Swisscom AG
Q1 2021 Earnings Call Transcript

Published: 2 May 2021

[Operator:]

The floor is yours.

[Louis Schmid:]

Good morning, ladies and gentlemen. Welcome to Swisscom’s Q1 presentation. My name is Louis Schmid, Head of Investor Relations. And with me are our CEO, Urs Schaeppi; and Eugen Stermetz, our Chief Financial Officer. The first part of today’s analyst and investor presentation hosted by our CEO consists of 2 chapters

[Urs Schaeppi:]

Good morning, ladies and gentlemen, and I welcome you to this Q1 results presentation, and I would like to start directly with our Slide 4, the key achievement in 2021. So financially, we have a strong good first quarter, operationally a solid one. And once more, we were able to win mobile tests all the mobile tests in Q1 on Chip or Ookla. So this shows our network leadership. We have also a very solid and good performance in our B2B segment. So our solution business developed well, mainly cloud and security products. Also, in the retail market, a good momentum on our brand experience. And to the subscriber, a bit weaker with some exceptions that will come late to it. And then we announced today this fiber partnership with Salt, which I will give you extra more details. And on Fastweb, strong performance in Q1, also on the market performance side, where all segments performed well, mainly also in the B2B market, and brand experience of Fastweb is increasing. And we have a strong brand in Italy. If you go on Slide 5, you see our market performance, so Switzerland, some extraordinary effects. And in Italy, we have revenue-generating growth. In Switzerland, you see that broadband is impacted by a phase out of a product. It’s the Casa product, where we made a phase out. And therefore, we lost 5,000 connections. And then also, we have some spillover from the aggressive promotions of Q4. And the Valentine’s day, it’s always a bit the case in Q1 that the performance is weaker. And then, there is certainly also a third effect, which leads to a bit weak net add performance in Q1 because we had the shutdown and the shops are important for the market performance of Swisscom. But overall, as expected, the broadband business and also the fixed voice business. On mobile, postpaid mobile, you see that underlying net adds are plus 17. There we have extraordinary effect of the phase out of 2G, which we have done in Q1, at the end of Q1. This has a bit slight negative impact on the net adds. And then you see slightly increasing net adds on wholesale. Fastweb, with a good momentum on mobile 105,000 new subscription mobile and a growth of 18,000 broadband. So overall, a quarter like expected, with some extraordinary effects, as I explained. If you go on Slide 6, some key remarks to our financial performance. So we were able to have a revenue growth of 2.5%, mainly driven by a bit better service revenue in Switzerland, but also solution business in Switzerland, that IT business and some more smartphone sales. And then on the EBITDA, on the right side of this chart, you see that the underlying performance of the EBITDA is plus CHF 9 million, so stable. That’s a good performance if you look to the price erosion, which we have in Switzerland. So even then, we were able to compensate the service revenue decline through efficiency measures. So we had plus 7% on Swisscom Switzerland and plus CHF 10 million on Fastweb EBITDA growth. So overall, solid EBITDA and also a solid operating free cash flow, you see it stands at CHF 509 million in the first quarter. If we go on Slide 8, very short, our priorities, they are as explained during the year result presentation of 2020. So investing in our infrastructure remains important to be leading on network quality. Defending our market position in Switzerland, who is and stay important. Then this commitment to operational excellence, where we have announced this target of plus more than CHF 100 million savings in this year. And then pushing Fastweb and increasing the free cash flow in Italy. On Slide 9, some remarks to our network initiatives. So on mobile, you see that we are able to continue to rollout the network in a challenging environment. We have today a coverage on 5G [why] [ph], this 5G base version of 96%. So 96% population coverage end of Q1 and 26% of our sites are 5G+ enabled. That means this 3.5 gigahertz frequency sites. So you see that we were also able to increase the footprint. And we get some better, I would say, some better environment for rolling out networks, still very challenging, still a lot of sites are blocked. But a bit more positive outlook on 5G rollout. On the fiber rollout, on the right side of this chart, you see the waves, how we ramp up our fiber network. So, the first phase was a point-to-point approach to get 30% coverage in Switzerland, approximately. The second wave was Fiber to the Street to come fast in all the areas of Switzerland to get a bandwidth, a base bandwidth in the region of 200 megabits to 500 megabits. And now we are in the third phase, where we are rolling out our network to 60% fiber to the home coverage in the architecture, fiber architecture points to multipoint, so some words to the COMCO investigation. So the investigation is still continuing. So we don’t have really visibility how or when the end state will be. Swisscom appealed against the precautionary measures. And we are also in a dialogue with the authority to convince them that we have a very effective competition in Switzerland. So it’s too early to judge the impact. Important to say is that on the rollout, we continue to do our rollout. So we haven’t stopped the rollout on the fiber to the home initiative. If you go on Slide 10, some words to our fiber approach. So we are an infrastructure player. That means we want to own networks. We are not a whole buyer, but we are open to cooperate. And in this slide is also the partnership with Salt, which we announced this morning. We have always an open network approach. That means we give access to our competition on a nondiscriminatory base to our fiber networks. Important to say is that we are also open for other cooperation if they make sense for us. And this approach was successful in the past, where we have done some regional cooperation with utilities – mainly with utilities and now the 1 with Salt. How is the partnership with Salt structured? You can see it on Page 11. So it’s a long-term agreement with 2 investment components

