Edited Transcript of SRCG.S earnings conference call or presentation 27-Feb-20 8:30am GMT

ZUERICH Mar 21, 2020 (Thomson StreetEvents) — Edited Transcript of Sunrise Communications Group AG earnings conference call or presentation Thursday, February 27, 2020 at 8:30:00am GMT

Sunrise Communications Group AG – CEO, a.i. Chief Consumer Officer & Member of Management Board

Joh. Berenberg, Gossler & Co. KG, Research Division – Analyst

Ladies and gentlemen, welcome to the full year 2019 financial results conference call and live webcast. I am Andre, the chorus call operator. (Operator Instructions) The conference is being recorded. (Operator Instructions) The conference must not be recorded for publication or broadcast.

At this time, it’s my pleasure to hand over to Stephan Gick, IR Manager. Please go ahead, sir.

Good morning, and welcome to Sunrise full year financial results call. With me in the call, I have André Krause, CEO; and Uwe Schiller, CFO of Sunrise. We start the call with a presentation and follow up with a Q&A. André, the floor is yours.

André Krause, Sunrise Communications Group AG – CEO, a.i. Chief Consumer Officer & Member of Management Board [3]

Well, good morning, everybody. 2019 was undoubtedly an extraordinary year for Sunrise. And I would say despite all acquisition-related distractions, we have confirmed our position as Switzerland’s quality challenger and our business has delivered a resilient and very strong operational performance.

Our 4G network quality has again been ranked outstanding, reaching a top 3 rank globally, and we have started to roll out 5G in the 3.5 gigahertz frequencies as one of the first companies globally. In B2B, we successfully continued our transition while achieving solid growth momentum, and that has been underpinned by a vast amount of new customer wins. For example, if we look at the Q4, we could win SRG, the Swiss public television provider as 1 new customer on our B2B side.

Overall, our focus on the highest quality network infrastructures, outstanding services and relevant innovations for our customers has driven 8% to 15% of customer growth within mobile postpaid, Internet and also TV. Again, Sunrise has — growing faster than our competitors, and thus, gaining market share in all of our focus segments.

In terms of financials, 2019 is the second consecutive year of growth. Our adjusted EBITDA growth has now accelerated to 3.9% year-on-year. All in all, operationally and financially successful 2019 leads us to propose a dividend increase of 5% to CHF 4.40 per share. I would say this excellent set of results is also a testament to our strategy and also to the leadership of Olaf in the past years. And I would also take — like to take the opportunity to thank him, not only for his leadership, but also for his drive to get the company where it is today.

Now, today, I would like to also provide you more visibility on my strategy for Sunrise as a stand-alone business going forward. And later on, we will talk about how to elevate our quality challenger strategy to the next level. And we will also guide for continued top and bottom line growth, enabling progressive dividends from 2020 and beyond.

Now let’s look a little bit more in detail into the 2019 achievements on the next page. So with our Sunrise brand, we follow the quality-based strategy focused on high-value and convergence. Consequently, we have been investing into 3 areas: network quality, a differentiated customer interface and innovative converged products. Now if we talk a little bit about network quality, in 2019, we have acquired sufficient 5G spectrum at favorable terms. We have started to roll out 5G in the 3.5 gigahertz frequencies as one of the first companies globally. And we are now present with our 5G network in 426 cities and villages across Switzerland. We have been also the first to launch a European 5G innovation center, and here, we are also demonstrating our capabilities in regards to product innovations. We have an initial focus on smart manufacturing with Georg Fischer as 1 of our partners. We have a strong farming product setup. We are focusing on smart buildings and also on sports, where, for example, we are building a — the 5G, I would say, lighthouse stadium in Switzerland together with FC Basel.

If we talk about customer interface. We have very high NPS levels, and we have seen steady improvement since the NPS measurement introduction in 2013. In 2019, we have also won the connect Shop Test following our refurbishment program of our shops and where our ongoing digitalization is seeing an increasing online channel share. Lastly, if we look at the converged products. Then also, we have driven quite a list of attractive innovations in 2019. We have seen the commercial launch of our 5G Fixed Wireless Access product, and with that product, we have also been one of the first operators globally to launch a market-ready product to our customers. We have launched a TV OTT product. Firstly, on a 4K-enabled Apple TV set-top box, but also in Q4, we have moved to a preinstalled app on a Samsung TV that no any longer requires a set-top box, which we believe, by the way, is one of the great breakthrough innovations going forward. In my view, I think, a TV set-top box is something like a CD player in the past. You know that from the past, but you probably don’t have it anymore.

Additionally, also in B2B, we have launched the Unlimited Mobile Workplace strategy with a great set of tools allowing our customers to digitalize and get their workplaces more mobile. We have seen a revenue growth of — in revenue of 14% in 2019. And I would also expect 5G to drive more growth into B2B, in particular. All these achievements have further increased our brand equity, and we are very happy and proud that we will continue our partnership with Roger Federer as our brand ambassador. And that is also quite unique in Switzerland. Sunrise is the brand that has a face, and that has a very emotional face in an iconic brand with Roger. So I think that is a great asset also going forward.

I’d also like to flesh out that Sunrise has been awarded Great Place to Work in our first year of participation in this exercise. And this is an important priority to provide an attractive workplace to our employees, enabling high motivation, but also attracting top talents for our business.

Now our continued investment and the focus on our mobile network is the basis for our improved positioning and reputation. And under the leadership of our CTO, Elmar Grasser, who by the way, has been awarded the Europe’s CTO of the Year 2019, we have built a leading mobile network. Our network quality has improved by 42% since 2011, and Sunrise actually provides one of the best mobile networks globally. In the international P3 test score, we are among the top 3 of more than 50 European and internationally operators participating.

Let me also add, our network is the most reliable one in Switzerland, a quality that I would say, most recently has gathered a bit more public attention. And if you look at our customer feedbacks, I think they speak for themselves. We have, again, been achieved a very strong BILANZ ranking. This is important to us because this is a questionnaire that is answered by 13,000 telecom users. And we have been ranked ahead of our largest competitors. So again, a very strong achievement here. And also on B2B, of course, the willingness of our B2B customers to be testimonies of Sunrise and provide their names as references for marketing campaigns, I think, also speaks for itself. This shows, I would say that overall, something has changed from consumer to business, Sunrise really has become the established quality challenger within the Swiss market.

