Swisscom AG

SIX:SCMN

Earnings Call Transcript 2022-Q4

[Louis Schmid, Head, IR]

Good afternoon and welcome to Swisscom's Full Year Results Presentation. My name is Louis Schmid, Head of Investor Relations.

Now, let's move to slide number two with the agenda for today. Christoph Aeschlimann, our CEO, starts the presentation with Chapter 1, the 2022 results where he dives into the key achievements of last year, commercially, operationally, and financially.

In Chapter 2, trends and strategic priorities, our CEO gives a short overview of the trends and an update on the macroeconomic situation in Switzerland and Italy before elaborating on our group strategy and ambitions 2025.

Christoph continues with Chapter 3, presenting the 2022 achievements, financials, and the strategy for Swisscom Switzerland before updating on our network and IT activities and priorities for next year.

Dirk Wierzbitzki, Head of Residential Customers; and Urs Lehner, Head of B2B customers -- of Business Customers will present thereafter the achievement 2022 and the priorities 2023.

Alberto Calcagno, CEO of Fastweb, will then talk in Chapter 4 about industrial and financial performances of our Italian business and its plans going forward. After Alberto's presentation, Eugen Stermetz, our CFO, will present in Chapter 5 in all details the financials 2022, including the outlook 2023. And in the wrap-up Chapter 6, some final remarks from our CEO. After the presentation, we will directly move into the Q&A session.

With that, I would like to open today's conference and hand over to Christoph. Christoph?

[Christoph Aeschlimann, CEO]

Thank you, Louis and welcome also from my side to this full year 2022 results presentation. Just as an introduction, a couple of highlights. We still have these five group goals that we pursue since a couple of years. In Switzerland, we remain voted the strongest brand in Switzerland and we also won one of the benchmarks as being the strongest telco brand in the world, which made us extremely proud as well as winning all or several of the relevant benchmarking tests.

In Italy, Alberto will dive into more details later, but we were again able to deliver four quarters of growth in an extremely challenging market which is, from my perspective, an outstanding achievement in Italy. All of these achievements in Switzerland and Italy led to solid financial results in overall for the group, which Eugen will present in more details later on.

Also on the sustainability side, we were able to move ahead and remain the industry leader according to World Finance as the most sustainable telco in the planet.

On the product side, we launched many new products, both in Italy, but also in Switzerland, B2B and B2C, which Dirk and Urs will talk about later. And also on the network side, we were able to increase our network coverage, both in mobile and in wireline and many tests, as previously mentioned.

Overall, the market results are pleasing. We were able to continue our growth story on the mobile postpaid side and increasing our RGUs by 166,000 units. Whereas on the broadband and the TV side, our base was slightly declining, but in also overall declining TV market, we were actually able to increase our market share on TV despite losing 21,000 RGUs.

Fixed voice is still declining as it was in the past years at roughly 100,000 RGUs per year and we also expect this decline to continue this year moving forward.

On the wholesale side, we had minor losses after the Sunrise including some of the Sunrise optimizations and migrations, but we are now, again, in a stable situation on the wholesale business side.

In the Italian business, we were able to maintain our growth engines and increased our mobile subscriber base by 25%, winning over 600,000 new customers in the mobile B2C space.

And if you look at the wireline market, we continue to pursue our value strategy on the B2C side, losing some RGUs in broadband, but largely over compensating them by an increased wholesale coverage and new wholesale contracts where we serve all the new market entrants in the Italian market, which allows us to compensate the losses we have on the private side and Alberto will detail a little bit more later on.

So, overall, we can say a good performance in a challenging market environment, both in Italy and Switzerland and we are very pleased with those results.

Overall, on the financial side, we were able to post CHF1.1 billion revenue. On an underlying basis, this has increased by 1% and also on the EBITDA side, we were able to write a profit of CHF4.4 billion, which, if you compare it on a like-for-like basis without all exceptional we had in 2021 and 2022 corresponds to a 3.1% year-on-year increase over the last year.

On the right-hand side, you can see how we managed or how the EBITDA is composed. So, overall, the underlying EBITDA increased by CHF139 million, most of it coming out of Swisscom Switzerland, but also Fastweb delivered its EBITDA growth, contributing CHF30 million to the overall EBITDA result.

And then at the bottom, you can see the CHF211 million exceptionals linked to provisions and other effects that Eugen will explain later on in his presentation, bringing us to CHF4.4 billion EBITDA in 2022.

Now, if we look a bit forward in trends and strategic priorities for Swisscom. On the trend side, I would say the trends are largely still the same as last year. So, on the technology side, the most important trends for Swisscom are related to cloud, AI, and cybersecurity, but we also have emerging trends such as Web 3.0 or the meta where we are doing first experiments to see how we can enter those new markets and provide new products for our customers.

Talking about customers, we can say that the trends are also largely the same. They have higher and higher expectations more reliable, more secure, more instant, and more digital, and we have many initiatives underway, especially in digitizing our interfaces towards the customer interaction to make these -- to match the expectations of our customers.

And also on the stakeholder side, I think we can say, especially in Switzerland, ESG is taking more and more relevance or importance in the market, also on the customer side, our customers expect us to behave in a certain way and contribute positively and sustainably to our environment.

Also, the war of talent is something which is an important aspect of the company. As you know, in many markets, there is a talent shortage, especially on the IT side, and we are deploying many efforts to counter this shortage.

We are increasing or accelerating our education, upskilling our own employees, but also training new market or new employees with our internal training facilities, but we also invest a lot in the branding activities around our Swisscom brand to attract and retain more employees at Swisscom.

Now, in terms of economic environment in Switzerland, the country is fairly robust. We have a limited inflation in Switzerland, running slightly below 3%. We have a stable economy. And I would say we have unchanged dynamics in the telecom market. Most of the market is not growing or declining with the exception of mobile, which is still slightly growing, but you can see that the price battles and promotion battles have increased again in the Q3 and Q4, where we have seen very aggressive and sustained promotion from our competitors, and we expect this to continue in 2023.

The regulatory environment is also increasingly challenging, and this is also reflected in one of the provisions that we have made last year in our overall reevaluation of regulatory risks, which Eugen will explain later on.

But what is positive in Switzerland, but also in Italy, is the IT market, which is growing substantially in many different segments and it is also still a very fragmented market, which offers opportunity for consolidation for Swisscom.

If we look at Italy, the situation is slightly different. We have a country with a declining population versus a growing population in Switzerland with a much higher inflation. So we have a sort of, let's say, a more challenging macro environment.

And you can also see the effects of this challenging macro environment in the behavior of all the market participants, where we all know that the market is extremely competitive, and we are facing many new entrants which despite having already a very competitive market or entering the market and try to win market share, in the wireline market and resell or cross-sell broadband subscriptions to their existing customer base.

And we expect this to continue this year on the telecom side, but also in Italy, we are focused on IT, and we are continuing to expand our footprint because the market in Italy is still very fragmented, and it offers a lot of possibilities for Fastweb to increase its current business.

So, overall, we can say that Swisscom as a group is very well positioned today. We are in excellent shape for the future, both in Switzerland and in Italy. We are doing the best to extract the maximum value on the telecom side and invest heavily on the IT side to grow in line with the market in this very important market for the future.

So, overall, our 2025 strategy and ambition is unchanged previous to our -- which -- is unchanged compared to before. So this is a strategy we decided over two years ago, and we continue to remain completely focused on executing this strategy.

We are defending our market position in Switzerland to remain the market leader in Switzerland, being also investing heavily in the networks in Switzerland, and we remain the leading challenger in Italy -- or basically the only challenger, which is growing -- and growing on the topline and increasing its profitability, and we want to continue this growth in the coming years until 2025.

If we manage to do this, this will lead us to excellent profitability and rock solid financials. And as I already mentioned before, we will continue to execute on our corporate responsibility side and continue to create new innovative products and increasing the reliability on our services. And we will now go into more details in these five different domains later on.

Before we move to Italy and to Switzerland, I will quickly talk about corporate responsibility and innovation and reliability to highlight some of the achievements of this year.

So, on the corporate responsibility side, our strategy is based on three pillars. We are focusing on the environment, on the people, and on good corporate governance. So, on the governance side, it is quite simple. We have been voted again as the best Board of Directors out of 171 companies in Switzerland, which is extremely pleasing, but we are continuing to invest in the governance of the company to ensure that the company is well run and ethic business behavior is in place everywhere.

On the people side, we are heavily investing on educating our own employees, but also our customers. We have a digital academy in Italy. We have an academy in Switzerland to continue to train the citizens in the media usage and the profit of the digitalization or the chances of digitalization.

And on the environment side, most of the focus is invested into decreasing our use of energy and decreasing our creation of CO2, where we are focused on all four scopes helping our customers saving CO2, but also decreasing CO2 in our supply chain and in our own operations.

On the innovation side, we have three -- seven -- sorry, seven different cluster or focus areas where we are investing in. So, I will not go through all of the seven areas to probably be way too boring. But just to highlight a bit or to make you aware in which areas we are actually concentrating on because these areas are the basis of our business, being the network, AI analytics, but also the entertainment side, especially in Switzerland with a big entertainment business.

But also, I think the cybersecurity area is increasingly important for our customers, both on the B2C side but also on the B2B side, and we continue to invest heavily in these areas to take advantage also of future opportunities where network and security continues to merge more and more together, which is, for us, a very interesting avenue to create future growth.

Now, moving to Switzerland. So, Swisscom Switzerland has achieved many things in the last year. Urs and Dirk will highlight them in more detail. But maybe from my side, just one word about the IT aspect.

We have clarified the FTTH rollout strategy in last October where we announced that we will move to a point-to-point construction model versus previously point to multipoint. And we will continue to execute this strategy. And actually, the change is on track as well as all the other IT consolidation projects which are ongoing.

On the B2C side, I would highlight the launch of the blue product portfolio, which is actually the launch after three years, a major product launch, which is always a big undertaking.

And I think the B2C organization executed it marvelously well. The customers love the product. We have a very good market uptake and Dirk will explain in more detail what we are doing on the site.

On this side, this was also one of the reasons which we helped us to stabilize for the first time in seven years, the service revenue evolution in Switzerland where we had a flat service revenue on the B2C side in Switzerland in 2022.

On the B2B side, we managed to slow down the service revenue erosion on the telco side and the IT side actually grew by 6.3% which is a very good achievement in the IT market and managed or led to an overall growth on the B2B side as well.

Now, in Switzerland, the financial results are CHF8.27 billion net revenue, which is up CHF37 million compared to 2021. And also on the EBITDA side, we have an increase of CHF30 million, leading to CHF3.483 billion, which is an increase despite all the provisions that we had to do due to the regulatory actions, which is very pleasing.

The strategy on the other side, in Switzerland is also unchanged compared to last year. It resides on three pillars. The first one is delivering the best customer experience. This has two aspects. One is based on delivering the best products for our customers.

And the other one is based on the best service in all the touch points, being it in the shops, the call center also the digital interaction with our app for customers and we were able to generate or increase our NPS lead on this side, which demonstrate that the actions we have in place and the strategy we pursue is working, and we can increase the distance towards our competitors.

On the operational excellence side, this is focusing on two different aspects as well. The first one is increasing quality of services, quality of network, quality of products. And the second aspect is delivering a lower cost base, so decreasing our cost and most of the initiatives in this bucket are based on simplification, automation or introducing AI, which at the end, makes the products and the services faster, better and cheaper at the same time.

And then on the new growth side, we also want to continue our growth in Switzerland. We want to maximize the telecom business we have. This is with various strategies on the B2B or B2C side with a multi-brand approach.

But we, at the same time, want to grow on the IT side, as mentioned before, with a special focus on cloud, cybersecurity, AI, but also application business delivering in SAP or other areas where we still believe that the market is growing and offers up interesting opportunities for Swisscom.

Okay, I will now move to the networks and IT piece. In Switzerland, delivering -- giving you some insights on our strategy for networks and IT. So, in the technical area, we are working on five different pillars.

As mentioned before, we changed and clarified the rollout strategy for FTTH and we are now implementing full speed this change to switch the whole construction model to point-to-point, but we are advancing at full speed and as expected, and were able also to increase the UBB, the broadband coverage at all levels and win all the relevant benchmarks both in mobile but also in wireline which is extremely pleasing result for the team.

On the mobile side, we were able to really keep our lead. We have in the -- on the quality side, but also in the coverage side an increased population coverage substantially. I will come to this later on in a more detailed slide.

Another important action on the IT side is the consolidation and simplification of our landscape as historically, we have built up quite a complex IT architecture and I will talk a bit about this later on to show you where we stand on the simplification initiatives, which will also deliver or contribute in an important way to the future cost savings of the company. And then reliability, I will come to later as well, where we were able to increase our stability substantially.

Now, the priorities 2023 actually remain the same as the priorities 2022. We want to continue the rollout in mobile. We will continue the roll out on wireline, continue to invest in securing or making the network and services more reliable and secure. And also going back into a growth model on the wholesale side to secure really the contribution of wholesale to the value creation of Swisscom.