[Eugen Stermetz:]

Thank you, Urs. Good morning, everybody, also from my side. We’ll move on to Page 22, starting with group revenue. As Urs already mentioned, group revenue is up by CHF 66 million on an underlying basis, net of currency effects at plus CHF 53 million. Very nice growth once more from Fastweb with plus CHF 41 million, that’s plus 7% growth also out of Fastweb, as Urs mentioned, driven by all 3 segments

[Operator:]

Thank you again. [Operator Instructions] So as first we have Polo Tang, UBS.

[Polo Tang:]

Yeah, hi, thanks for taking the questions. I actually have 3 quick questions. The first one is really just about Sunrise/UPC. I mean what are you seeing in terms of competitive behavior? So are you seeing signs that they are maybe focusing on maximizing profitability? Or are they kind of more focused in terms of driving subscriber growth? So that’s the first question. Second question is really just trying to understand COVID-19 impacts in a bit more detail and how that may or may not evolve through the year. So for example, how do you think about the SME segment and business customers? But, I’m also curious in terms of how we should think about roaming revenues from here? But also in the presentation, you mentioned the uplift in metered revenues as people work from home. So, is this here to stay in terms of these metered revenues? Or do you think that will kind of fade over time? So can you talk about kind of COVID-19 effects for this year and how you think about it? And my final question is just really about the sale of your stake in BICS. Can you remind us why you decided to sell it? And specifically, what is your view of the TeleSign business within BICS, because, I mean, obviously, the multiple that you kind of got for BICS, I think it was around about 4 times EBITDA. So kind of were you quite cautious in terms of the outlook for BICS overall? So those would be my 3 questions. Thanks.

[Urs Schaeppi:]

Good. Well, thank you for the question. If I start with the Sunrise/UPC question, what will be the behavior in the market? So if I look to the behavior in the last quarters, they are very volume-driven, promotion-oriented. And I think this will not change in the next months. I think it will remain promotion oriented business. Long-term, mid or long term, it’s quite hard to say. Maybe I’m the wrong one, which you put this question. From the back book side, I think, to be too aggressive long-term on promotion is quite a risky game also for this NewCo. But the next months, I think we will have same behavior as we have it today. On the COVID-19 impact, we see some positive impact on solution, digitalization, so is pushing through this home office. And that’s why there is a bit more solution business. This traffic effect, which Eugen explained, I think they will flatten out in the next month, when home office is also going down. There will be weak this effect in the next quarters. And roaming, also, we will have a certain relief on roaming, but big travels will be not made. That’s our assumption in this year. Maybe more on the retail side than on business side. We think that the roaming revenues will stay quite low also in this year, also in the third and fourth quarter. Maybe next year, we will get a better situation on it. Then why we sold our stakes in BICS? That has nothing to do with the performance of this company, though this company is well performing. The main reason is we have a minority stake in this company and it’s not a very liquid actually asset. And that’s why if we get the opportunity to sell it, it’s a strategic, we sold it. So that’s all behind it, but not because of performance of BICS. We stay a customer of BICS and so we realize a further cooperation with them.