And now moving on to customer momentum on the next page, you will also see that this is not only a mindset change, but people are also acting on it. We have increased, in 2019, our mobile postpaid customer base by more than 160,000 subscribers. We also had a robust momentum on Internet and TV, and in total, we grew our customer base by more than 35,000 subscribers in both Internet and TV. And overall, we clearly gained market share in all 3 areas. As you can see on the right side, this strong growth had also a positive impact on our gross profit growth. After stabilization in 2017, we reached now the second consecutive year of GP growth. And our customer growth and B2B momentum has been able to overcompensate for lower ARPUs. While we kept a strict focus on costs, we also reinvested part of our gross profit, like we did in the past, into our top line growth and into quality improvements. And as examples, we have increased our commercial expenses, we have opened new shops and we also invested in our front-line resources. I believe in a premium market like Switzerland. Relentlessly improving and pushing ahead has become the proven approach for the continued success of Sunrise.

Now if we look at EBITDA and dividend, our growth investments has helped us to turn around both top line and EBITDA trends at Sunrise. The adjusted EBITDA in 2019 accelerated to 3.9% growth year-on-year. At the same time, leverage has moved to 2.5x. This is half because of the IFRS 16 accounting change, but the other half is also driven by a 5G spectrum, landline upfront investments and the UPC M&A one-offs that we will elaborate a little bit more on later on. And based on our operationally and financially strong 2019, we are proposing a dividend of CHF 4.40 per share, fully covered by our adjusted equity free cash flow. And that represents a 5% increase year-on-year. And if you look at the evolution since IPO, our dividends have increased by 47% now.

Now with that, I’ll hand over to Uwe for some more financial details.

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Uwe Schiller, Sunrise Communications Group AG – CFO [4]

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Thank you, André, and also a very good morning from my side to everybody. So let’s have a closer look into our Q4 results. And as usual, we start with our mobile subscriber development. As you can see on the left-hand side, we have gained 38,000 new postpaid subscriptions in Q4 alone, which is the continuation of the good trend in the previous quarters and represents a 9% year-over-year increase in our base. This clearly implies continued market share gains. The 29,000 high-value primary SIM net adds reflects our continued progress in B2B as well as our budget brand, yallo. The prepaid base declined by 28,000, which is an acceleration from Q3, but is rather impacted by seasonality, and we continue to see ongoing pre to post migration. With 5G, we have also opened that to our prepaid customer base, and we started to offer 7 days unlimited tariffs in Q4 of last year.

Looking at fixed subscriber development on the next page, you can see that we have a slight improvement in the Internet net add subscriptions. We added 7,000 new subscribers. We continue to use promotions such as dedicated fiber offers to unlock market liquidity. Around 56% of our Q4 net adds are currently actually on fiber. TV saw 10,000 new subscriptions in the quarter. And what you can really observe here is a big shift from classic to OTT TV, and André also elaborated already on this one. We have done a promotion where we have given Samsung TVs with our pre-installed TV neo app, and that has proved very successful in the quarter. Competition in general remained intense in the area. But overall, we ended 2019 with 279,000 TV subscribers, an increase of almost 15% compared to the end of 2018. The solid performance also in fixed net was supported by 2 to 4P bundled offers. We continue to increase our converged customer base by more than 9% and our 4P customer base by 11% year-over-year.

On ARPU development, you can see that the postpaid ARPU decline is softening. The promotional environment in the mobile area remains intense. As already communicated in Q3, value measures have been put in place, and we will continue to monitor the development. As such, we expect the softening trend also going forward to continue. Additionally, we continue to see the dilution from the secondary SIMs. So the SIM cards you use for iPad, watches, et cetera, which are accretive to our business, but they are dilutive to the overall ARPU. To a lesser extent, roaming and mobile termination rates still put pressure on our ARPU. In prepaid, high-value customers continue to migrate to postpaid and OTT. Internet and TV ARPUs decreased CHF 1.10 and CHF 0.7 respectively, mainly driven by promotional activities. Also here, we are monitoring the market, but as liquidity is much lower, promotions are one way of increasing market liquidity.

With this, let’s have a look at the financial overview of Q4 at the next slide. Total revenue and service revenue grew by 5.2%. Each — be rest assured that this is not a mistake or a typo, there will be another 5.2% on that slide later on, but this is not a mistake. And total revenue, we saw a slight increase in hardware and hubbing revenues. As for service revenues, I’ll come back to it on the next slide with the details. Service revenue was also driving solid gross profit growth of 2.3% in Q4, improving from 1.9% in the last quarter, with adjusted OpEx almost stable in Q4. EBITDA resulted in a total of CHF 161 million, a growth of CHF 8 million or 5.2%. And as I said before, that is the third 5.2% on the page.

Reported EBITDA is down 56%, and this is primarily driven by the costs related to the UPC transaction. Q4 was impacted CHF 83 million from this one. In the full year, we have booked CHF 107 million of OpEx and CHF 5 million of CapEx, in total, CHF 112 million. We have paid the — not only the majority, but almost all of that one in 2019. So I don’t expect any cash impact in 2020 relating to the transaction.

So let’s have a closer look at the service revenue. As already mentioned, hardware and hubbing were growing in Q4, but these are low-margin revenues and tend to be volatile by nature. Postpaid continued to grow and prepaid declined with a total mobile growth of CHF 5 million, which is an improvement compared to Q3, where we only saw CHF 2 million combining from those 2 points. Prepaid is now representing 3% to 4% of our total revenues, so the exposure further declined on it.

Landline voice was stable year-over-year. Internet and TV continued to grow and contributed CHF 8 million to the growth. It is, on one hand, driven by a strong customer base. But additionally, and I mentioned that already, very similar to Q2. We had a TV promotion out there and this contributed with TV hardware revenues to this result of CHF 8 million growth in the quarter. Other revenues also contributed CHF 8 million. We saw especially here some project-driven revenues in Q4 in our integration business, which tend to be rather low margin.

With that comment, let’s move on and look at the gross profit development. Gross profit grew 2.3%, which is an improvement compared to last quarter where we only saw 1.9%. Higher contributions from mobile and Internet TV service revenues supported that growth. Gross profit margin is down 80% driven by a different revenue mix. I already mentioned on the last slide, the integration business of CHF 8 million. That is one big contributor to the downside in gross profit margin, but also our promotional activities impact that development. OpEx was almost stable compared to last year, but Q4 is always a very high OpEx quarter for us because we have a lot of commercial activities in the last quarter of the year.

Leaving the P&L now and moving on to CapEx and leverage. Total cash CapEx amounted to CHF 460 million for the full year. Infrastructure investment increased to CHF 185 million. And here, are included the spend for our 5G rollout of 3.5 gigahertz — is the 3.5 gigahertz spend, so the high-speed 5G rollout, whilst we are still extending capacity in the 4G+ area to cater for mobile data growth.