Now, if we go a bit into details on these 5 different pillars I talked about before, so the first one is the wireline area where you can see that we actually were able to increase the broadband or ultra-broadband coverage by 3%, moving -- covering now 91% of the country with over 80 megabits, which is the new universal obligation speed in Switzerland starting 2024.

And we were also able to increase the footprint on the fiber rollout side. And maybe I would take some time now on the fiber side because there are quite a lot of numbers on this slide. So, we have to distinguish on the fiber side between constructed and marketable footprint because some of the footprint we have built are still in the multi-point topology, which is today blocked by the COMCO. So, we are standing end of 2022, we actually constructed footprint corresponding to 43% of the country, marketable is 34%. The difference is the multipoint topology.

And for 2025, we actually plan to reach between 55% and 60% constructed and between 50% and 55%marketable as announced in October last year. So, this is in line with our October announcement.

What is also interesting to note is that we have roughly 10% fiber footprint in Switzerland, which exists outside of the Swisscom footprint, which was built by third-party companies.

So, this means that if Swisscom achieved and we plan to execute and achieve our target of 55% to 60% constructed footprint, Switzerland will have approximately two-thirds of the country covered with FTTH footprint in 2025, so in three years. And important most of the interesting areas will actually be completely built in 2025, which is, I think, an excellent news for the future.

What we will also do this year is written on the bottom right, we will start testing copper phase out as we start to investigate this topic, how we can be in the most effective way, reduce the copper coverage in Switzerland.

We will do first municipalities this year to test the best way of migrating and collaborating also with the authorities to see the -- to decide on the future of the copper phaseout strategy related to the fiber -- ongoing fiber construction.

Now, on the mobile side, we were able to increase the mobile coverage by 12%, and we now cover roughly three quarters of the population with 5G plus. So, the new 3.5 gigahertz 5G frequencies, which is a substantial increase compared to last year. And we will continue to build out new towers to increase the 5G plus coverage.

Also this year, our goal is to reach at least 90% 5G plus coverage in the coming years, and we will keep our CapEx envelope of about CHF300 million stable on the mobile side to continue to upgrade and densify our network. The goal being to create extra capacity in the network and also extend our coverage leadership, which is already today about two times ahead of competition.

Now, on the IT and network simplification side, which is a very important topic and quite close to my heart. When I became CTIO four years ago, we decided on a radical simplification program, and we are continuing to execute on these goals in the coming years, also with the new CTIO joining us in the next two weeks, because it is the basis for a lean, simple and automated operations in the future, which will allow us to operate our network in a higher quality, more reliable and a lower cost base, but also deploying in the future new products in a much faster manner.

And you can see where we stand. So, we were able, in the last three years, to remove a quarter of all our network platforms. Some of these projects are, let's say, executable in a couple of months or by half a year. Some of them take four or five years like the 2G phaseout, which we completed a couple of quarters ago.

But it just shows you that some of these projects are very heavy lifting, inquiring, involving a lot of people and a lot of resources. And our ambition is to reach nearly two-thirds of less network platforms in 2025 and we are well underway to execute this target.

On the IT side, we also continue to remove IT applications in a continual phases. We actually decreased the number of IT applications. We are operating by 15% and we are continuing to remove IT applications every year and reaching the 25%. On this side, we are slightly ahead of our plan and we might be able to even decrease IT applications further than the initial set target in 2025.

Also on the supply reduction side, we are well ahead of our plan, already reduced 70% of our supplier base compared to 2019. And we continue to reduce our supplier base to simplify contract management interaction with supplier, decreased costs and simplify the overall landscape.

So, this, in summary, is an important pillar contributing to the reliability and security of our services. We were able to improve the reliability by around 40% last year compared to the year before, and we are continuing to heavily invest in this area to further reduce the number of incidents we have on our network.

We have a stability program in place with very ambitious targets until 2025 because I am convinced that the stability of our services creates the trust in the brand and the reason or is a big reason why customers also stay with Swisscom.

And therefore, it is important that we continue to execute on this topic. And also, I think on theB2B side, a customer which is happy with the stability of services delivered is much more inclined to renew his contract and it is much easier to sell new services to a happy customer. And therefore, this is a key pillar of a technology department contributing to the success of B2C and B2B.

And next to this or last but not least, we also want to ensure the best monetization of our network investments. So, as I previously outlined, we are investing a lot of money in the fiber rollout and we want to ensure that it is best used. And this is the role of our wholesale division where most of our competitors in Switzerland are customer of Swisscom wholesale buying wireline services from our wholesale branch.

And we -- I think have quite a stable evolution on this side. We had a minor loss of revenues last year because of the MVNO effects of the UPC merger, which was still visible in the first half year 2022. But this year, this effect will not be there anymore. And the goal is to, let's say, try to increase the wholesale activities again this year to make a meaningful contribution to the network utilization.

This was it from the network side, and I will now hand over to Dirk Wierzbitzki for the B2C side.

[Dirk Wierzbitzki, Head, Residential Customers]

All right. Thank you very much, Christoph. So, a lot has been said already. B2C has had a good year in 2022, particularly around the stabilization of the revenues. And I would like to expand a little bit into it what we see as the drivers for that achievement.

I think 1 key aspect is certainly that we have played our multi-brand strategy. And I would like to talk about the Swisscom brand first and then about the second and third brands.

On the Swisscom brand, from my perspective, we clearly doubled down on delivering our customer promise and that means the customer promise in all aspects. Christoph already talked about the quality of the network has never been as great as it has been now.

And that is clearly perceive by -- by the customers, nobody else offers more performing and stable network than we do and it clearly pays off.

Similarly, that is true also for the touch pound service, B Digital or people and customers are experiencing. Similarly also for our offers and for products and other experiences that they are using.

That as a package that is recognized also by the external world. I believe there are the only price that we have not obtained last year regardless of service networks or products and for the brand as such but be the strongest telco brand in the world.

And that then, in turn, obviously, leads to a very satisfied customer base. We are by a huge far distance, the NPS leader in Switzerland. So, quality play does pay off. And then in terms of numbers, it clearly shows itself and again, in a record low churn that we have seen last year.

The other aspect I would like to highlight on is we focus quite substantial efforts on the ARPU management and value play. One thing that you might have noticed, for instance, that we substantially have been reduced our promotions. In terms of duration, maybe went from 12 to six months, but also in terms of the height of the discount which were like half prices eventually. But now you get between, let's say, 15% to 20% of the discount. So both effects then basically provided for a good ARPU result also.

And also, the additions performance has not suffered from a reduction of promotional activity. And again, the explanation for that is the Swisscom brand and all that it delivers has never been as strong as last year.

And then thirdly, to the right-hand side, Christoph touched also upon that briefly already, we have launched an entirely new mass market proposition I would dare to say a board first.

It's kind of like a mass market digital-first product that also actually make service a tiering dimension in the portfolio scheme as such for those customers that opt in and prefer to interact with us in a digital-first way. They also get a certain pricing advantage.

But not only is that, obviously, the entire way we rethought the presentation of telco services in terms of simplicity and in terms of versatility is entirely new and totally new setup. And by the way, also here, we managed that quite a big part of the customer base got substantial improvements on the performances for instance, in connectivity.

So, I think it's like these three things are -- I will expand a little bit further later on, on that. And then there is the second and third brand play where most particularly Wingo, our second brand has stood out. And I think it has been particularly standing out because of great offers, but also great execution of marketing and communication, some channel expansion that overall yielded particularly in the mobile domain, very positive results for us.

And lastly, in terms of margin contribution, as you see on the right-hand side, the quality play and the shift-to-digital is paying off also there. We had substantial decrease in the customer care. Where there is no problem, there is no reason for anybody to call in. And when there's good digital possibilities, people prefer these.

Contrary to what might some people think, already more than 50% of customers appreciate the digital interaction with it and not the least, the pandemic time has even accelerated that a little bit, and particularly the new customers that come into the market, they are digital first. And they don't look at digital as a burden. They see it as a preferred choice for us -- for them to interact with us.

All of this has worked from our perspective that well that in 2023, there's a very simple strategy. We just continue what we have been doing in 2022 and pursue the trajectories as I laid them out, and you'll see the five big categories here.

Obviously, we continue our value play in defending ARPUs by further looking at our promotional behavior and pricing measures. They want to maintain a strong market position, obviously, still expanding on the newly launched Blue offer. There's still a couple of things that we have in mind that we will bring to the market.

And again, in terms of -- for the price-sensitive segments continue to make our way with the second brand, Wingo. Then obviously, churn prevention remains high on the agenda by continuing our play on quality and brand and all the things that I have been mentioning.

Revenues is not only a topic then for core connectivity, but we also see pockets of growth, for instance, in entertainment and certain value-added services in the accessories business and so on. And last year, of course, the shift to digital is in full swing. We are particularly well underway for the shift to digital and care.

We are well underway for the shift to digital in digital sales for the second and third brands. We still see an opportunity to beef meters on the Swisscom brand in that respect.

When we look into the particular categories here, as mentioned in 2022, we have substantially cut down on promotional activities. We will explore further measures that we might explore on that path.

Clearly, promotional activity is still intense in the Swiss market. Nonetheless, let's say we are performing well. So, we don't see any reason to become more aggressive again. Actually, to the contrary, as I said, we see how can we further maybe lower promotional activity also in 2023.

For pricing, as I said, we already have executed some, as we call it, targeted pricing in 2022. We see certain pockets of opportunity also in 2023, particularly if you look, for instance, as the customer base in the back book, if you wish, there are certain older tariffs where we will develop customers into the newer tariffs and by that also hoping to gain a positive ARPU momentum as we do these phases out of these shifts actually to front book tariffs. And obviously, we're going to continue Wingo in the second brand space.

When it comes to the Blue in the next year, as said earlier on, we launched an entirely new proposition. There's still elements that can be exploited further and paid out further.

So, clearly, on the dimension, for instance, of entertainment, and other solutions, we will enrich the portfolio. We will also enrich the possibilities of the digital sales service with the chatbot we have launched and so on.

We see some good opportunity also to exploit FTTH again after all the things that have been happening that you are also aware of we are happy and look forward that we can recommend to sell FTTH, and we see some potential there also, again, be it in the base, but also be it to gain new broadband customers as we are now servicing them. And then obviously, as I said earlier on, we are going to continue the Wingo Play and then reach that offering, too.

Here on that chart, I would really like to draw your attention on the graphic that we had put in there for the NPS development. Of course, you might want to take it with a grain of salt. I mean, that is our measurement with our customers, but also with customers from competitors.

And as you can see, the last couple of years, the NPS gap has been substantially widened up. I would almost dare to say we are playing in a different league now. If not two leagues above use competition.

And I think the reason for that is all that I explained about the focus on quality, on customer experience, offers and so on and so forth. And that is then clearly paying off also in very low churn rates as you see them at the bottom of the chart here.

And obviously, the strategy as said, we continue the route that we have embarked upon in 2022 also for 2023. We want to continue with our activities in loyalty and retention management, which we have substantially beefed up and also gained some real, let's say, operational sophistication and professional in that we are going to continue our brand and experience play and so on and so forth.

There's pockets of growth in entertainment, so next to like core connectivity business, there's pockets of growth in core entertainment. You see some index numbers here around, for instance, the spot users, the spot customers, which have been very nicely growing in the last couple of years. And here also, we want to continue onwards on that trajectory.

We're also obviously beefing up our entertainment proposition with new possibilities and functionality and obviously also content, some of which that we provide, but also many opportunities that we see by reselling content and also other applications from others as we want to increasingly try to leverage that a trusted customer relationship is not only serving telco services, but also content services and maybe even services beyond that.

And then to finish up, obviously, as I said, the shift to digital is in full swing. We want to continue on that path. We are well underway on -- in care and the shift to care. We managed down workloads quite substantially.

Christoph mentioned the deployment of AI, which we already do. But I guess you all have seen that AI is making tremendous advancements in these days. And that is certainly something that we believe we can likewise profit from -- for us, but equally also deploy provide a profit then for our customers with it.

In terms of assisted channel, we are halfway in the rollout of our totally new job [ph] concept, which also deploys lots of digital opportunities in the job, which again provides for better sales and better service opportunities but also higher degrees of efficiencies that we are looking for.

And similarly, also, we want to more and more personalize and digitize and optimize the entire digital customer life cycle management so to say, from the first day, you are a customer until -- well, hopefully, you never leave, but let's say throughout the entire customer life cycle. And a particular focus in the coming year, we want to put on the sales channel share for the own brand.

Well, that's a briefing for 2023 for B2C segment. I hand over to Urs for the B2B segment.

[Urs Lehner, Head, Business Customers]

Thanks a lot, Dirk and also welcome from my side. Happy to share some additional insights to all these, which was already explained by Christoph concerning our B2B business in Switzerland. Our core achievements in 2022, we definitely can build on strong results commercially and operationally.

Some highlights. I'd like to explain first, starting with the telecommunications business where we definitely have exceeded our own expectations. I guess our quality approach really pays starts to pay off, not bidding for every price in a very demanding market also in 2022.