[Polo Tang:]

And can I maybe just ask a with clarification question about what you said on the second quarter, because I think for B2C you said you’re more optimistic in terms of talking about improving trends in Q2 versus Q1. So can I clarify whether you were talking about subscriber trends or revenue trends or both?

[Urs Schaeppi:]

Subscriber trends, Q1 is always strongly impacted by this aggressive Q4 promotion, so Black Friday and Christmas. And then also the lockdown, which we had in Switzerland, where Swisscom shops were closed and this leads to a lower gross add performance. That’s why we think that the performance in the next quarters will be a bit better.

[Polo Tang:]

Clear. Thanks.

[Operator:]

Next question, Steve Malcolm, Redburn.

[Steve Malcolm:]

Yeah, good morning, guys. Thanks. Can you hear me okay?

[Urs Schaeppi:]

Yes, clearly.

[Steve Malcolm:]

Yeah, okay, sorry. Thanks for the detail on the Salt transaction. I’ve got a couple of questions on that and then one on Fastweb. First of all, can you just clarify that the transaction is not dependent on any outcome from the ComCom investigation? And do you expect this deal to help your negotiations with ComCom or the discussions around getting regulatory clearance? Secondly, the guidance you’ve given, I assume that doesn’t bake in anything for the retail consequences of Salt coming in as a wholesale partner. Can you maybe give us a sense of how much market share Salt had in those new fiber areas? I assume it’s very low because there is no fiber. And what your thinking is on the retail consequences of giving this wholesale deal to Salt? And then just a question on Fastweb, I mean your B2C growth in Fastweb is only 2% growth. All the growth is coming from enterprise and wholesale. I mean, do you think that Fastweb can grow mid-single-digits if it’s only growing B2C at 2%? And if not, how do you revive the growth in B2C to have your sort of midterm growth ambitions for Fastweb? Thank you.

[Urs Schaeppi:]

On the first question, the Salt still and the Salt whole impact on the COMCO, So it’s too early how they judge it. But if you ask me, this should actually help because we have a layer-1, with Salt now we have a layer-1 still in the point to multipoint turf. And that’s exactly what COMCO is asking for. So we have a solution for it. It will lead to a good competition, to a healthy competition. So in my view, it should help to this investigation of the COMCO. But I can’t tell you. Today, it’s too early. And then on the guidance topic or what will be the impact of Salt in retail market, if they entered the retail market. What you have to assume is that they get a digital footprint. That’s clear. But this footprint will not come from one day to the other. So that’s incremental, we will ramp up our footprint in the next year to 60%, from something above 30% to 60% in the next 4 to 5 years. So it will be an incremental impact. But it will certainly bring competition in the retail market. We have the advantage that we will get to wholesale revenues. And to be sustainable in the retail market, it’s not only the access which is important. We were successful in protecting our market share through this combination

[Steve Malcolm:]

Okay, the guidance does not taken any assumption of their own future retail market share loss. It’s purely – the guidance is given that there is a purely the wholesale side of the equation.

[Urs Schaeppi:]

Yeah, that’s right. But the impact will be neglectable in 2021.

[Steve Malcolm:]

So, clearly, it will be negligible this year. But going forward, you would assume that Salt is doing this, by doing it, the starting point for the market share on – from the new fiber plant is very, very low, because they haven’t been marketing fiber, because there isn’t any there, correct?

[Urs Schaeppi:]

Yeah, it will take time. It will be a process. And then we have our strategy to defend our market share, as I explained it before. So there will be not – in my view, there will be no big changes in the next, compared to today in the next quarters.

[Steve Malcolm:]

No, I wouldn’t expect much impact in Q2 and Q3. But thanks, I think I understand it. Thank you.

[Urs Schaeppi:]

And then…

[Operator:]

Thank you. Sorry.