Landline CapEx is also increasing from ’18 to 2019, but here the upfront payment to Swisscom for the contract renewal is included. Customer demand for fiber connections resulted in additional fiber lines acquired in 2019. As already mentioned earlier, about 56% of our net adds in Q4 were already on fiber. Leverage, André mentioned that already, increased to 2.3x. If we exclude the IFRS 16 effect, that is a slight increase from 2.1 in the last quarter. Including IFRS 16, the result is 2.5x. The increase is mainly driven by the lower cash balance due to the payments related to the UPC transaction, and out of that 2.5x, 0.3x are related purely to the IFRS 16 effect.

With my last slide, I will focus on equity free cash flow. Taking all components together, equity free cash flow reached negative minus CHF 22 million, but this is mainly driven by the already mentioned CHF 112 million transaction-related cost, CHF 91 million spectrum cost and CHF 60 million upfront payment to Swisscom. In the individual components, there are some shifts related to IFRS 16. But overall, the impact on cash and equity free cash flow is, of course, neutral. Adjusting for the components above I already mentioned, and a few other smaller ones, equity free cash flow would have been CHF 210 million. And as you can see, the underlying equity free cash flow fully covers the proposed dividend payment of CHF 4.40, which in total would reach CHF 198 million. This actually concludes the financial

update for the quarter. And with this, I would like hand — I would like to hand back to André for the outlook.

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André Krause, Sunrise Communications Group AG – CEO, a.i. Chief Consumer Officer & Member of Management Board [5]

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Yes. Thanks, Uwe. Now if we look ahead. Well, I think, firstly, as we all know, the acquisition of UPC did not achieve the required shareholder vote. And as a consequence, the expected consolidation benefits of own infrastructure, a larger-scale customer base,and the cost synergies are not available to us. So if we step back and take stock on our stand-alone starting position, the 2019 results suggest that we are absolutely not in bad shape as a stand-alone business. We have an internationally leading mobile network. We have a smart executed multi-brand approach covering distinct customer segments. We have service excellence with an NPS focus and diversified distribution channels. We have continued product innovations and targeted promotions, coupled to an improving brand appearance. This has translated into strong customer growth, allowing for market share gains and for positive financial trends.

In my strategy assessment, the core elements of our strategy have proven to be right and have also proven their ability to drive growth in the Swiss marketplace. And I do see more potential and upside for more growth, as highlighted on the next page. Our quality-based challenger strategy allowed us to grow market shares by a low to mid-single-digit number in the last 4 years. But you can also see the shares are still low. So there is room for more. If we look at postpaid market shares, those are well above landline, and this gives us room for cross-selling. The converged customer base is still relatively small, and we also see it growing above average.

Furthermore, if we look at RGUs per subscriber, we are at around 1.3. And this number has been rather stable in the past 18 months, which also is indicating that there’s a strong value potential within our existing customer base. And our B2B market shares are also well below the residential shares. So there’s quite some catch-up potential available here and as confirmed by the 14% revenue growth that we have seen on B2B in the year 2019. All in all, I do believe there is substantial opportunity for more growth. So let’s discuss how we want to elevate our strategy to the next level to capture the growth opportunity in front of us.

Elevating our strategy, we’ll focus on 3 priorities: leading future-proof infrastructure, product and service differentiation and higher efficiency. Now on infrastructure, as a stand-alone company, a leading future-proof infrastructure is decisive. Fiber, in our view, is the fixed technology of the future. But currently, it is only available at 30% to 35% coverage in Switzerland. And that is quite lagging to other European countries. We see there’s a positive initiative of Swisscom that they want to extend the fiber coverage to 50% to 60%. However, we are, of course, also concerned about the fact that the fiber access is nonregulated in Switzerland. As own fiber build-out is not our intention because we don’t see it economically too attractive, we will look at partnerships in all directions to drive fiber really to 50% to 60% POP coverage by 2025. Attractive access conditions are really key to us in those partnerships, and we intend to use our strong balance sheet to finance any suitable partnership and would expect any model to be NPV accretive with also additional positive P&L impacts short term.

On the mobile side, we will drive for network leadership. We continue to build out 5G in the high-speed 3.5 gigahertz band to cover nonfiber areas to enable Fixed Wireless Access. But we will also roll out in the low-band in order to catch the opportunity for the arrival of 5G smartphones in 2020 in particular. On products and services, over the last years, we have massively increased our quality and NPS, and this has laid the foundation for cross-selling. And as you can imagine, a happy customer, of course, is open to buy more products from us. We want to drive innovation and cross- and up-sell to exploit the convergence trend. Like for example, we have just recently, this week, launched our Sunrise family benefit. And this is an area that we will continue to drive. And with that, we want to monetize the growth within our existing customer base and the potential that we see in here. Also, we intend to gradually reduce our promotional intensity around discounts, in particular, and return to a stronger product and service innovation and differentiation, in particular, on our main Sunrise brand. We will also continue our multi-brand approach and fully capture all segment opportunities in B2B and also on our second brands, yallo and Lebara. We will do this through targeted channel expansions, but also through product line extensions.

Lastly, talking about efficiency. In the past, we have turned gross profit from declining to a growing trajectory and partially have reinvested that GP growth — the GP into growth. As a result, EBITDA growth was impacted by required reinvests and going forward, we want to accelerate our GP to EBITDA conversion by improving our operating model. We have clearly defined multiyear efficiency program set up to improve our EBITDA to GP margin by 100 to 200 basis points by 2022. Overall, together with my management team and the Board, I am convinced that these strategic initiatives will enable continued customer and financial growth and driving our track record of progressive dividends also into the future.

Now if we talk a bit more in detail about the investments. We want to drive further investments in 2020 to extend our mobile leadership into the future. And let me stress out that we really believe that 2020 is a decisive year, where the foundation has to be laid on 5G, but also has to be laid on continued and accelerated fiber rollout. If we talk about mobile, we want to continue a fast rollout of 5G on 3.5 gigahertz, where we are currently present in 426 cities and villages, mainly for our Fixed Wireless Access product. Additionally, we would also like to build out a wide coverage on the 5G low-band on 700 megahertz in order to enable 5G, 4G carrier aggregation to really be ready for the 2020 5G handset launches and to capture the opportunity in the marketplace.