I guess we definitely could, let's say, reduce our revenue erosion above, let's say, our own expectations. And we are trying to continue also working on that way forward. But I definitely see still a very demanding and, let's say, challenging market environment in telco B2B space where our opponents pretty often in a one-off approach, draw prices in a way which, from our perspective point of view, sometimes are definitely not reasonable at all.

But having said that, we definitely work on our quality strategy and execute on it way further. We launched in Q4, our 5G FEA solution with very promising first results. And we definitely are also working strongly inleading the software-defined technology business, our technology approach in our telco, offering also in the SME market, and also in the corporate space way forward.

As was elaborated by Christoph, we had a strong growth in our IT business, outperforming on the topline, let's say, the revenue erosion on the telco side, which led to an overall growth in B2B business 2022.

We could tacitly expand on one side on our core elements around cloud, around security, but also had a very nice growth in our software business, driven by SAP and other elements where we are working on and also the positive trend in profitability evolution goes into the right direction, but still a lot of challenging and work ongoing there.

Our growth in the security space, we double, for example, in the threat detection response area, our revenue for the second time in a row on a year-on-year basis and trended off also some large cyber-attacks, which, let's say, meant through our networks where we really could play an important role for our economy and our customers here in Switzerland.

Last but not least, we were executing strong in the -- in digitizing our customer interactions in the corporate space, we have fully closed our migration towards a new self-service portal for our corporate customers.

And in the SME space, this migration and transformation is half underway, which will lead us to, for sure, better, let's say, execution and more efficiency also way forward and also more sales service capabilities, especially in the SME space, where from a historic perspective point of view, we definitely had still some work to do.

As already laid out by -- in the B2C space, by Dirk, also I'll come back to that later in a minute, our NPS result is really very promising, and we are working hard to make sure that, let's say, it's easy to make business with us as we come in the B2B space here in Switzerland.

Our priorities 2023. First of all, further on pushing our telco value differentiation. We will enter into the market with some additional elements, especially in the SME segment, where we have a pretty old portfolio actually in place. There is definitely more to come within 2023.

We will further expand our position in the IT -- Swiss IT services market in the corporate domain but also strongly in the SME space. And for sure, we will act further on to deliver seamless customer experiences and work in our priorities to make sure that our strategy is executed in a relentless manner.

If you dig in a little bit further into telco business, as laid out, I guess, we improved operationally. We have maximized, let's say, our approach in working on differentiation. We started with new products, with new services as laid out.

And also, for example, in the IoT business, we made steps forward into a direction to be able to provide integrated solutions, not only based on connectivity, also added business solutions, including applications, analytics, where we definitely have very solid results.

On the RGU basis, which is laid out in the middle, you definitely can see that besides the fixed voice, we were very stiff still had some losses in the RGU base, we were very stable on a year-to-year basis.

Our blended ARPU is still under pressure, as mentioned before. Let's say, we had a certain decline in price erosion, but price erosion in the B2B space is still ongoing. And I don't see, let's say, a huge potential there. I believe also looking forward to 2023, we have to let's say, have a look on it, but we are pretty sure that, let's say, the pressure will remain. I don't see a fundamental trend change there, but we are working the best we can on that.

And last but not least, the IoT space, we have after corona, seen a pretty nice, let's say, ramp-up in implementing solutions. So a lot of rollouts, which were stopped over the last two years have started to take off, which helped us also to grow the RGU basis in the IoT business.

If we have a deeper look into our IT activities within the market here in Switzerland, where we see a CAGR also way forward of somehow 5% per year. We definitely have the ambition to grow at least the market level or above, which we delivered in 2022. I guess we have our portfolio, our unique differentiation that we are really able to be the one-stop shop for B2B customers here in Switzerland. We execute on that, try to reduce complexity to make it more simple.

And as also laid out by Christoph, the profound foundation and stability in our existing services where we had for sure made a lot of advancements in 2022, but where still a lot of work has to be done on a -- in a joint effort with in Swisscom Switzerland to make our ambition 2025 real that we don't have to talk about stability anymore concerning services here of Swisscom.

If you look to the quarterly evolution in our IT business, we definitely can say on a year-to-year basis, we had a solid trend in every quarter. For sure, depending somehow in a quarter basis also from certain large project situations, but fundamentally spoken, we believe we definitely have delivered well.

Also -- and we will continue to work on that trajectory way forward in 2023. We have integrated very successfully over the last year, some organic moves last year in the SME space with MTF, which delivered a great first year under our umbrella and where we are working on also to push the IT business in the overall, let's say, percentage of our business in the SME space, we did a very solid, let's say, ramp-up, which will evolve over the next year.

Coming to some elements of our value, let's say, security and hybrid ICT product. We truly see that there is a huge transformation ongoing every customer, every B2B customer in his own speed and his own strategy how it comes out of these data centers into either a full public cloud world or normally into hybrid situations where we definitely have all the capabilities in-house to support our customers in their digital transformation.

We are by far the largest Microsoft Azure partner; Azure expert partners here have on also a lot of exclusive partners later there. Also, we are very strong together with AWS as a partner in Switzerland, and we are working on this transformation to be the integral partner on the infrastructure, security, but also application transformation side for our Swiss-based headquarter customers here in Switzerland.

And this will remain our focus way forward also in 2023, advancing unified communication collaborate space. We will bring new cloud-based services in the workspace and workplace environment, which is for sure very near, let's say, very asked need for our customers, and we will advance to make it easier to work as an integrated partner for our B2B customers.

For us, also there we are really also proud of that we can see over the last years, we have let's say, ramped up our already very solid NPS level to next heights. And it's, first of all, in the corporate space, but also in the SME space, let's say, the trend is our friend there, and we are working at the, let's say, also to write the story way forward because we truly believe differentiation comes from customer satisfaction when it comes to these two business that they can't decide either they want to let's say, two changes wherever it's possible on their own, on their timing or hand it over to us as a partner.

And this flexibility is a part of our B2B transformation on the telco side, which also will deliver in 2023, new elements of our portfolio starting in the mobile space in the first half of this year.

And yes, we are maintaining on the way to reduce complexity to get rid of a lot of legacy applications and also products phase out is a very important function we are working on, but also we will deliver new additional services on the foundation that we have built on over the last two to three years.

I'm pretty solid that there is a set of opportunity in a market where we are really able to deliver a broad variety of services to our B2B customers in Switzerland. Closing with the really mark, I'm convinced that at least in the telco space, it will also in 2023 be more risky than an opportunity business.

Handing over to my colleagues from Milano to Alberto. Okay. Thank you.

[Alberto Calcagno, CEO, Fastweb]

Okay. Thanks Urs. Warm welcome also from my side. And so let's cross the border and go to Italy, okay? Soon the main achievement 2022, yes, we did it again. So, we are -- we reached the 38th consecutive quarter of growth. And this based basically on several, let's say, things, but the main message is that the growth comes from each market we address.

Clearly, such result is underpinned by strong commercial and customer results. We grow -- we grew as a whole by 700,000 even if the vast majority will come has come -- sorry, from the mobile, but also the wholesale, we see has been a terrific contributor. Clearly, this helped our positive financial performance.

If you ask about the recipe, clearly is the, I would say, the old investment that we keep going and we keep doing in our infrastructure and actually following a well-consolidated Swisscom tradition, we have been also let's say, awarded with the best wireline, best FTTH for 2020 -- network for 2022 and also the best mobile network for the second half of 2022. So, clearly, to have the most reliable and also dense infrastructure is extremely important.

As I was saying, we have been performing consistently in all the markets, also in the consumer where we have, let's say, two strategy. If you look the fixed line, basically here, the goal is to stabilize ARPU, not to follow any price war to really go for value and that what we are successfully achieving on the market. We are pushing clearly on ultra-broadband penetration because we want to leverage on the superior quality of our network.

And clearly, on the other side, the second strategy on mobile is to be extremely aggressive as wearer leading the monthly net adds since a long time now. So basically for -- in the year, we were able to achieve more than 600,000 new customers as an evidence of our success in the market.

If we go to enterprise, also here, we have a very well consolidated reputation, all the EU funds, specifically related to school and to the health systems have started. Also, we launched the 5G mobile. For us, the 5G mobile in this market represent a unique growth opportunity. And we just started, but we have already the first response from the market and the response is very, very satisfying for us and for the customers.

Clearly, we are also now paving our let's say, a path to become leader in the cloud space and in the cybersecurity space. we have done some acquisitions. We have done some important partnership with major hyperscaler. So, also here, we really want to be -- and to strengthen our already consolidated position as one-stop shop for big enterprises.

Also, the wholesale market for us represents, as I said, a very good contributor to growth. We have been growing revenues double digit. We have been growing our customer base significantly and we have a very strong pipeline also for 2023.

In terms of sustainability, we have been, let's say, announced in our new purpose that is basically to safe tour [ph], which means that as a company, we feel a strong responsibility for the digitalization of the society, not only by delivering the best infrastructure, but also by delivering the best digital training.

So, we have launched not only -- or we have strengthened not only our Fastweb Digital Academy, but also we opened our step -- our, let's say, gate or museum of the future, where basically we train and we offer for the tailor-made, let's say, digital courses to all Italian population.

Clearly, environment is extremely important for us. In terms of zero CO2 emission, we have already achieved significant results as this is really clearly embedded in our overall strategy.

If we move to financial results, we start with the net revenues. The Q4 was extremely strong. The good news is that, as we were saying, the growth comes from all the markets, specifically, it was a very good quarter because of wholesale performances, but also enterprise.

If I look at the year, we almost reached CHF2.5 billion revenues. And also here, the growth was coming from wholesale enterprise, also consumer with, I would say, mixed feelings because, yes, on the fixed line, let's say, we are kind of flattish, while mobile is growing.

If it comes to EBITDA, the first -- the last quarter was clearly almost CHF230 million, plus 1%, because of different mix -- the mix of revenues is different in Q4 was more revenues at lower margins. But I would say also that Q4 has been impacted by seasonality effect and also from the energy bill that has been particularly severe during this Q4.

If I look at the full year performance is almost CHF850 million EBITDA, so representing an absolute growth of roughly CHF30 million or more than 3.4% in percentage. Also operating free cash flow, I would say, growing and free cash flow almost reaching CHF200 million. Our relationship CapEx to sales, stable at 25% as we really want to continue to accelerate on our investment.

Just a quick history, just to remember our performance, also relative performance versus the market in the last almost 10 years that we are growing. So, if we look at overall customers, we have done a significant growth because basically, we more -- almost triple our customer base while the market is actually decreasing.

If we look at our revenues basically, we grew almost by 50%, while the market went down by 25%. And if we look to EBITDA, we were able to add 70%, almost CHF300 million where the market has lost almost 40%.

So, I think this is a unique, I would say, performance not only vis-à-vis Italy, but also vis-à-vis Europe. And the reason for that is because of our sound strategy because in terms of growth, we want to achieve a profitable growth.

Clearly, we have several engine that contribute -- engines that contributes to our growth surely, we want to scale up on our 5G mobile market because we are already very, very strong in the consumer space, but also there is a very strong opportunity in the enterprise.

In the enterprise, there is also the opportunity of cloud and security where we are already today a very clear leader in the Italian market, but we can actually become even stronger vis-à-vis the clients. And then we can monetize our superior infrastructure by leveraging on the wholesale opportunity.

Clearly, this strategy relies on a superior network. So, we want to continue to roll out our gigabit or ultra-broadband footprint. We wanted to continue in our path to becoming really an infrastructure over the top, which means that we are -- we have already abandoned the, let's say, old telco traditional telco model, but we are becoming more NICT-type of company where infrastructure is important, but also service platform and code is even more important.

So, we can really have an end-to-end control of our services. And that's why we want actually to position ourselves not as a price leader, but as a quality and innovation leaders.

We want also to have a distinctive position by trying to be the best-in-class in terms of reputation. Clearly, this is a strong commitment to digitalize the Italian population for us is part of our core strategy, also the environmental attention is very clear. We want to become carbon neutral by 2025, exactly aligning ourselves to Swisscom, and we want to be clearly a role model also for inclusion in Italy.

In terms of priority. So, we just need to continue to roll out as much as possible and so to expand and strengthen every quarter our network. As a matter if it comes to fiber, FWA or 5G, we need, as we did actually also in 2022 to manage the macroeconomic scenario, as Christoph was anticipating at the beginning of the presentation, Italy is facing very, very high inflation, but I think that we have been able to manage correctly in2022, and we'll do the same also in 2023.

When it comes to markets, clearly, for us, on consumer, we want to -- on the mobile side to continue to accelerate on our growth, while on our wireline and we want to go for value. For enterprise, we need to leverage our mobile entry and then to strengthen our position in cloud and in the cyber security.

In terms of wholesale, it's just a matter to continue increase our ultra-broadband customer base. We have a strong and important pipeline of new entrants that has chosen Fastweb as main supplier. So, I think that the pipeline is very strong, and we have just to deliver.

And also, last but not least, SG, really, we'll see in a second, but we really want to continue to distinguish ourselves from the others, we have become a benefit company, and we want really to push hard also on this target.

So, when it comes to infrastructure, as you can see, our ambition is very spread because we want to continue to expand our fiber network. We have done it in 2022, and we will continue to do in it also in 2023. Also in the 5G FWA, we have been basically at the end of 2023.