[Urs Schaeppi:]

Then, sorry, there was the last question on the Fastweb, the growth profile, so we will have a – we are optimistic to have a strong momentum on B2B and wholesale, that the B2C will become more competitive also because of the market entry of Iliad in broadband. But on the other side, we have our strategy to defend our market share in the broadband business. And what you have to assume is that prices in Italy are on another level. It will then – let’s say, the freedom to undercut the actual market prices in Italy is not so big as it was in the mobile market. And our strategy is to get a good momentum also with fixed converged offer in Italy with a superior product portfolio, with a very transparent product portfolio. So the market will be tough in B2C. But we are optimistic that we will have further growth path here also in B2C.

[Steve Malcolm:]

Okay. Thanks a lot.

[Operator:]

Next, we do have Jakob Bluestone, Credit Suisse.

[Jakob Bluestone:]

Hi, good morning. Thanks for taking the questions. I had 3 questions, please, fairly short regarding the fiber partnership with Salt. The first question is, who actually makes the decision of where to build? Is it you or is it Salt? Or do you do it together? And I mean, just following on from Steve’s question, you presumably have less retail market share to defend in cable areas, whereas, I guess, for Salt, it’d be a little bit more different, whether it’s – whether you’re building in a cable area or not? So any color on who makes the decision on where to build? And the second question is, can you just clarify do you pay per home passed – sorry, does Salt pay you per home passed or per home connected? And what I can see, it looks like the feeder payment is homes passed. The drop might be home connected, in which case, presumably there would be some further growth in revenues as Salt connects customers over time. So if you can maybe just clarify that? And then just a final clarification, I think, you mentioned that the wholesale revenue impact in a build year would be low triple-digit millions, so call it sort of CHF 100 million plus. But I think you also said that the impact in 2021 from Salt, roughly half of the CHF 200 million upgrade, so CHF 100 million was coming from Salt contributing essentially for 6 months. So can you maybe just clarify a little bit? I mean, it seems like both the CHF 100 million impact in the 6 months and full year effects. Maybe it’s just to do with rounding or maybe I’m just misunderstanding. But can you just clarify around the revenue impact from Salt on your wholesale revenues? Thank you.

[Urs Schaeppi:]

So I will take the first one on the decision, how we do the rollout. And Eugen will take the 2 other questions. On how do we construct this network? So Swisscom has the full ownership on the strategy, on the network strategy, on the rollout and also that’s why we decide where we want to build and how we build the network. Certainly, we will also listen to Salt, what are their ambitions, but we control the network and we decide how we do it and where we do the rollout. And we do certainly the rollout on a competitive-driven approach, where we think that we get the best momentum.

[Eugen Stermetz:]

I’ll try to answer the second question, if I got it correctly. So we deliver – we will deliver the rights of use on the feeder to Salt as we rollout. Okay. Secondly, we will deliver the drops to Salt as they need them depending on their gain in market shares. I believe that was your question. If not, please follow-up. I think you used the terminology homes passed and homes connected, I think I got it, if I didn’t, please.

[Jakob Bluestone:]

Okay. If I can just jump in on – so it sounds like – I mean, as for the second part for the drops, because that is something that comes over time as new drops are done, it sounds like there might still be some revenues even in 2026. It’s just not immediately visible to day 1, is that correct? There might still be a longer-term effect.

[Eugen Stermetz:]

No. We just – if you just give us a second, then we’ll try to answer it. Otherwise, we’ll do it afterwards, okay. Just a second.

[Jakob Bluestone:]

Sure, Eugen.

[Eugen Stermetz:]

Okay. Sorry, we just clarified that internally, yes, we deliver the [euro for the drops] [ph] also later on in the later years, 2026 plus. But we have to account for them as revenue in the first 5 years of rollout. Sorry for the time. We needed to clarify it with accounting.

[Jakob Bluestone:]

No. That’s very clear.

[Urs Schaeppi:]

And then the impact on net revenue?

[Eugen Stermetz:]

Yeah, net revenue. So I’ll start from the guidance again, which is half a year, and then it will not be too difficult to work out the full year effect. So on the revenue guidance, we updated the guidance from CHF 11.1 billion to CHF 11.3 billion. And as said that a little bit less than half of the effect is due to the Salt deal and that is a half year effect. So from that, you can work backwards to the full year effect, which I called a low 3 digit number.

[Jakob Bluestone:]

Got it. Thank you.