Also, additionally, we want to continue to invest in 4G+ capacity, mainly because we see that 5G is arriving a bit later than what we initially had expected. And secondly, also because we do see strong data growth, which we, of course, want to more efficiently handle rather on 5G than on 4G. This all in all will result into a CHF 130 million to CHF 150 million incremental CapEx, network CapEx in 2020. And this is a further acceleration of our 5G plan, which will result in a total CapEx envelope of CHF 410 million to CHF 450 million for the year 2020. We have decided to go for an accelerated 5G rollout, resulting in a CapEx peak in 2020, really to capture the opportunity in the marketplace. And to continue our leadership also as a key driver for our positioning in the Swiss market. This will allow us to reach a very strong 5G coverage on low-band and additional 4G capacity by the end of 2020. It will, therefore, also trigger less investments beyond 2020, allowing us to normalize our CapEx run rate beyond 2020 to CHF 250 million to CHF 290 million per year. The mobile network investments are a key enabler for continued subscriber growth and monetization of speed of larger entertainment packages. We really intend to fully utilize the expected 5G smartphone push in 2020, and also enable larger product packages, including more entertainment features, giving customers a reason to buy 5G now.

Additionally, we would also like to drive 5G momentum in B2B and in related IoT opportunities. And of course, we will continue to support our Fixed Wireless Access proposition outside of fiber areas, to give the whole of Switzerland access to gigabit speeds, also where only poor copper infrastructures will remain. The incremental 2020 network CapEx will be financed by our solid balance sheet, and we extend also our 4% to 6% dividend growth guidance to 2021 in order to shield our dividend returns from this short-term network CapEx peak in 2020.

I’d also like to mention, while we are extending it to 2021, we see in 2021 already with the normalization of CapEx to CHF 250 million to CHF 290 million as the initial rollout will be completed, this will materially improve our equity free cash flow position already in 2021. And we already expect that the dividend guidance is fully covered, in line with our dividend policy that is underlying.

Now also, I’m talking a bit about the efficiency program. This one will start from 2020, and we will roll out a multiyear efficiency program that will target significant cost improvements of our operating model in 3 main areas. The first area will be about digitalization and process efficiencies, something that we have started and continuously been doing, but we further will emphasize this and drive this in the future. And we will focus on improved digital customer journeys as well as process automatization of internal processes. The operational cost model will review the IT efficiencies, including architecture and set-up, and will also consider sourcing alternatives. And on purchasing, we will challenge functional indirect cost positions and also renegotiate supplier contracts. And as I said already, the efficiency program is targeted to deliver an adjusted EBITDA to gross profit ratio improvement of 100 to 200 basis points by 2022. You should also expect this as a steady phase in over the period 2020 to 2022.

Now with that, let me conclude the presentation with the financial outlook and the guidance. You should expect a continuing strong subscriber momentum in 2020, driven by our quality focus, convergence and our multi-brand approach and B2B. We will maintain our strong cost focus supported by digitalization, enabling profitable growth. And overall, this should lead to a revenue and EBITDA growth. Therefore, we are guiding for a 2020 revenue of CHF 1.875 billion to CHF 1.915 billion; an adjusted EBITDA range of CHF 675 million to CHF 690, implying a 2% year-on-year growth at the midpoint; and a CapEx of CHF 410 million to CHF 450 million driven by the accelerated 5G rollout expected to normalize to CHF 250 million to CHF 290 million beyond 2020. And finally, on dividends, we extend our 4% to 6% dividend growth guidance to 2021. Beyond that, we confirm our long-term dividend policy of at least 65% of equity free cash flow to dividend payout, targeting 85% if net debt and adjusted EBITDA is below 2.3x. The target leverage ratio was adjusted to 2.3x from earlier 2x due to the IFRS 16 accounting change, as Uwe has alluded to earlier.

And with that, I conclude my presentation, and we will now open up for Q&A.

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Stephan Gick;IR Manager, [6]

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Thank you, André. Thank you, Uwe. May I ask the operator to start the Q&A process, please?

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question comes from the line of Simon Coles from Barclays.

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Simon Alexander Arulraj Coles, Barclays Bank PLC, Research Division – Research Analyst [2]

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Simon from Barclays. Just on the CapEx and the extra CHF 130 million, CHF 150 million for the 5G accelerated rollout. You gave quite detailed information around some of the areas. But it seems like maybe where you think the incremental EBITDA could come from has changed? Because last year, I think you were talking about low single-digit million EBITDA from FWA, but now it sounds like maybe you see more of an opportunity in B2B. So just wondering if you can give us a bit more color around where you see the best opportunities are coming from, from 5G in the shorter term. And then also, what reassures you that CapEx can fall to the normalized run rate that you’re talking about from 2021 onwards. Then secondly, on service revenues, we’ve seen a very nice acceleration this quarter. Could you talk a bit more in detail what drove this? Because, yes, postpaid looks a bit better and TV remains strong, but is it mainly some project-driven things that has driven the acceleration this quarter? So this isn’t necessarily sustainable, and we might revert more to the 2% to 3% range that we’ve seen in 2019. Any more color there would be great. And then finally, just quickly, you launched some new family benefits on mobile earlier this week, and they look very attractive when you add a mobile line to an existing tariff. I’m just wondering what’s the thinking behind this strategy. Is that a defensive move or an attacking move? I think you mentioned that you see some ARPU dilution coming from mobile on the call today already. But what do you expect the new offers to — how do you expect the new offers to impact ARPU in 2020 as well?

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André Krause, Sunrise Communications Group AG – CEO, a.i. Chief Consumer Officer & Member of Management Board [3]

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Yes. Thanks, Simon, for your questions. So if I take the first and the third one. So firstly, what is our thinking around 5G? So the business opportunity in 5G is clearly, in our view, sitting on Fixed Wireless Access, but also, of course, with the smartphones now arriving in 2020, it will get more important to have attractive entertainment propositions for mobile phones that allows customers also to benefit from 5G in the larger speeds on their smartphone devices. So that’s the reason why we are changing a bit, if you want, the communication around what we are targeting. On B2B, we always said that this is an additional opportunity, of course. And there is the access opportunity on 5G. But beyond that, we are also in lots of discussions around IoT projects with our B2B customers. Now I don’t see that as a short-term big business opportunity, lead times for such discussions are easily in the range of 9 to 12 months. But we have multiple of those discussions, and there’s strong demand for this. So overall, we are strongly convinced that 5G will enable better customer experiences, and we see the opportunities where we saw them before. On the one hand side, Fixed Wireless Access as a replacement for — if you want, low-quality copper access in rural areas mainly and beyond that, driving more speeds to smartphone users at B2B. CapEx, like we said, I mean, we already said last year that we want to really extend our network leadership, and we initially said we want to do this in a 3-year horizon. Now we believe that 2020 has become more decisive given the fact of the arrival of the smartphones now. And also, honestly, you have seen that we were not really fully fulfilling our rollout targets in 2019 because of some of the obstacles we had in Switzerland. We are quite convinced now that we can drive this in 2020. But with all of those investments that we are doing, then we will sit on a very strong network infrastructure by the end of 2020 that allows us to invest much less and on a normalized level thereafter.