We will be almost 3.5 times, almost four times the network that we had in 2021, 5G FWA for us is extremely important in gray and in white areas where clearly, fiber is the best technology for the black areas. And then there is the 5G mobile, which is, I would say, it's an umbrella technology that, let's say, brings ultra-broadband everywhere.

Also here, at the end of 2022, we are very well-positioned in Italy as the, let's say, the more -- the widest 5G mobile network. And also, we want to develop it further and to reach 75% by the end of 2023.

If it comes to the, let's say, the management of the macroeconomic headwinds. For us, basically, we had 2kinds of issues, not only just personal -- just Fastweb, sorry, issue, but we are, I would say, country issues.

One is related with the energy cost. As you can see, energy costs have been an issue, particularly in Q4, but I would say that has been impacting negatively our P&L all across the quarters.

Here, we have done a very strong revision of our consumption in our consumption, basically the major contributor to the electricity bill are the wireline network and the data center. Here, we have developed consumption, a new project that aim at reduced consumption by 20%, and they are -- all the projects are overall on track.

Also, I think in terms of inflation, we have been clearly, very, very cautious. We've been revising our cost structure significantly. And as we said, it was not impacting the overall growth per quarter and also for the full year.

For consumer, I would say that for the wireline, here, we want to actually go for value. We did not enter in the price war that started back at the beginning of 2022. And actually, also here, we see that the market is becoming a bit more rational.

But nevertheless, we have been always counting just on our strategy. We want to extend our fixed offering with value-added services. We are pushing our WLAN extender, which helps us also to have a very strong coverage.

Indoor, we are pushing our loyalty programs. We are also launching ancillary services like the home insurance. I think that all the results or the KPIs shows that the more you push towards ultra-broadband and quality services, the more your services are innovative, the more you have an ARPU uplift reduction of churn. So, that's -- we are going to continue such strategy and execute such strategy also in 2023.

In terms of mobile, we want to continue to grow. Actually, in October and November, we have been the best performer in terms of mobile number portability. Our ambition is to become the best performer also for a quarter or maybe also for the full year.

I think we now have a very -- the most extended 5G network, where we have the best network has also the award of Ookla certify. So, it's just a matter to continue to push and getting new market share, but I think that the quality of the network is certainly key in order to achieve this target.

In terms of enterprise, it was, again, a very strong year, plus 4%. We have an overall market share of 35%. If I look at the public administration sector, we almost reached 50%, so we are definitely recognized in the enterprise as a leader.

We will continue to push for cloud services, for cybersecurity. We have been awarded as the Italian AWS Raising Star of the Year. So, we are now doing a very strong partnership with hyperscalers and where we find opportunity also to expand inorganically our offer, we do it.

We have done in the last basically two years, two, three years for acquisition, two in the cloud, two in the cybersecurity because it helps us really to have -- to expand our hands-on approach on a wider market. Definitely enterprise will continue to perform also in the future.

Same thing will apply also to wholesale, where we almost reached a growth in revenues by 20%. If I look at the customer base, it grew almost by 50% in the last quarter. Also here, I think we have basically signed all the new entrants that enter in the Italian telco or will enter in the Italian telco business.

So, is a proof that we are considered also a leader in the wholesale space. Also here, we will be able clearly to exploit our FTTH expansion. And so we will be considered even more interesting for the existing and for new customers in this particular market.

If we look at our position of Tu sei Futuro, as I said, as a benefit company now, we don't have just only financial targets, but we do have also ESG targets. One just for your reference with our, let's say, digital courses at Fastweb Digital Academy, we want to reach 500,000 certificates by 2025, and we state is this I would say, a permanent workshop on future, we want to become the most visited location in Milan by 2025.

Also, I think this is extremely important because many times, tariff are focusing just on digital infrastructure, but we do think that it's also important to release digital skills because this will make the difference.

In terms of 2023 and environmental target, we already said we wanted to become carbon neutral by 2025, also following Swisscom mission.

In terms of summary, as I said, 2022 has been a terrific year. We have been awarded with the best, let's say, award for both wireline and mobile. We were able to grow even if clearly, especially in Italy that has been a macroeconomic scenario that was adverse, and we have been able also to grow our best-in-class reputation by adding to the consolidated quality in the infrastructure also this ambition to digitalize people.

We have several engine of growth that are both -- they are also all working. So, mobile -- consumer mobile, enterprise, cloud and security and wholesale. So, it's -- that gives us high comfort and confidence on the outlook of 2023, which will be other four quarters of growth and specifically an objective to reach 4% growth in revenues, 2%, 3% EBITDA while CapEx will be stable, and so free cash flow will grow accordingly.

Thank you for your time, and then I give the floor to -- my colleague.

[Eugen Stermetz, CFO]

Excellent handover with growing free cash flows. Welcome from my side. Let's move to the numbers. As usual, I start with group revenue, page 57. So, group revenue was down by CHF71 million at first half, but that's entirely due to the weak euro. So, the euro-Swiss franc exchange rate was a negative currency effect of minus CHF187 million on revenue.

Now, net of this currency effect, underlying revenue actually grew by CHF116 million with Swisscom Switzerland contributing CHF37 million in Fastweb, CHF97 million or €90 million as we heard in euros with a 3.8% growth.

Walking through the individual segments, B2C revenue was down minus CHF18 million. We had a very benign service revenue development, as we shall see, hardware revenues were lower. So, this basically added up to the minus CHF18 million.

In B2B, revenue was up by CHF99 million, as usual. And during the year, a mix of lower service revenues on the 1 hand, but higher hardware revenues and as we heard already, higher solution, IT solution revenues, about half of it organic and about half of it non-organic.

Wholesale was down minus CHF43 million, but you already know the effect that accounts for half of that number, about minus CHF20 million of those minus CHF43 million is the second half of the MVNO agreement that we lost last year. So, that's totally as anticipated.

The remainder to the CHF43 million is from roaming revenues, which were down and the interconnection revenues, which were down CHF23 million without any margin impact whatsoever, we have the mirror image later in our payments that were also downing the same order of magnitude.

Fastweb, as you already heard, €90 million -- or €97 million up over the year as we heard consumer more or less flat, but enterprise and wholesale with strong growth. Q4 was particularly strong, driven by wholesale revenues, and we had one or the other euro revenue in there that made the growth in the fourth quarter, particularly strong.

If we take a look at the Swiss side, as usual, on the left-hand side, the components of the revenue development of Swisscom Switzerland, I spent some time on service revenue, as this is obviously the most important driver of our P&L. So, service revenue was down CHF49 million. B2C actually up CHF6 million and B2B down minus CHF55 million.

Now, most of you remember the numbers we had in the previous years, in particular, on the B2C side, the difference is stark. We had in 2021, a year-over-year effect in service revenue of minus CHF105 million and now it's plus CHF106 million [ph].

So, the question is what happened? We heard a lot already from Dirk on some of the things that happened, I'll repeat the most important drivers for the change in service revenue trend.

Number one, excellent commercial performance both on second and third brands, which provided us lots of net adds, but also on the Swisscom brand with a very low churn. So, that was factor number one, in particular, on the wireless side, with the success of Wingo.

Factor number two, on ARPU, much less aggressive promotions from our side. The market is pretty much as bad as ever, but much less aggressive promotions from our side, also a structural discount that contributed to service revenue decline over the last couple of years seems to fade out now, which is fixed mobile convergence. Fixed mobile convergence, for those of you who remember gave us service revenue downdraft in the order of magnitude of CHF100 million or so per year, that's now a single-digit figure. So, that also played an important role.

And we should not forget voice on the ARPU wireless side. We do have a bit of an uplift from roaming in there. So, there's a bit of a roaming rebound. It's not a huge number. It's single-digit both on B2B and B2C in Q3 and Q4, but it does distort the overall picture a little bit to the upside.

And finally, in particular on the wireline side, ARPU, Dirk already mentioned this as well. We did some selective repricings on content packages, on fees, on charges, on discount on charges that previously we granted and now we don't grant anymore. So, this was also very important.

It seems more at first sight, but in total, it does add up. So, in a nutshell, less aggressive pricing from our side on the B2C side and still very decent commercial results. So that formula works for us in 2022.

The other revenue components, B2B solutions, as we mentioned, up CHF70 million, a very good result, 6.3% growth. I think it was already mentioned about half of it organic, half of it organic. Hardware was up, mainly also on the B2B side. B2C hardware revenues were down and wholesale we already talked about.

On the top right corner, service revenue evolution over the last eight quarters, so I'm not going to talk too much about it because I already talked about this major shift that we can see there from a situation in 2021, where we lost minus CHF189 million and just minus CHF49 million in 2022.

I'd like to talk, obviously, a bit about the outlook because your obvious question will be, how is this going to evolve into 2023. Now, my message islet's not get too excited about the pluses on that chart, okay?

But for B2C service revenue, we do think that a flat service revenue evolution is achievable. We don't take it for granted and neither should you, but we think freight service revenue evolution in B2C is too ever.

On the B2B side, we already heard it from Urs, we rather foresee an evolution similar to the run rate that we had in the previous quarters on average, so that might average out about CHF50 million service revenue loss for 2023, I'll pick that point up again when I talk about the guidance.

Bottom right, I'll leave it to you to look at that. There is not much change in Q4 compared to Q3 and the main drivers of service revenue change. So, I'll move on to the next page with group EBITDA evolution.

As we are already -- EBITDA was CHF4.406 billion, CHF72 million down versus previous year. However, a whole list of exceptionals that accumulated over the year. One is FX. So there is a minus CHF65 million effect in there as well. But there were also adjustments on EBITDA.

In particular, we had -- we booked provisions for regulatory litigation; one in the second quarter when we had to pay a fine of CHF72 million and booked the provision of CHF82 million. We paid the fine in the meantime.

But we booked another one in the fourth quartering the size of CHF75 million as we reassessed the probabilities of our litigations and the potential outcomes. And there was also, as some of you might remember, positive pension effect in the prior year, CHF60 million of that shows up now as a negative year-over-year effect.

Now, with all that out of the way, underlying performance of the business was really plus CHF139 million with Swisscom Switzerland contributing CHF121 million and Fastweb, CHF30 million in swiss francs or €28 million.

The fourth quarter was particularly strong, that was mostly due to phasing issues on the cost side. We anticipated some of that and commented on it already during the year. I'll highlight it once we go through the individual segments.

Starting with B2C. B2C, EBITDA up CHF58 million. Obviously, on the one hand, we have the flat or even slightly positive service revenue, but we also had significant cost savings in the B2C segment and lower subscriber acquisition costs year-over-year.

Fourth quarter, particularly strong, mostly driven by phasing. The phasing of the cost savings was very much geared out the fourth quarter on top of that, we had lots of advertising spend compared to 2021 in the fourth quarter in 2021 yes -- sorry, lots of advertising spend in2021 in the fourth quarter and in 2022 in the second quarter when we launched our Blue offering. So that also contributed to the positive development and some seasonality in direct expense in the B2C segment like sports rights and others.

B2B EBITDA up CHF9 million. So, on the one hand, we had the service revenue decline. As we talked about, we also had cost savings on the telco side in the B2B segment and obviously, positive EBITDA contribution out of the profitable growth of the IT Solutions business.

Wholesale down CHF7 million. So, that's much less than what we saw on the revenue side. So, we managed to compensate for the EBITDA impact of the loss of the MVNO with some cost savings in the wholesale segment and also with a small increase in other excess services. The whole roaming story that I mentioned when I talked about revenue has no impact on EBITDA at all.

Finally, in Switzerland, infrastructure and support functions up CHF61 million. This is where a lot of our cost savings take place in the infrastructure section and in the support function. Also here, heavily geared towards the fourth quarter. We talked about this evolution during the year, so this should not come as a surprise.

And finally, Fastweb up CHF30 million. The fourth quarter was a bit weak on EBITDA. Alberto mentioned it we had higher energy costs, in particular, in the fourth quarter compared to the previous years and some other seasonal effects.

Moving on to the Swiss side. EBITDA, Swisscom Switzerland. We talked about revenue. Subscriber acquisition cost was lower this year, no change in the fourth quarter. Our payments were lower. So, this is the matching position to the lower wholesale roaming revenues that I talked about no margin impact.

Costs for goods and services purchased were higher than in the previous year by CHF33 million obviously, due to the higher hardware revenues that we booked in the B2B segment.

Most importantly, also in 2022, we achieved our indirect cost savings target in the telco business with plus CHF104 million. Most of it -- or a lot of it in the fourth quarter, as we discussed in the previous earnings calls.

And obviously, costs for the Solutions business were up CHF47 million compared to previous years because-- to the previous year because of the increased revenue from the IT Solutions business.

Talking about cost savings, just a quick glance at what we did over the last seven years. Over the last seven years, we managed to save in total, CHF712 million in indirect costs, so an average of CHF100 million per year. What is the outlook on this?

I always said, you can't save CHF100 million costs forever, that's mathematically not possible, but we don't think we are there yet. So we still think we can manage to save costs in the order of magnitude of CHF100 million per year. But there are compensating effects in 2023, we will have increased costs due to inflation.