[Urs Schaeppi:]

And what you have to assume is this is related to the network rollout. It depends on the network rollout, how we can construct the network. So it’s not very easy to forecast.

[Jakob Bluestone:]

Sure. Thank you.

[Operator:]

Next, we do have Ulrich Rathe, Jefferies.

[Ulrich Rathe:]

Yeah. Thank you very much. 3 quick questions, please. The first one is, did you have any benefit in the first quarter of lowering marketing or advertising costs because of the lockdown and you decided that maybe campaigns while the shops are closed aren’t so useful. You didn’t explicitly mention that. I was just wondering whether that is part of the overall financial profile in the first quarter. The question – the second question is so you mentioned that Salt pays – you have sort of payment terms agreed with Salt. Could you give us sort of a general picture of how that payment profile looks? Is this front-loaded? Will there be higher payments during your rollout period? Or has it all been in the actual payment terms all flattened out, so that’s effectively, they pay as they get the customers. So from their economic situation, it’s essentially a wholesale deal. And you’re sort of absorbing that in these working capital shifts? That will be my second question. And the third question, please. When you talk about these free cash flow accretion numbers of the deal coming back to an earlier question, is that – and you sort of – you’re talking about that into 2025 and then beyond 2025. You sort of gave numbers to that. That excludes any retail effect? I just wanted to confirm that you haven’t subtracted the potential retail impact when you were guiding for the free cash flow accretion? Thank you very much.

[Eugen Stermetz:]

Okay. So I can take the question. So number 1, yes, we had some seasonal effects in indirect costs. As I mentioned, we believe this will level out over the whole year, whether it’s in MarCom or somewhere else, I would not dive into that. But on the quarter, you always have some seasonal effect. On the payment terms, we can’t comment on the details of the agreement. There’s certainly no full front-load. I explained that. If there was a full front-load, there would not have been a net working capital effect. But on the detailed payment schedule I ask for your understanding that we can’t give any details. On the third question, the free cash flow number does not account for any retail effect. So what we gave you is the impact of the deal.

[Ulrich Rathe:]

That’s helpful. Can I just clarify your first answer? I understand the seasonal effect. The question was whether you have held back beyond the seasonal pattern in the first quarter because of the specific situation like the shop closures, that’s the question, not the usual sort of Q4 to Q1 pattern?

[Eugen Stermetz:]

We actually did a little bit less MarCom than originally intended, but it’s not a huge effect that would impact in any significant way the financials of the quarter.

[Ulrich Rathe:]

Thank you very much.

[Urs Schaeppi:]

Ulrich, it’s not a big impact. So we made also big campaigns in March in the retail market. So there’s really not a big impact from marketing communication and COVID.

[Ulrich Rathe:]

Thank you.

[Operator:]

Next question, Michael Bishop, Goldman Sachs.

[Michael Bishop:]

Thanks. Good morning. Just 2 quick questions for me. Firstly, just picking up on Slide 11, where you’ve talked about clearly the CapEx impact of the Salt deal. But the slide also refers to, in combination with CapEx optimization. So I just wanted to ask, with the guidance change on the CapEx, how much of that is the Salt deal? And is there actually any underlying change to your CapEx or your assumptions around how – or what price you can build out the Fiber to the Home expansion at? And then my second question was just around the improvement in the B2B service revenue trends. It looks like Salt and Sunrise both over the last couple of quarters have refreshed, particularly SME mobile offers, but you’re reporting better trends. So you’re just not really seeing any impact there? And, what’s the competitive landscape like in B2B mobile? Thanks very much.

[Urs Schaeppi:]

Good. I will take the service revenue trend, and Eugen, the guidance on CapEx and costs.

[Eugen Stermetz:]

Okay. Sorry, I’ll start with the first one. So no there is no significant underlying change in our CapEx guidance. The effect that we talked about on the updated guidance is primarily due to the Salt transaction, and the work primarily stands that because also on CapEx, there is a small foreign exchange effect if you update the foreign exchange rate. But there is no change in guidance as to our normal CapEx envelope.

