Swisscom significantly increases profit with hardly any more revenue
Published: Thursday, Nov 2nd 2023, 08:10
Updated At: Friday, Nov 3rd 2023, 00:54
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In the first nine months of the year, Swisscom posted a clear increase in profit on barely higher revenue, thanks in part to one-off effects. However, headwinds came from the currency front. The "blue giant" is therefore lowering its revenue target for the year as a whole.
Sales grew by only 0.3 percent to CHF 8.2 billion from January to the end of September, the group announced in a communiqué on Thursday. Swisscom was hampered by the weakness of the euro, which pushed down the earnings contribution of its Milan-based broadband subsidiary Fastweb. Adjusted for currency effects, group revenue would have increased by 0.9 percent.
In operational terms, the usual pattern emerged: In the Swiss core business, revenue decreased slightly by 0.6 percent. Sales of telecoms services contracted by 1.4 percent. By contrast, revenue from IT services for business customers increased by 2.6 percent.
Meanwhile, Swisscom again grew in Italy. Fastweb increased its revenue by 6.0 percent to EUR 1.9 billion.
Significantly more profit
The picture is better when it comes to profit: Swisscom's operating profit before depreciation and amortization (EBITDA) grew by 4.1 percent to CHF 3.5 billion. The absence of special effects that had depressed the previous year's result also contributed to this. Excluding the non-recurring effects and at constant currencies, EBITDA would have increased by 2.2 percent.
Overall, the result a year ago had been burdened by provisions for litigation amounting to 82 million Swiss francs. The largest part of this was a fine of 71.8 million Swiss francs imposed by the Swiss Federal Competition Commission (Weko). This was because, in the Weko's judgment, the telecoms group had abused its dominant position in the broadcasting of live ice hockey and soccer matches on pay TV between 2006 and 2013.
In addition, there was a positive effect on pension expenses this year. This is lower due to the increase in interest rates, which supports the profit.
The absence of these one-time effects had an even more significant impact on net income. On balance, Swisscom increased net income by 7.9 percent to CHF 1.3 billion. In addition to the special effects, cost reductions helped: In its Swiss core business, Swisscom was able to offset the decline in revenue through efficiency gains.
With these figures, the Group exceeded analysts' expectations.
Fiber optic expansion continues
There was no news on the fiber-optic dispute with the Weko. In the summer, Swisscom received a request for an injunction from the competition authorities and was able to comment on it. A hearing is the next step.
In October 2022, Swisscom decided to change its construction method in accordance with the Weko requirements. Instead of a feeder line from the telephone exchange to the street shaft for several households, the provider is now building direct lines for each household. The Weko considered the previous construction method to be anti-competitive.
As of the end of September 2023, 2.47 million homes and businesses will be connected to the fiber-optic network. That is 45 percent of all homes and businesses. By the end of 2025, Swisscom aims to increase fiber coverage to around 55 percent, and to 70 to 80 percent by 2030. "Including third-party networks, around two-thirds of homes and businesses in Switzerland will have a fiber connection by 2025," the group wrote.
Sales target lowered
Due to the euro slump and weaker cell phone sales, Swisscom is also lowering its revenue outlook for the full 2023 financial year. The Group now expects revenue of 11.0 billion Swiss francs, down from its previous forecast of 11.1 to 11.2 billion francs. The lowering of the revenue target was not on the radar of the majority of the financial community.
The industry leader left the other targets unchanged: EBITDA is expected to reach 4.6 to 4.7 billion Swiss francs and capital expenditure around 2.3 billion Swiss francs. If the targets are achieved, shareholders will again receive a dividend of 22 Swiss francs per share.
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