Salary increase is one of them. Energy increase is another and some other smaller items. So, while we do still aim for CHF100 million of gross cost savings, the net figure will be about half of that. I'll also take that up again when we talk about the guidance.

CapEx on the next page. CapEx was essentially flat at CHF2.3 billion for the group, slightly up for Switzerland at CHF1.7 billion, slightly up in euro for Fastweb and down in Swiss francs, but no major change.

Alberto also mentioned that before on the right-hand side, you see the main building blocks of our CapEx spend in Switzerland. We did spend as anticipated, a bit less on wireless this year than in the previous year and a bit less on fiber.

On fiber, I'd like to remind you that the FTTH rollout has come to an end that was an very expensive piece and so as anticipated of spend was bit lower than CHF500 million. However, we do confirm that the envelope going forward, for the fiber rollout will be between CHF500 million and CHF600 million over the next three years.

We spend on backbone transport infrastructure. I think Christoph mentioned some of these initiatives on IT and others, obviously, some of these investments need in order to reap the benefit and cost efficiency down the road. First you need to invest and then you can harvest.

I move onto page 63, free cash flow bridge. So, free cash flow is very strong at CHF1.349 billion, down CHF164 million year-over-year. Two reasons; one is operating free cash flow box. It was down CHF80 million, but that includes all the exceptionals. So, if we would adjust that, that would obviously be significantly higher.

And the second reason was CHF99 million cash -- income tax is paid. So, cash -- more cash taxes paid in 2022, which is a mere phasing issue. So, still, again, very good dividend coverage of our dividend of CHF1.14 million.

I'll move on to the net income bridge. Net income, very solid at CHF1.602 billion, main components, EBIT, CHF2.040 million, down year-over-year, just CHF26 million. Also this unadjusted and including all the exceptionals.

From EBIT, the other two components to net income tax expense minus CHF57 million, still very low. As we shall see, we still have about 1% average interest rate and tax expense was CHF360 million at18.3%.

We are now close to what you should assume is our expected tax rate going forward, which we highlighted before is 19%. So this year, we are very close to the steady state in that regard.

Net income was CHF230 million below last year, but that's due to a whole list of exceptionals. On the 1hand, the EBITDA exceptionals that I mentioned, but also mentioned many times during the year, we had an exceptionally high financial income in the previous year due to the FiberCop transaction and the BICS transaction and the positive effect on taxes also in the previous year.

So, if you add all that up, that becomes quite a big number for CHF410 million. If you were to adjust that to get to an adjusted net income increase you would end up with a plus of CHF180 million.

Financing side, not much news. Net debt down to CHF7.374 billion, leverage stable at 1.7x, rating stable at A, still a very conservative financing mix with a very spread out maturity profile over the next many, many years, higher fixed floating mix with 82% fixed interest, very low interest rate, 1.05% on average on our debt portfolio and very strong liquidity position with CHF2.2 billion in committed credit lines unused.

So, let's talk about the outlook for 2023. I'll walk you through the guidance step by step. Revenue guidance for 2023, CHF11.1 billion to CHF11.2 billion; Switzerland, about CHF8.6 billion, so stable; and Fastweb growing with 4% as Alberto mentioned.

Jumping to CapEx, stable at about CHF2.3 billion. That gives me more time to talk about EBITDA, which is certainly the more interesting piece. Guidance for EBITDA 2023 is CHF4.6 billion to CHF4.7 billion. Now, how do we get there from CHF4.406 billion in 2022 to CHF4.6 billion to CHF4.7 billion? Let me walk you through it step-by-step.

Number one, first, we need to deal with technical effects. So, we need to eliminate the one-offs, the exceptionals in the EBITDA figure 2022. So starting from 4.0 -- sorry, CHF4.406 billion, we need to add back CHF152 million of exceptionals in 2022, which yields an adjusted EBITDA of CHF4.558 billion. And you will find that number on page 71, in the appendix to the analyst presentation. So, CHF4.558 billion is the adjusted EBITDA for 2022.

Then we have another technical effect. Our pension expense -- that's IFRS pension expense. It's a non-cash effect. Our pension expense will decrease by CHF90 million in 2023 compared to 2022 due to higher interest rates. That's how the formula works. So, that gives us another uplift of CHF90 million. So, the real starting point is about CHF4.650 billion, 4.650 is the real starting point if you add back the technical components.

So, from there, we start actually talking about the operating changes from 2022 to 2023. And here, our guidance -- the operating guidance for EBITDA Swisscom Switzerland is flat.

We assume, as mentioned, the service revenue decline of about CHF50 million. Compensating for that, a decrease in indirect costs of about CHF50 million. So, these two factors we expect to balance out over the year.

There are some other risks in the Swiss business, which we would like to highlight. One is on the wholesale side, BTS back holding might come in lower than in the previous year -- than in 2022. There could be a normalization of subscriber acquisition costs. So, that's on the risk side. There are also upsides, obviously, profitable growth from the IT Solutions business, that's a clear upside. But we do expect, from today's point of view, these risks and upsides to balance out.

One word to a potential upside that you might have in mind but that doesn't play a big role at least in 2023 is the potential renewal of the Salt agreement. You remember the discussion we had in Q1 2021 about IFRS 16 and all that, while we still believe that the economic essential -- the long-term economic effect of this agreement will be in place, the short-term impact on our EBITDA in the wholesale segment will be rather small and it doesn't play a big role in the guidance for 2023.

Finally, Fastweb, EBITDA growth in the order of magnitude of 2% to 3%, and this is how we end up in the range of CHF4.6 billion to CHF4.7 billion. If we reach these targets by the end of the year, we will again propose to pay out the dividend of CHF22 per share.

With that, I hand back to Christoph for a wrap-up.

[Christoph Aeschlimann, CEO]

Thank you, Eugen. So, just one last slide as a wrap up before we go into questions. From my point of view, the situation is simple and clear. We had a successful 2022. We have a good strategy with clear priorities for2023. And we are very focused on executing this strategy to deliver and reap the benefits in the coming quarters. And we are, as Eugen said, committed to solid financials and the continued stable dividend in the future.

And with this, I close the presentation and hand over to Louis.

[Louis Schmid, Head, IR]

Thank you, Christoph. Now, it's time for the Q&A session. [Operator Instructions] Let's kind start the second part of the meeting. And with the first question coming from Polo Tang, UBS.

[Polo Tang, UBS]

Hi, thanks for taking questions and I have three. So the first question is really just about competitive dynamics. So, you mentioned that the Swiss market remains promotional. But can you comment in more detail in terms of what you're seeing from the competition in terms of the current quarter, Q1 2023? And how does this compare to a year ago?

Second question is really just about use of cash going forward. So, just given the better than expected trends across the business, can you maybe talk about how you're thinking about shareholder returns longer term? Is there a scope for either a growing dividend? Or alternatively, given the low leverage, would you consider share buybacks?

And my third question is really just about Italy in terms of EU recovery funds. How much of an uplift will this be for Fastweb in 2023? And how much of an impact have the EU recovery funds had on the Italian market if we look back in 2022? Thanks.

[Louis Schmid, Head, IR]

Thank you, Polo. I think the first question on competition can be answered either by Dirk and maybe -- or also by Urs. Thereafter second question, use of cash by Eugen and then the Italy question by you, Alberto.

[Dirk Wierzbitzki, Head, Residential Customers]

Okay. So, regarding competitive dynamics, I believe the question was also particular to Q1 this year against last year. First of all, I mean, quite a lot of what you see in Q1 already happened in Q4, obviously. As the order entries become additions or as churn entries become real churn. So, in Q1, you quite often do see a little bit of what happened in Q4.

We had rather, let's say, competitive Q4 from a promotional standpoint, particularly around Black Friday or now it's even the Black November turbo days, which for some really accumulate a large chunk of sales proportion throughout the year is centered toward not only Q4 but then to November.

We see even that some sales that usually happened in December now come are being brought forward to November and others are, let's say, put on hold until November actually occurs.

That in itself, we don't find too much of a healthy development as Swisscom own brand, we had had almost no promotional activities. We work quite active with Wingo, and that is paying off with additions that we see right now. We do see some cancellations, but nothing to overly worry about with the competitors' activity around the Black November that is coming in now, there's slight signs.

I mean, obviously, the January is then not as intense as a November is. For instance, with Sunrise, we have seen, and that's something we welcome you know that they have cut back promotions from 24 months to 12 months. It's in any case, not a good idea to have a 24-month promotion because that coincides with the minimum contract period and -- but this is for a store, so they have basically cut back a little bit there, but it does remain competitive. It does remain competitive, particularly around the second brands, like our brand Wingo or Salt or Yallo.

And I think one thing that remains to be seen and it's really interesting to look at in the marketplace, where do Sunrise positioning itself? Are they playing with a brand in the, let's say, price-sensitive price-led market or as they actually desire and sometimes communicate but the work doesn't, let's say, follow through with the action, do they also want to be seen like in a quality segment of the market, which, by the way, is still the majority of Swiss consumers are quality led?

When we look at our own customer base, we see that only 25% or so are price-sensitive. There's 30% to 40% that are not at all price-sensitive. You just buy whatever you can sell them the highest tariffs and so on and another 30% to 40% are like in between. So, they're looking, let's say, for value.

But as Christoph said that the Swiss consumer environment or the macro environment is still a good environment. I mean, there's a low unemployment compared to other places, low inflation and so on and so forth. So, we are not overly seeing, let's say, any accelerated trend towards seeking bargains. There's a certain segment that is after bargains, but we are not seeing any acceleration.

And to my perspective, au contraire, I think what we have seen in the marketplace that people that were lured into cheap tariffs eventually figured out that cheap tariffs and great quality just don't go along which is the reason why the competition has rather high churn. And it's also the reason that I'm not sure whether Louis is going to kick me. But for the first time also in last year, we had a balanced net porting relationship.

So, as many customers that has left have come back from the others because eventually they figure out a cheap price alone doesn't do the trick as they are seeking for quality, with still the majority of Swiss consumers do.

[Urs Lehner, Head, Business Customers]

On B2B, I guess, in the SME space, more or less the same dynamics, as mentioned by Dirk. And in the corporate segment, we had a strong Q4 in order entry, which for sure will drive also our business in Q1, but overall, I would say, more or less stable in comparison to a year-on-year basis for Q1 2022. As far as we can see it now just starting into February.

[Eugen Stermetz, CFO]

Very good. Then I'll take question number two on shareholder remuneration. So,, as you know, our financial policy has two main pillars. One is attractive shareholder returns and the other is a very solid balance sheet. So, we have achieved both over the last many, many years.

On attractive shareholder return, we are committed to pay out a high share of free cash flow in dividends. We have done so in the past and will do so in the future. We will not pay uncovered dividends, but we do have a high payout ratio.

At the same time, we are committed to a stable dividend policy and stable and reliable dividend policy. So at this point in time, there is no discussion whatsoever on the board level with regard to cash or cash utilization policy, as you mentioned.

Now, sometimes, we do get the smart question, what would it take for such a discussion to happen at the Board level? So, I anticipate this question. And our answer is always it takes -- it would take a proven substantial and sustainable increase in free cash flow, proven substantial and sustainable. And we are not there.

[Polo Tang, UBS]

All right. Thank you.

[Christoph Aeschlimann, CEO]

Okay. Then I'll take the third question. So, basically, just to refresh what kind of bid has been backed by EU funds. We are talking about the -- for the school, the let's say, provisioning fiber connection to 10,000 school.

And for the second one, we are talking about the fiber provision into 12,000, sorry, health care sites. So, it's a project that will take a long time. So, basically, we started in September. So, I would say that the financial impact in 2022 was extremely limited also in 2023, we will be not completing the project.

So, I would say that it will have an impact into 2023, but nothing major. Bear in mind that our -- these are normal bids for us because we are used to win big bids coming from the public administration. So, I would continue to assume a solid growth for enterprise regardless these European funds. Thanks.

[Louis Schmid, Head, IR]

Thank you. Thanks Polo. All right. Thank you. Let's move to the next question coming from Jakob Bluestone, Credit Suisse.

[Jakob Bluestone, Credit Suisse]

Hi, good afternoon. Hopefully, you can hear me okay. I've got three questions as well. Firstly, on the guidance, you're guiding for flat service revenues from B2C, given the very strong performance you've delivered and I'd say the generally fairly upbeat message on that segment, why are you not more bullish in your guidance on B2C's revenue contribution? Is that just being a bit conservative? Or if you can maybe just elaborate on that?

Secondly, on free cash flow, which obviously described as the sort of key underpinning element for your future thinking around dividends. Can you maybe just help us bridge free cash flow for 2023, I guess you've got tax normalizing, some of the one-offs going away and EBITDA going up. So, where should we land sort of roughly on free cash flow, kind of CHF1.6 billion-ish. Is that kind of the right ballpark?

And then just thirdly, on fiber specifically, is there any pressure on you to go beyond your current fiber coverage targets I appreciate right now Switzerland is not a sort of major outlier on fiber.