[Urs Schaeppi:]

And then on the service revenue trends, I think the best picture for it you get on Page 23. So – and in the B2B market, you see that we have price pressure that’s coming out of the corporate market and the SME market. So it’s price driven, and we will have also these effects in the next quarter. So there is competition in the SME mobile market. But on the – let’s say on the whole performance market shares, we are quite stable, but we have price competition. And it will remain.

[Michael Bishop:]

Great. Thanks very much.

[Operator:]

Next question is coming from George Ierodiaconou.

[Georgios Ierodiaconou:]

Good morning, guys. Thank you for taking the question. I just have a few quick follow-ups. The first one is around the question that was asked earlier about the regulatory review. Perhaps just to follow-up on that, was there any other party apart from Salt that was requesting, let’s say, point-to-point kind of option? If there are other interested parties in this kind of arrangement that you announced today with Salt? The second one is on the deal itself, and apologies for this because I know you may have already given the numbers, but I was a bit confused between the annualized impact of this transaction, when it ramps up versus what we are seeing this year I just wanted to confirm some numbers, just to make sure I get this right. So in terms of the overall EBITDA and operating free cash flow proxy impact, is it fair to assume that when it ramps up, not in 2021, but in the future years, this could potentially even be more than 3-digit on an annualized basis on EBITDA and probably more than double that when it comes to operating free cash flow? I just want to just get an idea of the magnitude. And then the final question I had is more around other implications for your wholesale business from this. Whether you are building in assumptions for doing something similar within your existing footprint of fiber, not just in the new builds with other players and whether this option could be available to that? Thank you.

[Urs Schaeppi:]

Good. Eugen will take this impact question from the Salt deal. And maybe you can start with it, and then I will take the wholesale question and the regulatory question.

[Eugen Stermetz:]

Okay. So I will try to best simply repeat what I said, hopefully answering your question. So the comments I made on EBITDA, CapEx and operating free cash flow proxies were as follows

[Urs Schaeppi:]

It’s more a 2-digit impact than a 3-digit impact.

[Georgios Ierodiaconou:]

Very clear.

[Urs Schaeppi:]

Good. And then on the regulatory point, do we have other companies who are interested in a deal like Salt. We certainly understand that I would or can’t comment this. But Swisscom is open for partnerships, if they make sense for us. So these are commercial-driven partnerships. If they make sense for us, we are open for it. And for all the competitors who don’t want to invest, we have very attractive wholesale offers. So we get this 3-layer offer. And we have, let’s say, one of the strongest competitor in Switzerland. He used this 3-layer offer and he is very successful. And in the point-to-point turf, the investments are done. So we – if we talk about further core investments or partnership, fiber partnerships, this would be in the region or in the footprint where we make the new rollout and certainly not in the existing one.

[Georgios Ierodiaconou:]

Very clear. Thank you.

[Operator:]

Thank you, George. [Operator Instructions] Next, we do have Luigi Minerva, HSBC.

[Luigi Minerva:]

Yes. Good morning. Thanks for taking my questions. Just on the Salt agreement again, I just wanted to get a sense of what’s your view on how the economics for Salt change following this agreement as compared to a pure wholesale option. So I mean – so essentially, my question is whether the agreement will give Salt more room, more scope to be more aggressive on the retail pricing. So, yeah, how the economics change compared to a pure wholesale solution for them? And the second question is about the CapEx outlook. And so, I mean, the savings are a positive. But I’m wondering whether you considered if there is scope to reinvest the CapEx savings from the agreement into a larger FTTH deployment. I appreciate you’re arbitrating your guidance today of the 60%, but perhaps it makes sense to reinvest in a broader footprint. Thank you.

[Urs Schaeppi:]

Good. On the economics of Salt, I can’t comment it. But the strategy of Salt is always a price-oriented one. On the other side, they get the capabilities to be a converged player to be competitive. So, I can’t give you insights to get through the economics and I don’t know that the price rather cheap of Salt. But I think it will not come more aggressive than it is already today. So maybe this is what I can say.

[Luigi Minerva:]

So perhaps say, I didn’t phrase it properly. I mean, for Salt, will it be more expensive to pay the IRU as part of the agreement.

[Urs Schaeppi:]

I can’t comment on this. We certainly understand it. But…

[Luigi Minerva:]

Okay.

