressure in Switzerland. Obviously, here, we can see that there's been a significant improvement. And I just wanted to understand your earlier answer. I mean, are you saying that the reduction in price pressure this year is because of lower renewal activity and that this might not be a trend? Is that -- so I just wanted to make sure I understand what's going on on that front. And then the second question was on Italy. As Fastweb continues to execute really well in what is a very tough macro environment. Just on the enterprise segment, in particular, where for some of the other telecom operators were beginning to see some early signs of pressure on revenues in B2B. I mean, how is it that Fastweb is actually posting an acceleration in revenue growth in the enterprise market in a challenged kind of macro environment in Italy?

[Urs Schaeppi, CEO, Head of Swisscom]

I will take the Fastweb question, Mario or -- no, I will take both. Because Mario is already in the retirement phase.

[Mario Rossi]

No, no.

[Urs Schaeppi, CEO, Head of Swisscom]

Okay. No. So you take the B2B.

[Mario Rossi]

We had a less pressure in Q2 and Q3 in B2B. But overall as you mentioned, it depends on the renewal activity. And it tells you, we have some seasonality. And I would say it's too early to think that we have here really released. So we still see, especially on the mobile side, very tough negotiations. We still see on certain accounts, Sunrise being more than aggressive, I would say. So it's too early to give -- we expect the same trend also in Q4 and going on into the next year.

[Urs Schaeppi, CEO, Head of Swisscom]

And then on the Fastweb question, the dynamic or the development in the B2B market. Fastweb has a strong positioning in the B2B market. We have also capable, very capable customer-oriented go-to-market structure. And through the -- also the small acquisition and the capability, improvement in the B2B market, we are we are able to offer differentiated product portfolio. So also, let's say, improved with security proposition and some cloud proposition. And Fastweb is an agile, an agile B2B provider. So that's the reason why we have a good momentum in the B2B market. And we see in the last months, we see a good development on bigger corporates in the B2B market. A bit calm there is actually, the SME market in Italy because of all this COVID and they are really suffering. But overall, we have really good figures in B2B, and we also believe that we will have good momentum in the next months. A question is what is happening with the bad debt? Up today, we don't see any signs that, bad debts are going up, neither in Italy or in Switzerland. So yes, that's a bit what I can say to it. I think we'll continue to have a good momentum in B2B.

[Usman Ghazi, Analyst]

Can I just follow-up? I mean, the pricing kind of -- the pricing pressure on renewals on the corporate side, you're not seeing that in Italy. It seems from your commentary.

[Urs Schaeppi, CEO, Head of Swisscom]

Well, we see it also in Italy, but it's everywhere the same. So if you have to renegotiate contracts, you lose some ARPU. But on the other side, in Italy, we have the potential to gain market share. So we have -- we are in the region of 30% market share in B2B, so we have momentum to get market shares. And this overcompensates the price decline.

[Operator]

Next question is from Georgios Ierodiaconou from Citi.

[Georgios Ierodiaconou, Director]

I have a few, some of them are follow-ups. The first one is on B2C. And particularly, they are very good numbers you had on mobile net adds. And I understand there's been a bit more promotions in the second and third brands. Is it possible to give us a bit more of t a picture of what the rest of the market is doing, whether we are seeing some signs of more rational behavior from some of your competitors or not? And my second question is on B2B. And kind of a follow-up on what you just discussed with Uzi (sic) [ Ghazi ] around the long-term growth drivers of B2B. And you mentioned security and cloud, is it possible to perhaps give us an idea around what are the prospects you see now versus in the past in the B2B segment, whether it's stronger potential? And then finally, on Huawei, just a quick follow-up. You mentioned that you don't expect the ban necessarily. Do you see a problem with some of the sanctions they are facing in maintaining a competitiveness of the equipment that they provide? So is there perhaps a reason to not use them? I know for you, you don't have exposure, but some of your competitors do. Do you see a reason why people could diversify away from Huawei just on the equipment side?