If I move to your family benefit question. I would say this is rather where we are, a bit catching up. And you remember probably that Sunrise One, when we launched it 3 years ago, was the first convergent product in Switzerland. Now the market has moved on, and we have seen more convergent packages, and there was also more family focus on some of our competitors. And we felt that this is a gap that we wanted to fill. We do see a big opportunity to cross- and up-sell that into our customer base. We have done quite a detailed amount of analysis. And like I said earlier, our RGUs per subscription are at 1.3x. So I think the cannibalization risk of customers getting a lower price for the existing second line is far less than the opportunity to actually grow additional lines. So therefore, I would rather see it as an accretive exercise.

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Uwe Schiller, Sunrise Communications Group AG – CFO [4]

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Yes, Simon, I will take the question on service revenue. I mean, first of all, you asked for the drivers and whether you can expect that rate going forward. On the drivers, of course, we have seen now, going forward, the increased postpaid base. So in every single quarter of 2019, we have added a significant amount of postpaid, subscribers have grown market share in that area. And that is certainly one of the drivers of the service revenue increase. On the rate, yes, the growth rate is a little bit higher than usual because that is the integration business. Normally, there are project-driven works, also partially some router selling, which happens towards the year-end. We take the business, we can earn some gross profit on this one. But this is, of course, not something you should expect on a recurring base. So if you look underlying, then basically, we have a sort of a continuous growth rate, and I think we expect that one also going forward. And if another project comes in the integration side, we happily take it, yes.

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Operator [5]

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The next question comes from the line of Jakob Bluestone from Crédit Suisse.

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Jakob Bluestone, Crédit Suisse AG, Research Division – Research Analyst [6]

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I had a couple of questions. Firstly, just trying to sort of dive a little bit deeper on the impact of Swisscom’s announcement of expanding its fiber coverage. Could you firstly help sort of share your thoughts on what do you think will be the impact on your IRU payments over time? I guess they’re doubling their coverage. Do you think your sort of IRU payments will roughly double over time as well? Or how do you see that evolving? I appreciate the comments you made about the difficulty of getting regulated fiber access. And then secondly, could you maybe give us some of your thoughts on how you think the competitive environment is going to develop over the course of this year? You mentioned in your prepared comments, the competition remained intense. So just any sort of thoughts on what your expectations are there and then what’s embedded within your guidance would be quite helpful.

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André Krause, Sunrise Communications Group AG – CEO, a.i. Chief Consumer Officer & Member of Management Board [7]

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Yes. Thanks for your questions, Jakob. So firstly, if we talk about the Swisscom announcement. I think at this very moment, the details are very, I would say, fluffy, and it’s not really clear what they’re going to do at what speed. Also, as I said, we are expecting them to grant access, but the reality is also that we don’t have certainty over this given the missing regulation on this. From an IRU perspective, I don’t see an increase, to be honest, because we are already using the full footprint of Swisscom today. So the footprint extension is an extension of the fiber footprint within Swisscom’s footprint, but I think this will not drive a significant difference on the IRUs. The IRUs will be rather driven by the question, what kind of deal can we negotiate, and also, what is our growth on the Swisscom network? That will be the key drivers of that, but not the fiber rollout as such. Again, I think what is important to mention, I said that in my presentation, this is not only about our partnership with Swisscom. We believe that Swisscom, of course, has a strong play in here, but we also believe we have partnerships with SFN, and we are also evaluating other models that could help us to drive a bit more of a diversified situation, helping us to benefit from the fiber rollout also economically going forward, beyond the fact that we really want to make sure that the Swiss population is not falling behind, but is continuously covered with good access infrastructures both on fiber and on 5G.

On your second question on the competitive environment in 2020. Well, I mean, we have seen now in the first quarter, a continuation of what has happened previously. But you’ve seen the numbers, right? So I think the reality is also that Sunrise has very much driven the market. And we also believe that our competitors are strongly looking at what we are doing. And like I said in my presentation, our intention is to gradually remove some of the discounting activities that we have seen heavily heating up in the second half of 2019. Now that, of course, will always be a technical exercise where we will watch what’s going to happen. But we see us also in a leading role in setting the market pace to some extent here. And we will, of course, only be able to do that if we drive product innovations. So this will be a gradual change. I’m expecting that the market, therefore, could become a bit more rational over time. To what extent that can be achieved already in 2020, it’s hard to say at this very moment.

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Operator [8]

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The next question comes from the line of Michael Bishop from Goldman Sachs.

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Michael Bishop, Goldman Sachs Group Inc., Research Division – Equity Analyst [9]

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Just 2 questions from me. The first is following up from the last one slightly, which is just trying to square your comments around potentially a more rational market with less promotions from your side with the need that you’ve referenced in the past to unlock market liquidity, because I think Swisscom said that churn was as low as 6% on the converged base. So the question really is are you seeing the market churn overall, naturally picking up a bit, and therefore, you don’t need to unlock the liquidity and you can be a bit more rational? Or is there anything else I’m missing? And the second question is just around the dynamics in terms of your fixed line market growth. I mean I’m nitpicking a little bit, but it slightly slowed in the second half versus the first half. So I was just wondering what you’re seeing in terms of competition, particularly from UPC as well.

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André Krause, Sunrise Communications Group AG – CEO, a.i. Chief Consumer Officer & Member of Management Board [10]

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Okay. Yes, thanks, Michael, for your question. So on the liquidity question. I would say, overall, the different segments have a little bit of a different positioning. Yes. So if you think about B2B, for example, of course, the position is more like we will continue to take the opportunities, and we are winning new customers. But we also want to, of course, prolong contracts that are running out, and we think that with our larger product portfolio, we have also opportunities to cross sell more. If you think about the Sunrise consumer brand, there, I think we have a big opportunity also in monetizing our customer base. As I said, RGUs per sub are relatively low and have been stable. Convergence is not bad, but it can also be improved. So there is an angle that we have probably not utilized as much as we can, which is selling more to our existing customers. That will also give us the opportunity to continue our growth in terms of value, while not needing to actually drive too much growth on the front end, i.e., winning new customers. And on the price-sensitive side, if we talk about yallo and Lebara. I think here, we are well positioned, and this is a market segment that is evolving, which we want to participate. And we see also continued opportunities. So you see the recipe for growth is kind of a little bit differentiated looking — depending on which segment we look at. Yes.