But if you look at the fiber rollout for some of the other European countries, the sort of 55% to 60% would be one of the lowest fiber coverage ratios in Western Europe in the sort of longer term.

So, can you just help us understand, is there a pressure from politicians to go beyond that? You envisage eventually ending up above that ratio. So, just your thinking around how far could you go on fiber coverage in the long-term? Thank you.

[Louis Schmid, Head, IR]

Thank you, Jacob. The first two questions are typical CFO questions, guidance and free cash flow. And the third question, fiber rollout will be taken by our CEO, Christoph.

[Eugen Stermetz, CFO]

Yes. Maybe on the B2C service revenue guidance, and happy for Dirk to jump in. What I mentioned when I talked about the service revenue trend is that on the B2C side, as well as on the B2B side, in particular, in the third and the fourth quarter that you might take as a reference point for what could happen in the next quarters, we do have a positive effect from roaming rebound.

And it's not massive, but it's big enough to make it look like there is an increase, but in reality, it's more a flat evolution. So, this is the very simple answer from my side. I don't know be any additional comments.

[Dirk Wierzbitzki, Head, Residential Customers]

No, it's -- it will continue to be a competitive environment. And when you look at 2022, I think we were on the mobile side, quite successful with gaining customers on second and -- particularly the second brand lost a few on the own brand and then had a bit of brand shift and with the respective ARPU impact there. I think we are on a good trajectory there. Nonetheless, I think not only for the first brand but also for the second brand, we are looking at what type of promotional levels we want to maintain.

If you look at the second brand market, basically, you got -- there's the anchor price for like a full flat in mobile that went from CHF30 to CHF25 to CHF20 roughly. And we want to make enough for to bring that up again towards the CHF25 really. And how that exactly then pans out, I think remains to be seen as we are also playing with price and promotion level in that space.

And on the broadband side, broadband is -- has been a challenging year also for some external effects. We need to see how that pans out as we are ramping up again our fiber sales.

And then also we need to be able on the second branch to activate the mobile base in terms of cross-selling also for the broadband and there are some uncertainties around that.

And lastly, I alluded to the fact that we do quite a lot of migrations from the base in terms of the back book pricing to front book pricing. And there's always two sides to this. There are certain customers in the base where we can do a value uplift, but then there is others also as you phase out that can do some optimization, yes?

Obviously, we are not looking for the customers optimization. We look for our optimization in that case. But again, in some even might because of price increases, there might be a limited churn and so on. Sot, here's some uncertainties around it, and I think all of that is reflected a little bit in the plan, yes.

[Eugen Stermetz, CFO]

Thank you. Second question, on free cash flow, I certainly would not like to get into guidance for free cash flow. There is a reason we guide for EBITDA and CapEx. However, let me give you two or three hints in that regard. One is the bridge from the EBITDA 2022 to 2023, where I explained what you have to add back to get to the starting point.

Most of that is non-cash. So, provisions taken in 2022. The pension cost effect is not -- that's all non-cash. That will not end up in a free cash flow year-over-year positive change from 2022 to 2023. So, that's one important element.

And another element you mentioned tax, tax has pretty much normalized in our view. I mean, obviously, it depends on EBITDA of the respective year. But this has pretty much normalized.

So, if you think about free cash flow going forward, and build your bridge from 2022, you need to take into account our operating improvements in EBITDA, but you need to take a very close look at those things that are technically up, but that are not cash.

[Louis Schmid, Head, IR]

Thank you. Christoph?

[Christoph Aeschlimann, CEO]

So, on the fiber question, actually, last year in October, when we announced the new 2025 target, we also announced a 2030 target, which might have not been noticed that much, but we announced that our intention is to build 70% to 80% fiber coverage until the end of the decade. Obviously, it's driving for the upper end.

And if you take into account the already existing other fiber turf in Switzerland because it's roughly today about 10% third-party or non-Swisscom fiber coverage. Then you get up to quite substantial fiber coverage in sort of around 80, 85-ish, 90% range by the end of the decade, which is totally in line, I would say, with what other European countries are doing as well.

So, that's the plan, and it's not fully committed yet, but we are let's say, striving to achieve those targets by the end of the decade.

[Jakob Bluestone, Credit Suisse]

Thank you.

[Louis Schmid, Head, IR]

All right. Thank you, Jakob. Next question coming from Georgios, Citi. And good to welcome you, Georgios, not outside down this year.

[Georgios Ierodiaconou, Citi]

Hopefully.

[Louis Schmid, Head, IR]

Hopefully.

[Georgios Ierodiaconou, Citi]

Thank you. And I'll follow a little, follow Jakob I will also ask three questions. The first 1 is on the improvement we are seeing in a relative commercial performance. And I know you discussed the behavior of the customer, but I'm curious because there was a pause in the active footprint for fiber. So, that cannot be the driver of your stronger related performance.

So, I just wanted to understand whether you believe it's the mobile network, whether it's execution in terms of the customer experience that is making this different. And also, I did notice on page 32. You have this graph of the Net Promoter Score and one of your competitors is seeing quite a significant deterioration, whether you expect that to normalize any comments you can make I know you may not want to comment extensively on that, but anything you can give us in terms of your expectations for 2023?

My second question is on [Indiscernible] and it's been fairly modest in recent years in terms of the growth of alternative networks. But there are some ambitious plans that have been announced or are being planned. I just wanted to get a better understanding whether you believe there are areas where you could be overbuilt in -- as part of your existing plan of deployment?

And I just wanted to also better understand whether there are new options on IRUs or co-investment as you are rolling out your own network, whereas some of these open access platforms can engage with you.

And then the final question is to Alberta, and I think I asked this question almost every year. There are new scenarios again coming out on the infrastructure side in Italy. I wanted your comments in terms of your expectations, but also your position as the biggest alternative call from either in the market were then you'll be supportive of these things, whether there's anti-trust concerns you want to raise? Thank you.

[Louis Schmid, Head, IR]

Thank you, Georgios. I think the first two questions on commercial performance and FTTH deployment goes to our CEO, Christoph. And last question is very clear, Alberto will take over.

[Christoph Aeschlimann, CEO]

So the commercial performance, as you mentioned, there is an improvement last year. We believe that this improvement has several different components. So some of you, you mentioned already, we are extremely focused on delivering a better customer experience, both in B2C but also on the B2B side, improving the digital interaction, self-service capabilities, both on the sales side, but also on the service side. And I think this is an important contributor afterwards to the Net Promoter Score of -- in our customer base.

We have a super high quality focus as well as we outlined in the presentation, continuously improving the reliability, but also the speeds in the network. And last but not least, in a market where products become more and more interchangeable especially on the B2C side, I mean, everybody basically delivers the same speed profiles.

We believe that brand becomes much more critical in the execution or success in the country. And we, therefore, invest heavily in our brand posture, especially also in the area of sustainability because itis a topic that is quite important for the Swiss citizens and it sort of pays into the brand position we have in the country. And I think if you add all those components together, next to some other things we are doing, then you end up with a better commercial performance.

Next to, obviously, executing well within the sales force and having the right pricing, the right bundles, the right product configurations, which is obviously also -- I mean, it's needless to say also important.

Now, on the fiber build, I think it's quite an interesting question you're raising. We are fully committed on building as much fiber as we can. We are basically using nearly all available construction capacity in Switzerland, rolling out hundreds of thousands of lines every year. And I think with the market share we have today in B2C and combined with wholesale, you have to be quite optimistic to start overbuild scenario because it's probably going to be not so easy to get your, let's say, make the investment profitable.

So, I would argue that the overbuilt scenario is -- I mean, it is always possible but seems to me not so likely. And maybe you also alluded to sort of joint construction. So we are also open to co-construct locally, and we have built with local partners, mainly utility companies in many areas to reduce cost, but there have lately also been rumors about us engaging in a nationwide fiber JV, which I would like to comment on that this is absolutely not true and we are not negotiating or have not agreed on any nationwide fiber JV rollout.

[Louis Schmid, Head, IR]

Alberto?

[Alberto Calcagno, CEO, Fastweb]

Okay. On the single network or on the national network, I think this topic has been extremely fashionable. Now, there is just a new chapter, which is the KKR. I think new chapter will come also because by reading newspaper also, probably, there could be also another bid coming from cash depositive price it.

Our point is that -- we are not involved. We are just basically -- we want competition to be preserved because as I said in my presentation, we do believe in our role in infrastructure, we do believe that -- we want to continue to compete also in the wholesale business, which is extremely important for us.

And if you mentioned antitrust, if there will be some remedies that are necessary, we will be more than happy to look at such a remedy package. And if there is some sustainable business to do with it, we will look carefully to the dossier.

[Louis Schmid, Head, IR]

Thank you, Alberto. Thank you, Georgios. Next question is coming from Josh Mills, Goldman Sachs.

[Josh Mills, BNP Paribas Exane]

Hi there. Josh Mills at BNP Paribas Exane. A couple of questions from my side. The first one was just related to the pricing in Switzerland. So, you talked to you about selective price adjustments. Can you just confirm whether that's on front book or back book pricing?

And then maybe just a few lines on your thoughts around back book price increases going forward. So I know the salt has introduced the provision to allow them to do this, but haven't yet taken a step to do so.

And then the second and third question is just around Fastweb. So, historically, they've had a fairly lumpy one-off incomes, which have helped EBITDA, I think, in the second quarter this year to the tune of about CHF40 million.

In the past, you've said that you don't include that kind of one-off benefit in your guidance. But when I look at the 2% to 3% EBITDA guide for next year, it looks like something may be included. So just a bit of a sense of whether or not you think you can continue to gain those regulatory incomes?

And then third and finally, again, related to Fastweb. Could you comment on how much you received for the sale of IRUs in 2022? What that was for revenue and EBITDA? And then also how much you're assuming for 2023? Thanks very much.

[Louis Schmid, Head, IR]

Thank you, Josh. First question will be answered by Dirk.

[Dirk Wierzbitzki, Head, Residential Customers]

Okay. So, in terms of -- I think the question was particularly around front book, back book. There's still quite a few hundred thousand consumer in the base that have older tariff schemes that are now outpaced like Vivo, as it was called on the wireline side or Infinity and in inOne on the wireless on the convergence side. And we are basically looking at phasing out these old portfolios.

And as we do that, obviously, we will try to migrate people to higher value and then obviously, also higher priced schemes, which I believe, let's say there's good arguments for it because the deal mostly is a pay a bit more, but you get a lot more in terms of whatever connectivity, broadband, TV and so on and so forth. So, I think that can pan out quite nicely and there's quite a potential for that.

We're looking at other spaces also there's like one-time fees and so on and so forth that occur here and there. We look at our content pricing also in sports. I think that is what I can say. How to make certain adjustments there.

And then I believe the other question was or what you were alluding to is that others also in the marketplace have made CPI provisions in the terms and conditions. We are looking at that and we also will make a CPI clause and introduce that. We will announce that in early March and then it comes active in June.

From my perspective, that type of a provision is a little bit, let's say, overstated in a way. We know that in the U.K. and elsewhere, they have that and they regularly actually execute the consumer price, index price increase. As that inflation is still low, luckily is low. It hopefully remains lower, becomes even lower.

Nonetheless, that we want to introduce such a provision vis-à-vis actually, let's say, utilize it or not is a totally different story, and that is something we might want to look later in the year.

But first of all, we want to see how the year develops, our activities, as we have laid them out actually come through and shape up, and then we look at potential other measures or not.

[Louis Schmid, Head, IR]

Thank you, Dirk. Second and third question will be answered by Alberto?

[Alberto Calcagno, CEO, Fastweb]

Yes, I'd say that again, our growth in EBITDA, I wouldn't say that it's particularly linked to regulatory one-off, certainly, also in our -- you were mentioning also in our history, there have been cases where regulatory impact has favorably contributed. But I would say that in 2022 and also in 2023 this will be limited.

Bear in mind, if you were referring also to the overall performance of EBITDA growth in 2022 of roughly 3%. We were able to absorb an extra cost of energy roughly CHF20 million to CHF25 million.

So, I would say that our EBITDA performance has been consistent regardless, let's say, these regulatory one-off. And I could say the same thing also to IRU have been always part of our business by having this extended infrastructure are just a service that we deliver to our customer as they were in 2022, there will be also in 2023, but I would consider them as I said, just a part of our business because just to mention wholesale, we are really -- a lot of the growth will come from the ultra-broadband customer base development.

So to cut a long story short, I would say that this one-off really did not impact or they were not determinant for the EBITDA growth, neither in 2022 and nor in 2023.

[Louis Schmid, Head, IR]

Thank you, Alberto. All right, Josh. I think your questions are answered. That moves to the next question coming from Yemi Falana.

[Yemi Falana, Goldman Sachs]

Afternoon everyone. Yemi Falana at Goldman Sachs. Thanks for taking my questions. So, if I start on Swiss competition, given the numerous moves you've seen at the value end of the market, Yallo, Wingo, et cetera, while your performance has been strong, do you have any concerns that the value segment of the market is expanding?

Secondly, just on energy costs, you've absorbed some energy headwinds in both Switzerland and Italy this year. Could you talk about the absolute headwind at the group level and perhaps the individual businesses into 2023?

