Swisscom Earnings: Revenue Guidance Down on Strong Swiss Franc; Maintaining Our CHF 440 Fair Value

Swisscom SCMN is the leading telecom operator in Switzerland. The company has one of the highest market shares among European telecom operators while also charging high prices to customers. High prices have been maintained due to the overall health of the Swiss economy, a supportive regulatory environment, and lack of alternatives to Swisscom’s networks.

In the broadband market, Swisscom enjoys the network with the widest coverage. It covers the whole country with a market share above 50%. The Swiss broadband market has historically been very fragmented, which has allowed Swisscom to enjoy very high market share. Swisscom has no obligation to provide wholesale access to competitors to its fiber-to-the-home network, something we believe is an advantage and will support its competitive position in the long term. In 2019 Swiss regulators also allowed the merger of UPC and Sunrise without amendments, which has created a sizable competitor to Swisscom. Allowing the merger was positive for the market in our view, as the merged company now has higher market share, hence less incentive to compete on price. It also highlights how supportive the Swiss regulatory environment is.

In the mobile market Swisscom has around 60% market share, very high compared with other incumbent European operators. Switzerland has historically just had three mobile operators (with a combined market share of 95%) and very little presence of resellers and mobile virtual network operators, which has been supportive to prices. Regulators have never forced a fourth mobile operator onto the market.

Swisscom has never ventured too far from home, something we support as telecom operators are normally stronger in their home markets. It acquired Fastweb in Italy during 2007 for EUR 4 billion, and Swisscom has since grown the asset through network expansion and joint ventures with Telecom Italia.