Uwe, do you want to take the second one?

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Uwe Schiller, Sunrise Communications Group AG – CFO [11]

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Dynamics on fixed line growth?

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André Krause, Sunrise Communications Group AG – CEO, a.i. Chief Consumer Officer & Member of Management Board [12]

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Yes.

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Uwe Schiller, Sunrise Communications Group AG – CFO [13]

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Yes. So I mean, there are 2 things behind that one. Actually — sorry, there are 2 things behind that one André addressed already. I think we believe that we can get more from our mobile customer base. The second one is really in the fixed line and in the residential areas. There, basically, liquidity is low as in the mobile area and certain promotions certainly will help. We have seen a very good success, for instance, with the Samsung TV promotion, where you have seen a big shift to the OTT TV app, which basically also has, economically, it’s attractive for us because we don’t need to provide a set-top box together with the OTT TV app, so that economically proves then also quite good for us. So there are different dynamics in the landline and in the mobile world. And I think with the move to OTT TV app, the overall economics could also be improved.

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André Krause, Sunrise Communications Group AG – CEO, a.i. Chief Consumer Officer & Member of Management Board [14]

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And maybe on your UPC point, where do we see UPC going? I think that’s very difficult to assess at this very moment. As you know, there has been a leadership change at UPC. The new CEO has just arrived. So it’s hard to tell what the direction is going to be. I think they have given a little bit of guidance to the market themselves. So we will, like always, of course, continue to observe our competitors and then react accordingly.

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Operator [15]

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The next question comes from the line of Luigi Minerva from HSBC.

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Luigi Minerva, HSBC, Research Division – Senior Analyst [16]

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The first one is on the fixed line access strategy. So you mentioned Swisscom, you mentioned SFN, and then you said, evaluating other models. I was wondering if you can maybe go a bit farther and clarify whether these other models would include, for example, access to the cable infrastructure ur maybe whether you’re interested in going as far as co-investment? And then the second question is, just going back on 5G. I understand your clarifications on why it is important to invest in 5G, and thank you for that. So my point is more around the case for accelerating the 5G investments. Because as far as we can see the FWA, B2B, there isn’t much new. The monetization case remains dubious, so if anything, it would be rational for operators to spread the 5G CapEx and have a more gradual deployment in order to protect cash flow and returns.

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André Krause, Sunrise Communications Group AG – CEO, a.i. Chief Consumer Officer & Member of Management Board [17]

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Well, thanks for your questions, Luigi. So firstly, on fixed access and the other models, the one thing that I can say is I would rule out cable access because of the complexity of the technology. So I think we would really focus on real fiber. Look, if you look across Europe, a multitude of different models has been tested in different markets. And we are seeing that there’s strong interest from a variety of players coming from the financial industry or coming also from fiber specialists and we have very different discussions with quite different partners. So we are evaluating really opportunities. What is important for us is, we want to create the opportunity to really ensure and drive the dynamic for the rollout to really get to 50% to 60% fiber coverage by 2025. And therefore, we will evaluate all of the different alternatives that we have at hand. And we will, of course, inform, as we have more visibility on what becomes realistically achievable. Yes. What is remaining important for us is, of course, we will be very focused on driving shareholder value. And you remember one of the big synergies in the UPC case was always that we potentially could get out of the Swisscom network to a certain extent. That remains an opportunity that we want to create, right? So now in a different way. And of course, we are assuming that we can drive financial benefits from that. So that’s really beyond the — driving the customer growth in the market with strong infrastructure, there is also a very strong economic rationale behind this.

On 5G, I tend to disagree a bit with your argument that the most rational thing would be to spread the 5G invest. I think in our case, there are a couple of reasons why this is not the best opportunity. Firstly, I mean, we have driven an innovation, if you want, position in the market. And of course, giving this up and losing our leadership role in this rollout would not be necessarily the smartest thing to continue our positioning and to even continue our leadership, number one. Number two, we have to build, in the meantime, capacity on 4G, and we know that 5G is 5 to 7x more efficient, so the data consumption tends to grow. If we are not utilizing the 5G opportunity as fast as possible, we will be stuck on a 4G network that requires capacity investments, which will be more expensive than if we would drive 5G.

And lastly, we are, of course, also in deep negotiations with our partner Huawei on how to economically find a model for that 5G rollout that ensures that we have very good pricing for the 5G equipment that we build now. So if you want, it’s a bit of a no-regret move because you would have to build that capacity anyhow, doing it in 5G is much smarter and it comes also with the upside of driving our positioning in the market.

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Operator [18]

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The next question comes from the line of Georgios Ierodiaconou from Citi.

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Georgios Ierodiaconou, Citigroup Inc, Research Division – Director [19]

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My first question is on the B2B side. You commented earlier about the fact that you would like to reduce some of the promotional activity in B2C. I’d be interested to hear if you think there’s similar opportunity in B2B. I know you are more of a challenger there, but whether you do think there is potentially room to reduce some of the ARPU pressure you’re seeing in that market. And then my second question, a series of them actually, is more around CapEx. Firstly, I was wondering if there is any indications you can give us around your thoughts on any potential for a ban at the core of the network for the Chinese vendor equipment. And if you were to have to replace that, if you could give an indication of how much it could cost you over the next few years to replace some of that equipment? The second one is, again, focused a bit on CapEx. It’s good that you give us indications for next year, but I was wondering if you can give us some feel of how we should think about CapEx more in the medium term. Is the level of 2021 indicative of the medium term? Any densification of the network, whether that comes from top, whether you have some arrangements with Cellnex where maybe some of these investments may not necessarily come to CapEx. Any indications on that would be great.

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André Krause, Sunrise Communications Group AG – CEO, a.i. Chief Consumer Officer & Member of Management Board [20]

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Yes, thanks for your questions, Georgios. So on B2B, well, you said it already partially, yes. Of course, on B2B, our positioning is different. We have a market share well below 20%, so we are an attacker. For us, it’s less about protecting our existing position, but actually enlarging our footprint in B2B. So therefore, we, by nature, have a somewhat more aggressive stance. That aggressiveness — I mean, we don’t necessarily feel that we have to extend it. And of course, we are also value focused. So it’s a little bit give and take, right? So I mean, we are in a competitive environment. Most of the times when we are talking to B2B customers, that is as part of RFQ processes. And therefore, of course, we have to be competitive in our offerings. But of course, we also try to monetize our quality. We try to monetize 5G. But I would not expect that from an overall pricing level that there will be a big relief coming anytime soon. However, of course, it is a priority for us also to sell more to our B2B customers. Like I said, the mobile workplace strategy is proving to get some traction. And of course, with 5G and IoT, we also have additional products to sell, which should also add over time to the growth that we can do on B2B.