[Urs Schaeppi:]

And on the CapEx, Salt, yeah, if we – we can afford ourselves a bit higher CapEx, and we could reinvest then. That’s clear. And our strategy is to make a fast rollout on Fiber to the Street. Bottlenecks are not only the CapEx, bottlenecks are also the capabilities to do the rollout of such networks. And, yeah, that’s a big story. But I’m not now here to give you a guidance for 2022 forward. But we want to have a fast rollout of fiber to the home. That’s maybe a [half of an hour] [ph].

[Luigi Minerva:]

Okay, thank you very much.

[Operator:]

Thank you, Luigi. Next, Simon Coles, Barclays.

[Simon Coles:]

Hi, guys. Thanks for taking the questions. Just quickly on the service revenue trend. We obviously have the guidance that the full year of CHF 250 million to CHF 300 million impact in the first quarter was only CHF 50 million. I’m just wondering why you don’t think it stays at that sort of CHF 50 million range, given or lap roaming headwinds. And you’ve obviously got a little bit of a boost from RGU mix on the fixed side.

[Eugen Stermetz:]

Simon, I’ll take this one. Yes, you’re right. If you just multiply the minus CHF 51 million, you obviously don’t end up at CHF 250 million to CHF 300 million. And I think in updating our guidance, we also acknowledge the fact that within that range of CHF 250 million to CHF 300 million, we are probably moving towards the lower-end rather than the upper end. Still, we see not only, as I mentioned, when I discussed Page 23, we don’t necessarily expect the trend to continue or the CHF 51 million to be the going run-rate. There are components in the service revenue mix that could well worsen. We mentioned the headwinds from traffic revenues that are there right now. But that will be gone very soon. And we also talked about price pressure in the B2B segment that could well get worse over time. So we made a balanced assessment and took all of this into account, not just the Q1 numbers, and came to the conclusion that we stick to the range. But I think you spotted it correctly, we are trending towards the lower end of the range as things stand right now.

[Simon Coles:]

Okay, that’s very clear. Thank you.

[Operator:]

Next Steve Malcolm, Redburn.

[Steve Malcolm:]

Yeah, sorry, guys. Another couple of questions, if I could quickly. Just a quick one on capitalized costs, they rose quite sharply in Q1. I think they were up CHF 30 year-on-year, which was a big component of EBITDA increase. Is that something we should expect for the full year through the year? Should we expect capitalized labor cost to rise every quarter to help EBITDA? And then just coming back to Salt, I just wanted to get slightly deeper again, the dealer structures IRU, I mean, can you give us a sense of how long that IRU lasts? Are we talking 15 to 20 years? Should we expect Salt to have to make further payments when the IRU period ends? And just for the sake of clarity, when the 5 year period is over, does Salt effectively have access to your network with no ongoing rental costs? Or how do the rental-costs work beyond that? From what the press release, I guess, they’re kind of zero, but could you help us understand the obligations beyond 2026? Thank you.

[Urs Schaeppi:]

So, maybe on the Salt question, so we don’t comment commercial details on this contract. And on the capital cost…

[Eugen Stermetz:]

On the capitalized – on the capitalized expense, I think it was in the first quarter, probably towards the higher end, as you as you saw. It’s not only capitalized expense, it also includes other revenue, and we had a not very significant but we had an effect in there, I think from the sale of real estate or something like that. So it’s towards the upper end of what we would expect for the coming quarters. That’s correct.

[Steve Malcolm:]

Okay. So Q1 was abnormally large capitalized cost increase versus what we could expect in Q2?

[Eugen Stermetz:]

Right.

[Steve Malcolm:]

Cool, okay. Thank you. Thank you.

[Eugen Stermetz:]

That’s what I would [indiscernible] today.

[Operator:]

Thank you.

[Urs Schaeppi:]

Okay, timing wise [indiscernible] the last questions?

[Operator:]

Last question, well, George was in the pipeline, but he does withdraw his question. So no more questions. Back to you.

[Urs Schaeppi:]

Okay. Thank you. And with that, we would like to thank you and conclude today’s conference call. Should you have any further questions, please do not hesitate to contact us. Speak to you soon. Have a great day. Thank you. Bye-bye.