[Urs Schaeppi, CEO, Head of Swisscom]

So to the dynamic in the mobile market. So we had better net adds because we have a good momentum also on pre to post migration on second and third brands, good dynamics, and let's say, low figures in our core portfolio of Swisscom. This leads to this better net adds. On the other side, promotion activities are unchanged. And so we see a lot of promotion. And if I would say, what is the red line through this promotions, it's half price. Half price promotion that's a bit red line. And I don't see changes there. I don't see actually changes. And on the driver of the B2B business. So it's -- as you mentioned it, it's security, it's cloud, the digitalization of the industry actually, its potential to grow. This needs more connections. This need more bandwidth in the networks. And on top, you have this possibility to deliver solutions. And therefore, we think that there is further potential. We are also in some verticals as the banking, as an example. And there, through the digitalization, we see also some potential. And then maybe a last remark to this B2B growth drivers. In the SME market, there is a mid term, not short term, but midterm is really IT potential. So the whole SME market is from the IT part underdeveloped and the digitalization will need more cloud-based solution in the SME market, and there we have as Swisscom a potential to grow. That's not tomorrow. But midterm, that's a potential because it has quite a long adoption phase? And then the third question on Huawei, I actually didn't get it. Was it that...

[Georgios Ierodiaconou, Director]

Whether without a ban, you think they will remain competitive given some of the sanctions they will face. So if you were exposed to Huawei, would you think that over time, you could continue to rely on keeping their equipment?

[Urs Schaeppi, CEO, Head of Swisscom]

Okay. I think Huawei is a strong company. They have a huge, huge home market. And they have other countries where they can deliver infrastructure, so they can remain scale. So I think they will remain competitive for in the future. This is a capable company. They will be competitive also in the future, even if they have some challenges. But no, I wouldn't say that this will be a less competitive company in the future. It's a political-driven discussion with a lot of uncertainty in it.

[Operator]

So we have the next question from Steve Malcolm from Redburn.

[Stephen Paul Malcolm, Research Analyst]

Yes. I just had a couple of quick follow-ups. One was just on Italy. You mentioned the small acquisition that you made. Can you just confirm that there was no sort of material financial contribution to the Fastweb business on the back of that acquisition? That would be great. And secondly, just on wholesale. I mean your wholesale revenue trends were very strong. An inbound roaming was down but not as probably as much as we thought. Are there any particular sort of movements in that? Did you have any big price rise in the quarter? Just help us understand, clearly, that's an area I would expect to be weak through the Liberty, Sunrise merger as the Liberty MVNO traffic moves off. But just maybe some color on wholesale trends in the quarter which looked particularly strong would be great.

[Mario Rossi]

On Italy, on FiberCop, these 2 acquisitions that no material impacts on both top line and EBITDA, nothing.

[Urs Schaeppi, CEO, Head of Swisscom]

That's more -- these are more acquisition to get some more momentum on the capability side.

[Stephen Paul Malcolm, Research Analyst]

Okay. So 0 revenues, 0 EBITDA, effectively.

[Urs Schaeppi, CEO, Head of Swisscom]

No, not 0.

[Mario Rossi]

CHF 1 million, CHF 2 million, which is required in Q3 and in Q2. It just started. You can see some impact next year.

[Urs Schaeppi, CEO, Head of Swisscom]

And on wholesale, so the dynamic on wholesale, if I go to the real wholesale business, not roaming in it, it's driven a bit by -- a bit more broadband wholesale business, which we are doing with competitors of us. It's not only Sunrise. There are also other ones. And if this merger is coming, Sunrise UPC, that's clear, we have an exposure on the MVNO business with UPC. And the exposure there for 2021 is low, I would say, a low 2-digit million figure.

[Stephen Paul Malcolm, Research Analyst]

A low -- sorry, say it again, a low 2-digit figure?

[Urs Schaeppi, CEO, Head of Swisscom]

Yes, next year.

[Mario Rossi]

The next year, and then it will build up. In 3 years, up to CHF 50 million, CHF 60 million.