Now on the CapEx, on the Huawei question. Well, as we discussed in the past, you know that Huawei’s positioning in Switzerland is slightly different, I would say, than in other countries. So the political discussion around Huawei is, I would say, less intense than in other countries. However, we are very closely monitoring the evolution in Europe. We have seen the decisions taken in the U.K., and we have to see where the trend is going and whether that causes some additional reputational damage. At the end, I mean, we are prepared to eventually take some action here. Like you were saying, we talked about that in the past and we have always looked into an alternative to eventually replace the core network over time. So you asked for the numbers. We expect that to be a 2- to 3-year project that will potentially have costs of CHF 30 million to CHF 40 million over that period. Now that is not an envelope that — it’s something that would be not — we would not be able to cover with our normal run rate to the largest extent. So nevertheless, this is nothing that we would like to volunteer and easily give away because we also think that the technical advantages that we have from the integration of core and radio are tremendous. And therefore, giving that up, we really need to make the case that the reputational damage on our business is really harming our development going forward. At the very moment, I don’t see that. But of course, this is something that has to be continuously monitored and reevaluated. And then lastly, on the midterm CapEx. Well, look, I mean, the normalization is not — we’re not talking about a year, right? So this is not like that we have a blip down from CHF 250 million to CHF 290 million. We are rather believing that the CHF 250 million to CHF 290 million is a reasonable good envelope to continue our quality strategy in the later years, in particular, also, if you consider that with the investments that we are doing or have been doing in 2019 and 2020, we are building a really strong network. So we have lots of empty capacity afterwards. So we will benefit from those investments, and that will enable us also to stay in that envelope, I think, for a midterm period. Now anything that comes beyond, I think we are not expecting something like 6G or other new technology evolutions coming anytime soon. If you look at the rollout speed of 5G on a global scale, I think 5G will be here for a couple of years.

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Operator [21]

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The next question comes from the line of Matthijs Van Leijenhorst from Kepler Cheuvreux.

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Matthijs Van Leijenhorst, Kepler Cheuvreux, Research Division – Analyst [22]

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The first question is regarding your incremental CapEx, could you give the actual building blocks? Because it seems — maybe I’m wrong, but it seems that part of your initial — original operating expenses are now capitalized, and that’s also one of the reasons why your outlook for EBITDA is actually quite good. The second question is, you’re mentioning that you want to accelerate this 5G rollout. But I always had the impression that due to — it was very difficult to get permits. So could you face possible delay because of negotiating with the local authorities to deploy 5G?

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André Krause, Sunrise Communications Group AG – CEO, a.i. Chief Consumer Officer & Member of Management Board [23]

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Yes, thanks, Matthijs, for your questions. Maybe I’ll take the second one first, and then Uwe can comment on the CapEx details. Well, of course, I mean, if the overall, I would say, public and political sentiment gets worse, then there is some risk of delaying, in particular, the high-band rollout. But you have seen that we are doing 4G capacity investments, and we are also doing low-band. On low-band, there is no building permit required. So therefore, we are more or less free with the speed that we can bring to the market. It’s only limited by our own, if you want, operational capability. And I would also expect that the political debate around 5G is improving. We see also some first indications for that. And it’s a bit ridiculous that the government has sold the spectrum, but has not yet given full clarity on the rules and the emission norms on 5G. So I think that’s something that has to happen pretty quickly. And we are also, of course, helping this discussion talking to politicians driving also informations into the customer base. And I think the reality here is, we have seen a very loud minority opposing the 5G story in 2019. Now there was not a great use case because there were no devices really that could be sold to the market. With customers now buying 5G devices, demanding the service, I think it will get much more of a balanced discussion. And with that, we also believe that our rollout plans are quite realistic.

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Uwe Schiller, Sunrise Communications Group AG – CFO [24]

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Yes, let me take your — first, rollout. [It’s on the incremental building blocks, we will not disclose them. But there are 3 parts. One is the accelerated 3.5 gigahertz rollout.] And I think this is where we basically face some of the issues you mentioned around building permits and what André elaborated to. The second element is the low-band coverage on 5G. So they are basically, there is a much easier way of rolling that one out. And there, we don’t really see any delays and problems. And the last one is actually the — still the extension on the 4G+. Because here, it is also important to note that on 5G, if you have low-band 5G, you can do carrier aggregation with 4G+ band. So that will also help us in the rollout. And therefore, that are the 3 individual components. And no, there is no shift from EBITDA to CapEx. So we did the rollout plan we started last year on that one. We worked with our network provider worldwide on that one. So we know what we are doing. We know the local situation. The team who’s working on that one has experienced last year what they could accomplish in the 5G 3.5 gigahertz spend. So we are convinced that we can roll out our plans and have a detailed plan behind it. But there is no shift from EBITDA to CapEx or some other funny things in that one.

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Operator [25]

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The next question comes from the line of Alex Roncier from Exane.

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Alexandre Charles-Edouard Roncier, Exane BNP Paribas, Research Division – Research Analyst [26]

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Just coming back a little bit on your CapEx plan and your partnership with Huawei. I’m just wondering if you had any discussion or if your CapEx guidance was taking into account any supply constraint or any rising cost in equipment that you know may happen given the slowdown we’re expecting from China given the virus outbreak?

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André Krause, Sunrise Communications Group AG – CEO, a.i. Chief Consumer Officer & Member of Management Board [27]

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Yes, thanks for your question. I mean, obviously, coronavirus is on everybody’s mind these days. We actually had a discussion with Huawei just yesterday. We are in a pretty lucky situation for the wrong reason, I would say, because Huawei has built quite a long stock reach because they were worried about the U.S. ban. And therefore, they have a stock reach of up to 6 months. And what they are seeing right now is that production capacities are ramping back up again in China. And they have confirmed to us that our supplies on the network side for 2020 are in pretty good shape. Of course, they have a visibility of, I would say, around 6 months, where we are in very good shape. Now if you fast forward the rollout planning, then the next 6 months delivery will give us more or less enough equipment to get through the entire year. And of course, if the coronavirus becomes — comes back again in China, and again, hampers production capacities beyond what we can see today, then there might be risk, I would say, at a marginal element to that. So that’s a little bit the situation that we have just yesterday discussed with Huawei, and I’m, yes, quite convinced that we are in a relatively good position here.