And then finally, maybe I could ask the use of cash question in another way. How urgently and what scale with -- will you pursue inorganic opportunities on the IT solutions side in both Switzerland and Italy? Thank you very much.

[Louis Schmid, Head, IR]

Thank you. First question goes in the direction of Dirk? Second is Eugen; and third, CEO, Christoph.

[Dirk Wierzbitzki, Head, Residential Customers]

Okay. If I understood it correctly, the question was this kind of price sensitive. You call it value, we actually see value more like in the price in it, but probably, let's say, definition question. So, the price-sensitive segment is that growing that is being served with the likes like Yallo and Wingo and so on.

Yes, it is somewhat growing. I mean you have seen that also with us. I mean we have growth on Wingo others have growth on Yallo and so on and so forth, it is somewhat growing -- but overall, as said earlier on, to our insight and our experience, Switzerland is a quality-led market. And there's a particular segment, which is not the entire market, it's actually it's a subset or a smaller piece of the market that is served by these types of brands.

An interesting factor is you might even know that one competitor had even introduced a new scheme for CHF10, that is solved with GoMo, and that is not, at least to our knowledge, not getting any traction because even consumers find that so cheap that they have doubt that anything this cheap can be of any quality at all, which is, I think, good and that is how it should be.

And -- that's my point to the second brand market. And I said earlier on, I believe also in the second brand market, there is opportunity, and we want to execute that to lower promotional activity in that space.

[Louis Schmid, Head, IR]

Thank you, Dirk. Second question goes to Eugen.

[Eugen Stermetz, CFO]

Yes, energy costs into 2023, so on the Swiss side, we are almost fully hedged, so we know what we'll get in 2023. And the impact year-over-year will be an additional energy cost in the low double-digit numbers. And it's part of those that CHF50 million I mentioned of inflation-driven cost increases that compensate for our gross cost savings. So, that's the Swiss side.

In Fastweb, we are now at about 50% hedging for 2023. So the situation is a bit more open and depends on the spot prices to come during the year. But at price levels that we see right now, we expect no year-over-year impact to 2022, if any, maybe a bit of an upside.

[Louis Schmid, Head, IR]

All right. Last question.

[Christoph Aeschlimann, CEO]

Okay. So regarding use of cash for inorganic IT moves. I think what is important on that side is that from our point of view, the IT market is a growing market. IT and telecom services are moving closer together and or converging in some areas like in cybersecurity and networking with the SASE trends.

So, since several years, we are constantly screening the market, both in Italy and in Switzerland for potential M&A moves, and we will execute any opportunity, which, at the end, creates shareholder value and is good for the customers and Swisscom as a company and its shareholders.

So, I think it is -- and we have already done numerous acquisitions in the past. We will certainly look at some this year as well in both countries and -- but there is nothing, let's say, more to say around that area today.

[Louis Schmid, Head, IR]

Right. Thank you, Christoph. Thank you, Yemi. Next question comes from Titus Krahn, Bank of America.

[Titus Krahn, Bank of America]

Yes. Thanks very much for taking my question. Good afternoon. Thanks for a very comprehensive presentation. Just a couple from my side. First, maybe a quick follow-up on Yemi's cost question, given you have this CHF50 million guidance for the Swiss division.

Just could you give us a bit more insights into what wage inflation you would expect from April 2023. I think Sunrise had a lot about 2% to 3% increase in the wages. Is it a good proxy for you? And on the cost savings side, should we expect a similar development throughout the year that you have more cost savings in Q4 and Q3 compared to the first half?

And then maybe quickly on your enterprise segment, given that it's still a bit negative and actually slightly weaker compared to Q3. Just do you see any impact from the macro environment on demand apparently not on the Solutions business, but on the telco side, even though you have this kind of quite good economy in Switzerland and relatively low inflation.

And maybe just if I can, a very quick third question just on the 500,000 fiber homes, which are going to be upgraded or change from -- to P2P. Why does it take such a long time given that I think you plan to still have quite a few of them in 2025? And what should we expect as a reasonable cost for upgrading one of those households from one technology to the other?

[Louis Schmid, Head, IR]

Thank you, Titus. First question goes to Eugen, second to Urs, and third question to Christoph.

[Eugen Stermetz, CFO]

Okay. Quick answers. So, the 2% to 3% wage inflation from April 1st is a reasonable guidance, that's it. And on the phasing of cost savings over the year, we have nothing very useful to say. It's also getting small numbers by quarter, if you start CHF50 million number for the whole year. There are lots of variations within the quarters. So, we have no useful guidance in terms of trend over the year at this point in time. Over to you.

[Urs Lehner, Head, Business Customers]

Right market for the telco business, we definitely still have solid dynamics in, let's say, losing some customers and winning back other ones on lower price levels. This is, as I laid out in my explanations, also our perception towards 2023, still a market environment, which is rough.

We see definitely, let's say, some potential upsides on winning back customers, which have made experiences, which was -- were not good enough to their expiration on quality after leaving us.

But on the other hand, we definitely can say our win-back ratio 2022 was solid, but we also lost a few large customers in 2022. But I fundamentally believe that the guidance that we put into place looking forward is series and has a balanced profile on risks and opportunity.

[Louis Schmid, Head, IR]

Thank you, Urs.

[Christoph Aeschlimann, CEO]

So, on the fiber rollout, what is important to understand is that we have about a one-year delay between decision of changing the strategy and the actual implementation in the field. So, we decided in October last year to change to point-to-point. And everything that we have built since then and that we will build roughly until end of the summer, early autumn, is still in point-to-multi-point mode.

So, at the end of last year, we had 500,000 lines which were constructed in multipoint. So, this number will actually go further up this year and increase to roughly 800,000 lines that need to be retrofitted. And in our plan, currently, we will retrofit about approximately a bit over half of those lines until 2025. But there will still be a chunk remaining after 2025. And that's why it also it takes such a long time.

And we -- in terms of money, we expect to spend about CHF50million per year on the retro fitting, but this is included in the CHF500 million to CHF600 million wireline FTTH rollout CapEx guidance.

[Louis Schmid, Head, IR]

Right, thank you. Thank you, Titus. Next question comes from Usman Ghazi, Berenberg

[Usman Ghazi, Berenberg]

Hi, everyone. Thank you for the opportunity. I've got two questions, please. The first question was just going back to the comment at the start of the presentation about the tougher stance from the competition authorities.

So, could you perhaps give an indication of which area the higher provisions were taken in 2022, including the provision taken in Q4. And if the actual exposure has a risk of being much higher than what has been provided and if all of this is related to that one case of market abuse on ADSL? So, that was the first question.

The second question was going through the -- some news flow that came out, I think, late last year about a quick line, the cable network looking to expand on a national basis and we're interested in a deal with you to expand their network.

I just wanted to ask if you're willing to comment if you are in talks with them? And if any deal like that with a party other than sold on your fiber network would be interesting or not. Thank you.

[Louis Schmid, Head, IR]

Thank you, Usman. The first question goes to Eugen and the second one will be answered by Christoph.

[Eugen Stermetz, CFO]

Okay. So, the first one, yes, the tougher stance from the competition authorities. So, every quarter, every quarter, we look at our pending regulatory and competition litigations and form an opinion about the likelihood of various scenarios taking place and the financial impact of those scenarios and we learn as we go.

So, every quarter, the outcome is not necessarily the same as in the previous quarter. In the fourth quarter, we did such a reassessment and booked this provision that I mentioned.

Yes, what did we learn in the fourth quarter, we had another 2 or 3 rulings that came our way that went against us again. One example is the Federal Court that upheld the measures of the competition authority on the fiber rollout after we lost the Federal Administrative Court. We lost the final court. So, that is just one example, but there are others. And so we reassessed the probabilities and financial impact of some of the outstanding litigations.

Now, I trust you understand that we cannot give any indication whether this is for one legal case or for several legal cases or for which legal case, that would not be a good service to our shareholders to do so.

[Christoph Aeschlimann, CEO]

Okay. So a quick line is a quick answer. So quick line is a wholesale customer of Swisscom. We have a wholesale agreement with them for the entire Swiss national footprint, and this is what they are using as a basis for their national expansion.

[Usman Ghazi, Berenberg]

Thank you.

[Louis Schmid, Head, IR]

Thank you, Usman. Next question comes from Steve Malcolm, Redburn.

[Steve Malcolm, Redburn]

Yes, good afternoon Louis. Thanks for letting me ask the questions. I'll go for three, if I can. First of all, I guess, if we look back over 2022, the big sort of positive surprise has been your outperformance on Swedish -- sorry, Swiss service revenues, particularly in consumer.

It feels like your execution has been pretty consistent, but I guess your competitors clearly have been less so. So, I would love just to sort of hear an explanation as to what does surprise you positively? Is it just the Swiss consumer sort of unwillingness be dragged in by discounted tariffs that you kind of alluded to?

And how do you see that going forward, because clearly you're talking about promotional market and yet you're spending less on high position subsidy. You're doing all the right things, but just curious where that positive surprises really be and how you think about that evolving?

Secondly just looking at your sort of -- your cost performance in Q4, clearly the -- your other operating cost seemed very, very good. But obviously your drag cost went down despite the fact that your equipment revenues were quite substantially in the quarter.

So, kind of -- I think you talked about lower content cost, any further light you can shed on that because when I do the math, your gross margins gone up by 250 basis points is quite a big move. So, just any sort of -- any color on that direct cost performance?

And finally, just on capitalized costs. I think you were up about CHF70 million this year. You're up about CHF200 million in the last two years. Clearly, that's quite supportive to the overall cost picture and EBITDA. So, -- just to sort of follow-up on Josh's question on other costs and capitalized costs. Can you help us understand how we should think about the capitalized cost picture in 2023 and beyond? Is there still upside there more to be capitalized? Thanks.

[Louis Schmid, Head, IR]

Thank you, Steve for those three questions. The first question will be answered by Dirk. Second question, third question, are financial questions, by Eugen.

[Dirk Wierzbitzki, Head, Residential Customers]

Okay. So, in terms of revenue performance, B2C last year. I think there is not the single one thing that happened. I mean it's really probably a dozen or two that has happened. Some is like external influence and some, I would say, like internally engineered and executed.

Like external Eugen already mentioned, better than expected roaming revenues. We had less than expected voice line cuts, for instance, and that helped and a couple of other effects.

The biggest part is really truly cutting down on promotions from 12 to 6 months. And instead of giving half price promotions only giving a moderate discount. I think that is really one of the biggest impact there. We did increase certain fees -- initial setup fees, both in wireline and in wireless.

In wireline, do for whatever reason, we had a high level of rebates or discounts on that and we eliminated that so we really consequently asking for that fee to be built. Then we really put the entire organization on value and ARPU management. We beefed up our effort, for instance, in customer retention -- by now, we are able -- 40% of customers that request termination from us to hold them back. And we upped that from like a 30% level.

And that in its own right, it makes an impact. We are consequently going into minimum contract duration management, be it for those customers that have been acquired like new customers as they come out of period or when we go into the base and do retention deals, we consequently demand a new contract period, thus having a more locked in if you wish customer base.

The whole incentive scheme for the channels is such that they better sell a higher tier tariff than a lower tier tariff. I mean which of course, sounds logical. Well, some of that we have just not executed or not executed well -- and so we sophisticated our efforts in that, both from a channel perspective, but equally also as we do the tiering for subsidies or incentives as seen from the consumer, which then makes for a better ARPU.

And then obviously, particularly on mobile, the biggest reason is really the better than expected performance, particularly on the second brand. I mean there we had really, really great export that we didn't see thus far as it turned out, and we're very pleased with that. So, that were the 2022 effects.

Now, not all of them, you can redo in 2023, which is what informs our outlook then for 2023 as we discussed it.

[Steve Malcolm, Redburn]

Can I just -- can I quickly follow-up and ask whether the decision to sort of cut promotional discounts was in response to seeing the NPS of your competitors falling. Was that something you envisaged? Or was that -- did you see enough evidence in the marketplace to allow you to do that? Because it doesn't feel like it's something you predicted at the start of the year when you gave guidance? Or is that something that you were able to do in response to others failures for one of a better work?

[Dirk Wierzbitzki, Head, Residential Customers]

Well, look, I think, yes, we had a strategic discussion if your vision and Christoph talked about that look, we want to execute on our brand promise, particularly when it comes to Swisscom as a brand and go for quality, customer experience and all of that.

We saw also like weaknesses coming up with the competition. You saw the NPS chart as I had it there that was not entirely new last year, but it was kind of like showing. And so we said we go clearly into a brand and quality play and reduce our activities on the promotional side.

[Eugen Stermetz, CFO]

Okay. Question number two, so the direct costs in Q4, in particular in B2B -- sorry, in the B2C segment. That was on the 1 hand tied to the accounting for our sports rights and sports content rights but also some other items. All of it is seasonal.

So, there is no sustainable effect to be drawn out of this Q4 development. So I would focus on the full year number as a guidance for the future. We also don't have a massive year-over-year effect planned for these items from 2022 to 2023.