[Urs Schaeppi, CEO, Head of Swisscom]

My first was on mobile, on MVNO, this will go faster way. That's clear. And then there will be some erosion on the wireline business connections, but it will take time.

[Stephen Paul Malcolm, Research Analyst]

Yes. If I look at wholesale services, in particular, that seems to grow north of 10% in the quarter, which has been fairly flat. Was there the broadband -- the increase in wholesale broadband lines, I guess, was fairly consistent. So it wouldn't explain a sudden jump up in revenues in Q3. I'm just curious as to why that line seems to grow quite so strongly in the third quarter?

[Mario Rossi]

I mean our growth -- revenues from third party is more or less flat. We have a growth on the core wholesale services, as you mentioned, in line, about CHF 10 million. And then we have a decline in inbound roaming of about CHF 10 million. And that's more or less flat.

[Stephen Paul Malcolm, Research Analyst]

So I guess when I look at -- the wholesale service revenue growth appears to stand out in Q3, but I don't see things sort of stable versus the previous couple of quarters. It seemed to grow faster in Q3.

[Urs Schaeppi, CEO, Head of Swisscom]

No, no.

[Mario Rossi]

No, no. Maybe you can check later. We will go through the numbers.

[Louis Schmid, Head of Investor Relations]

We can look at the numbers later.

[Operator]

Next question from Luigi Minerva from HSBC.

[Luigi Minerva, Senior Analyst]

The first one is on the CapEx outlook. You hinted that CapEx medium-term may decline once you're done with the current fiber program. Perhaps, can you make a more general comment how you see CapEx over the next 3, 4 years? And particularly, how the mix will change with 5G, fiber and maybe more traditional Capex? And then secondly, I was wondering if you have some early indications, early feedback on your OTT TV product? How is it going?

[Urs Schaeppi, CEO, Head of Swisscom]

On the CapEx mix. So we will have slightly higher CapEx in wireline because of the rollout of 5G but that's not so big actually. The CapEx driver in the next 2 years are driven by wireline network rollout. And my message was that the Fiber to the Street investments will go down after '21. And on the other side, in the next year, and up to '25, we will have some higher Fiber to the Home investments. But because of the boost of this Fiber to the Street investments, there is a potential that the CapEx are slightly going down midterm. But at the end, it's all related to also the competitive dynamic. It depends also on the competitive dynamic of the investments in fiber infrastructure.

[Mario Rossi]

And on the mix, I wouldn't see a dramatic change. We show the mix on Slide 28, and that will be more or less unchanged. It's also -- we always said that the 5G, the CapEx will not explode. So the overall mix will be maybe a little bit more in fiber, as Urs mentioned, and then maybe a little bit less on projects and basic infrastructure. But there are no material changes. And then the second question...

[Luigi Minerva, Senior Analyst]

Okay. May I ask if the Fiber to the Home deployment will go -- will have to go beyond your current targets. And perhaps you will want to match fully the cable footprint?

[Urs Schaeppi, CEO, Head of Swisscom]

Yes. That's the long, long, long term, it will be Fiber to the Home. But we will have a footprint of 60% where we have Fiber to the Home. In other areas, we will have through Fiber to the Street, a bandwidth of 200 to 500 megabits per second. So we will have a footprint of more than 90% with speeds above 200 megabits. So we have a competitive network. And that's a big -- the message. And then on OTT, we have a good starting momentum on this OTT also on the upside. On Smart TV, that was your question, Smart TV. We get some new customers, but that takes time because the smart TV penetration is still not so high in Switzerland. And therefore, that's more a topic, which will have a midterm impact.

[Operator]

There are no further questions at the moment.

[Urs Schaeppi, CEO, Head of Swisscom]

Okay. Then while, with that, I would like to conclude today's conference call. Thank you to everyone participating. If you should have any further questions, please do not hesitate to contact us from the IR team. Speak to you soon. Have a great day and stay healthy. Thank you.

[Operator]

The conference of [Foreign Language] ended.