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Operator [28]

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The last question comes from the line of Usman Kazi from Berenberg.

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Usman Ghazi, Joh. Berenberg, Gossler & Co. KG, Research Division – Analyst [29]

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I just wanted to touch base a bit on 5G, a bit on fiber. Just on — and then on your EBITDA kind of guidance. So the first question, just on 5G. I mean, like you said, I mean, the 5G deployment on low-band spectrum is not that expensive, right? That’s mainly a software upgrade. According to my understanding, it doesn’t require boots on the ground. So within your CapEx hike, I can’t believe that, that is a major source of upside risk. And so my question was, how aggressive are you planning to be on 5G on the 3.5 gigahertz because according to our estimates, you’re already north of 20% of the population in terms of coverage with the 3.5 gigahertz. And given that you’re saying fiber over the long term might cover 60% of households, is it that the 5G kind of deployment on 3.5 is pretty much done this year and then you evaluate fiber opportunities from there on? Just any color on that would be interesting. The question on fiber or FTTH, I mean, I guess the worry today would be that you said that CapEx will normalize in 2021. But you’ve also highlighted that you could see opportunities to do something on fiber. So I was just wondering, related to that, is there a balance sheet kind of leverage ratio that you are happy with keeping while investing any headroom you have on fiber co-investment, et cetera, and also keeping the dividend? Or are you not looking at it in that way? And then finally, on the EBITDA guidance. I mean you did note the 3% growth in EBITDA in 2019. Going forward, you’re saying that the GP to EBITDA conversion should be better, service revenue trends, obviously, should continue to be good, given your commercial momentum. So I mean, the 2% growth of EBITDA at the midpoint of guidance, it seems a bit conservative, but just wanted to make sure that there are no kind of offsetting factors to consider here.

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André Krause, Sunrise Communications Group AG – CEO, a.i. Chief Consumer Officer & Member of Management Board [30]

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Yes. Thanks for your questions, Usman. So maybe I’ll start off with your last one on the EBITDA guidance. Well, as you know, we are always a bit cautious when we get into a fresh year. Now we had a very strong run in 2019. And I think where we are missing, of course, is visibility on how much we can really accomplish during this year. And, well, we have coronavirus as a topic on top, we have 5G handsets coming to market, where we don’t know exactly timings, availabilities and what it will do to customers. So we have a year which also has quite some uncertainties. I also was talking about gradually removing some of the promotional activities, getting more onto cross- and up-sell. So you see there’s a lot of things that we are ramping up, that we are changing and many moving parts. So I think we have given a very realistic guidance, and this is how we see it today. Of course, if we do better over time, and you know our track record over the last years, we were able to improve. I don’t know whether we’ll be able to improve this year. If we can, of course, we will.

Then secondly, maybe if I take the fiber question on what this potentially means to leverage a dividend and so on. Overall, there’s a very strong conviction in the management and also in the Board that the Sunrise success story from a capital markets perspective is, of course, driven also by the attractive combination of growth and dividends. And we will, of course, protect this under any circumstances. So that is a clear and high priority that we’ll maintain. Having said that, we also believe that on the other hand side, we are now in a stand-alone position, right? So as a stand-alone player, we have to make sure that we have the infrastructure we need to have. And we have a very solid balance sheet. And so there may be opportunity to use our balance sheet to drive the right activities on fiber to create a sustainable position going forward. Now what does that mean? I don’t want to speculate around that, but obviously, there is some headroom and we have given some indications as part of the UPC acquisition of what could a leverage potentially look like. I think that probably marks a border line that we would not be willing to cross. But you see there’s still quite some potential in there. I don’t want to speculate today. We would stay rational. We try to create NPV accretive activities on fiber that are also helping in the short term, and we will update on those activities as soon as we have better visibility and real cases at hand.

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Uwe Schiller, Sunrise Communications Group AG – CFO [31]

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Usman, coming to your first question on 5G. I think, first of all, I mean, as we have already communicated last year, we have not done any rollout on 5G low-band. And I think it is not just going in a network which has been consistently built on 4G and 4G+ that you just switch a software switch, and then it’s done. There are certain things done. It’s a different frequency band, and not all of the sites probably are at a stage where you can simply just do the software upgrade. So there’s a bit more to that one. And I think, for us, the low-band is an opportunity with the handsets becoming available, but also basically combining that together with the 4G+ and carrier aggregation between 5G and 4G+, that can help us to roll out mobile data growth in a much more cost-efficient way. So therefore, a good coverage is essential to utilize that cost efficiency. So it is not like that basically the low-band costs you close to nothing, and everything else is going to the rest. It is a balanced plan. It is a plan where we basically want to roll out the 3.5 gig and continue that one, but also basically make the 5G low-band available with the handsets availability when they are coming in Switzerland.

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Usman Ghazi, Joh. Berenberg, Gossler & Co. KG, Research Division – Analyst [32]

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Sorry, can I just follow-up — can I just follow-up maybe on the last one, sir. Is it that by the — by 2020, you expect low-band — 5G low-band to reach the 4G, 96% coverage that you have? That was one follow-up. And then the other follow-up was just 5G on mid-band. Do you see a rationale to go beyond 40% of the population on the 3.5 gigahertz?

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Uwe Schiller, Sunrise Communications Group AG – CFO [33]

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Well, on those 2 points, Usman, and also for commercial reasons, we will not talk about our ultimate targets. But we will, on low-band, get to almost the limits of what makes sense in 2020. On the mid-band or high-band rollout, if you want, well, it’s a millimeter wave, but it’s 3.5 gig. On the 3.5 gig, I think we have a very decent plan whether there’s more required afterwards, that could be the case. It must not be the case. But we will go to a point where I think we have — we are fulfilling our target to — on the Fixed Wireless Access side. If there’s more needed afterwards, I think it’s not that our CapEx is going to 0 afterwards. So we still have significant amount of CapEx at hand, and it will allow us to do that within that envelope thereafter.

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Stephan Gick;IR Manager, [34]

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Okay. This concludes today’s call. We will be tomorrow on a roadshow in Zürich, and next Wednesday in London. If you have further questions, don’t hesitate to contact us in the IR team. Thank you for your participation, and goodbye.

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André Krause, Sunrise Communications Group AG – CEO, a.i. Chief Consumer Officer & Member of Management Board [35]

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Thank you. Bye-bye.

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Uwe Schiller, Sunrise Communications Group AG – CFO [36]

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Thanks. Bye-bye.

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Operator [37]

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Ladies and gentlemen, the conference is now over. Thank you for choosing chorus call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.

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