Swisscom Earnings Soft On Weak Domestic Performance And Worse Credit Metrics

Rating: A1/A (Neg review at both) EUR spreads <1bp tighter

Poor performance continues with H1 revenue flat, EBITDAal -1.2% and FCF nearly 24% lower which isn’t exactly what you want to see for a company planning to increase leverage and already on negative rating watches. Fastweb remains a bright spot despite high competition in the Italian market though domestic performance is in contraction with YoY KPI decreases across residential fixed/broadband/TV lines at home.

• Revenue +1.8% YoY, weighed upon by domestic operations at -0.2% (business growth just about offsetting residential and wholesale weakness) while Fastweb was supportive at +7.5% YoY.
• EBITDA was -1.3% YoY on similar trends to revenue with domestic operations -4.5% YoY (with all segments lower) while Fastweb was +5.8%. EBITDAal -5% YoY.
• OpFCF of CHF 397mn was -8.3% from the CHF 433mn in Q223 on the EBITDAal decrease while CapEx was broadly flat at CHF 420mn vs. CHF 427mn in Q223. Final FCF of CHF 155mn was down from CHF 253mn last year.
• We calculate EBITDA leverage as 1.72x from 1.53x at FY23 against the prior announced expectation that leverage would rise to 2.6x by FY25 before deleveraging to 2.4x by FY27.
• FY guidance unchanged.