For capitalized costs, yes, we have an increase in capital cost because of our in-sourcing of software development CapEx. That's a development that has gone on for two or three years. It will continue, whether this will lead to a specific increase in capitalized costs next year, I cannot comment on. We do not guide on individual P&L lines. I think you should take into account our guidance on overall OpEx from 2022 to 2023 in thinking about these topics.

[Steve Malcolm, Redburn]

Is there a World Cup effect in there with the fact that the leagues, I guess, didn't take place during the World Cup so some of the rights get pushed into Q1 and Q2 -- on the sports content side, sorry?

[Eugen Stermetz, CFO]

No.

[Steve Malcolm, Redburn]

Okay, great. Thank you very much.

[Louis Schmid, Head, IR]

Thank you, Steve. Next question comes from Andreas Müller, ZKB.

[Andreas Müller, ZKB]

Yes. Good afternoon gentlemen. Thanks for taking my questions. I have two or three. You mentioned you are not going into a fiber nationwide on venture. But can you please give us some color on what circumstances you will go for the proposal of feet what would deter you to elaborate there? And if you went for the model, would that go beyond the 500,000 block lines just on this footprint. That's the first question.

The second is, when do you see the sole contract being readopted, do you look -- does it look different from what we know about it? Then maybe the first -- the third question would be in the B2B business. Can you just say a bit the margin trends for services and for IT Solutions, I think you gave a comment that in IT Solutions margins are going up was a trend in the two kind of business lines? Thanks.

[Louis Schmid, Head, IR]

Thank you, Andreas. The first two questions on fiber and consult partnership, potential sold partnership goes to Christoph. And the third question, the B2B will be taken over by Urs.

[Christoph Aeschlimann, CEO]

So, on the maybe on the -- first, on the upgrade of the blocked 500,000 lines. So, these are lines that Swisscom has constructed without a partner in its own like fully 100% paid by Swisscom. And we actually don't need any partner or a JV to upgrade all those lines. We are -- basically have already started to retrofit all those lines and we will continue to retrofit all those lines fully in our own execution.

So, I think that's important to understand because those lines have not been built in a partnership with another company. There is no reason to now to expand this to a JV level, but we actually intend to upgrade them on our own.

And I mean, whether we can build something with SFN in the future together, we will see. We are discussing with many partners always a potential construction co-construction as most of the time with local utility companies. But it always depends on the local situation, you have to analyze basically municipality-by-municipality to see if a co-construction makes economic or financial sense.

And if there is an opportunity to build faster and at lower cost, we will obviously look at it. But there are many, let's say, parameters to take into account.

Now, on the Salt side, we are in discussion with Salt to adapt the old fiber contract to a new wholesale contract. We have agreed all the headline terms but we are not completely through with the contract, the final contract negotiation, and we will communicate on the contract once it is signed and executed but you can expect the deal to be sort of a regular type wholesale deal because we already have a wholesale deal today with Salt on the existing fiber turf.

So, the contract of the new fiber turf will be quite similar to the one we have in place already with providing then also, let's say, normal wholesale revenues and not linked anymore to sort of IFRS special accounting treatment as the one we had with the last contract.

[Urs Lehner, Head, Business Customers]

Concerning the profitability profile in the IT Solutions business in Switzerland. We definitely are looking going forward to further improve it. We are coming out of a mix of portfolio of activities where we especially handsome long-lasting old project contracts where we definitely have improved and are still working to improve.

So, therefore, I truly believe that there is a certain upside, but as we know, in the IT Solutions business and the outsourcing business, one big failure in one particular project and let's say, make a huge difference to whole profitability of the overall business. So, it's also about the maturity and the evolution of our skills and capability to work on that as an organization.

Yes, our ambitions are way for to further improve it, and we are convinced that there is some potential, but not let's say, on a very short-term basis. But in our plans towards 2023, there is an evolution included in ramping up our profitability profile, one or two basis points for the IT Solutions business, yes.

[Andreas Müller, ZKB]

The telecom service business in B2B is that since it's a bit under pressure, would there be kind of a margin drag there?

[Urs Lehner, Head, Business Customers]

Let's say, I truly believe in the SME space, I believe it will be capable, let's say, to maintain our profile, our profitability profile, but we still have to work heavily on our, let's say, cost basis.

And as I mentioned, we will come into the market with a new let's say, you integrated on B2B portfolio on the telco side, which, over time, after migrating the installed base to the new portfolio, where there we definitely see an upside in the efficiency and which will not impact very heavily in 2023, but further on, depending on the migration speed and the adoption rate we are able to make.

[Andreas Müller, ZKB]

Okay.

[Louis Schmid, Head, IR]

Right. thank you, Andreas. Next question comes from Luigi Minerva, HSBC.

[Luigi Minerva, HSBC]

Yes, good morning -- good afternoon everybody. Thanks Louis for taking my questions. So, the first one is on price indexation. So, the changes in the contract terms to include CPI link. I understand it's an option and not something you will necessarily do.

So, I'm curious to understand first in Switzerland, what changed your mind? Because I remember in maybe in the last conference call, you defined it as a last resort. And at that time, Salt had already done their move. So, what has changed your mind and leading you to change the contract terms?

And in parallel in Italy, I would be keen to hear Alberto's view. I mean now we have essentially all the big players, team Vodafone changing their contract with the possible indexation in 2024. Do you think this is something that will changed dramatically the price dynamics in the Italian market? Does it have the potential to do that? So, that's my first question.

The second question is on fixed line network strategy, and it's like the FTTH versus cable debate, there's a consensus, I think that FTTH is the future-proof solution. So, how do you see UPC evolving in Switzerland? Do we expect them to become a more and more important wholesale customer of yours? Or conversely, will they use more aggressive pricing to retain customers once their network becomes evidently less performing than yours?

And my last question is on the 5G monetization, which is lagging behind everywhere in Europe. And I always think of Swisscom as a great innovator, both in terms of services and tariffs. I remember you were the first 1to introduce speed tiers in your mobile tariffs. So, what do you think can be done to improve the 5G monetization, both on services and pricing? Thank you.

[Louis Schmid, Head, IR]

Thank you, Luigi, especially for your smart approach, by splitting the question one into A and B. So, I think the first 1goes to Christoph and then the second one to Alberto on indexation.

[Christoph Aeschlimann, CEO]

Okay. So, on indexation, what we ruled out or what we mentioned as being the last resort at the last call was actually across the board price increases. But we mentioned that we are open to -- or we are actually executing already targeted price increases. Last year, we will do so again this year, as Dirk outlined.

And on the CPI link, I mean, we had inflation last year. We will have some inflation this year. Nobody knows how much. Nobody knows what happens next year. So, it is more also a question of being prepared in case that inflation continues to be high and sustained. And obviously, at one point, you need to maybe act in a different way. So, this is our thinking around the price indexation piece.

[Alberto Calcagno, CEO, Fastweb]

Yes. And for Italy, I wouldn't talk about price indexation, but overall, I would say that the market after years and years of extremely poor profitability is -- I'm talking clearly about the fixed to try and somehow to increase overall price because I saw that you saw that Iliad increased prices.

I think that -- also some other players are somehow adjusting the prices for faster, but we decided, but not to enter in such let's say, price war. We have been always competing not with prices, but with more innovation.

So, I think it's just -- I believe that the industry today is becoming more rational. So I would say that overall, we do expect regardless, yes, there is a macroeconomic scenario that is clearly unfavorable. But I think that overall, the industry will look more carefully at profitability going forward, which I think is correct.

[Louis Schmid, Head, IR]

Thank you, Alberto. Second question goes to Christoph. And last question, 5G monetization, I think, goes to Urs because there's a couple of examples.

[Christoph Aeschlimann, CEO]

So, on wireline strategy. So obviously, we try to monetize our fiber footprint through the wholesale division. And Sunrise UPC is already a wholesale customer of Swisscom and uses some of our fiber lines. But I think you'll understand that I cannot comment on the strategy of our competitor. So, you would have to ask Sunrise this question.

And I think at the end, it essentially also depends on the evolution of customer behavior and how the customer ultimately sees the performance of cable versus fiber, which is probably be more a driver than sort of a proactive strategy of a company. But I think at the moment, I cannot say much more than that.

[Louis Schmid, Head, IR]

Thank you, Christoph.

[Urs Lehner, Head, Business Customers]

I guess the golden bullet around 5G monetization. If you would have it already finally, we wouldn't let you know yet. But for sure, we are working on several, let's say, dimensions as 5G FEA MPN mobile private network monetization, but there are also strong elements looking ahead with public spectrum for the industry in Switzerland starting 2024.

So, unfortunately, we don't have the golden bullet, but I can make you can assure that we are still working on it in an intense manner. And hopefully, we are the first one, which really has the golden bullet, and we will let you know.

[Louis Schmid, Head, IR]

Thank you, Urs. Thank you, Luigi.

[Luigi Minerva, HSBC]

Thank you.

[Louis Schmid, Head, IR]

We're coming to the second last question from Klara, JPMorgan.

[Klara Zabrocka, JPMorgan]

Hi. Thank you. So actually, most of my questions have been answered, but I just have a follow-up on what you said about the Salt -- potential Salt fiber wholesale deal. So, if I remember correctly, previously -- the previous plan handsome CapEx benefits. So, I just wanted to clarify, like does this mean that it's no longer a possibility to at least some of the burden on CapEx, if we do go into a deal with this new fiber architecture?

[Eugen Stermetz, CFO]

You can -- the answer simply you can throw the previous numbers, you can throw them out. So, there will be no CapEx benefit, no IFRS 16 financial lease accounting. As Christoph mentioned, the contract is not signed by the head of terms we have, and it will look much more like a normal wholesale deal with wholesale revenues, but no CapEx impact.

[Klara Zabrocka, JPMorgan]

All right.

[Louis Schmid, Head, IR]

Thank you, Eugen. Easy question, easy answer. Let's go to the last question coming from Russell, New Street Research.

[Russell Waller, New Street Research.]

Yes, thank you. Yes, Russell from New Street, saving the best last obviously. Three quick ones. On the Salt deal, are you worried about the impact the Salt might have on your retail business? I mean, it only covers a third of the country at the moment. And given that, it's actually built up a reasonable share within region? So, yes, that's my question. I mean, do you think your customers are going to be the main target? Or will it card target another company's customers given the kind of profile?

Second question is just you talked about the copper switch-off. I mean, obviously, it's very early days, but have you thought about kind of quantum of savings and the timing of those? And then the final question, yes, just on the -- you said there's maybe 10% of the country, I think that's covered in fiber by other providers. I mean what's your plan to cover that 10% of the country? Will you overbuild about 10%? Or will you have to take a wholesale product to offer a fiber product in that region? And if so, when would that happen? And when would we see that overbuild happen or when would we see those wholesale costs rising?

[Louis Schmid, Head, IR]

Thank you, Russell. I think both questions goes to Christoph.

[Christoph Aeschlimann, CEO]

So, regarding impact of the Salt agreement, I mean yes, obviously, will have some impact on the retail business. I mean if a customer -- existing customer switches to Salt, I mean they -- I mean I assume they will target the whole population base, which lives in a municipality. And there will also be some Swisscom customer switching. So, how big it will be, we will see in the overtime.

But on the other side, I mean, they could also move through other wholesale products we offer at the same --today, they could also buy copper services from us. So there is no real way of like preventing them entering the turf. And so they are there. And then we will see and we have to deal with the fact that there is sold in the market, and we just have to be better in service and quality and brand to retain the customers.

On the copper switch-off, I would say that it's a bit early for -- to quantify savings and timing. This is also the reason why we are running those tests with sort of select municipalities to sort of test a bit more how can we execute it? How much will it cost us to switch off copper Because, let's say, upfront, it will essentially mean more costs actually switching customers to fiber, removing the network and cost savings, I would say.

There will obviously be cost savings, many of them on the electricity side because the copper platforms are quite intensive on the electricity side. But those energy savings, they will rather come probably more towards the latter part of the decade than in sort of this year or next year. And we will certainly communicate more once we have reliable figures to communicate, but I wouldn't expect anything on this year.

And then on the remaining or third-party FTTH turf. So ultimately, yes, we plan to cover at least some of that turf, could be by overbuilding the turf if we don't find an agreement, and otherwise, we are obviously also talking to some of the actors to actually buy part of the infrastructure in a sort of a co-invest model.

What we are certainly ruling out is a whole buy. So, we will never rent infrastructure from an existing network builder because we believe that as an infrastructure company, we want to own our own network. So, whole buy is excluded. But let's say, purchasing half of the network that is already built and moving it into our property, that's obviously something that we are discussing with some of those local actors.

[Louis Schmid, Head, IR]

Right. Thank you very much, Russell. And obviously, there is still a very, very last question coming from a phone call. Please raise your questions.

[Louis Schmid, Head, IR]

Okay. And unmute yourself. Otherwise, we close down the conference. Well, I think at this point, it is from our side, in case of any follow-up questions or outstanding questions, please do not hesitate to contact us from the IR team. We are available for you. Thanks for your participation and attention. Have a nice evening. Bye, bye.

[Christoph Aeschlimann, CEO]

Bye, bye.

[Eugen Stermetz, CFO]

Bye, bye.