Swisscom AG - ADR

Strong Q3 execution; guidance confirmed with improved cash flow - Group: Q3 revenue only -CHF 14m YoY (Switzerland -CHF 9m, Italy -CHF 9m, “essentially stable”), helped by moderate telco service decline. - Operating free cash flow (OFCF): CHF 1.79bn YTD, +CHF 184m YoY, supported by Switzerland + Italy (notably synergies). - FY2026 guidance confirmed: growing EBITDAaL and growing operating free cash flow. - Eugen’s final guidance update: - Revenue: trending toward lower end of the range (mainly Italy). - EBITDAaL: toward upper end. - CapEx: toward lower end. - OFCF: now expected above CHF 2.0bn (slight marginal improvement vs “~CHF 2.0bn”). - Leverage: hybrid bond pushed leverage below ~2.3x. - Good: cash generation is materially better YTD; profitability/cash flow trajectory is consistent with the strategy.

Switzerland: service decline stabilizing; cost savings beat target - Service revenue decline in Q3 Switzerland: -CHF 6m (similar to Q2; much better than Q1). - B2C in Q3: +CHF 4m revenue, with hardware up and service decline moderate. - B2B in Q3: service decline -CHF 12m (slightly better than Q2), partly offset by IT and SME pricing measures; ARPU slightly up (~CHF 36 vs CHF 35 prior quarter). - Cost savings: achieved CHF 61m in first 9 months, already exceeding full-year target CHF 50m; management expects “not much more” in Q4. - Bad/negative: Q3 EBITDA reported down due to adjustments (restructuring charge for new B2B setup + prior-year provision release effects). - Opportunity: quality leadership (see “surprising” bullet below) supports churn stabilization and upsell in security/AI.

Italy: integration on track; telco turnaround gradually materializing - Integration & synergies: EUR 99m synergies delivered in 9 months; total EUR 265m, with expectation to exceed EUR 300m by year-end; synergy run-rate already ~EUR 99m per quarter. - Brand consolidation decision: migrate Vodafone + Fastweb to Fastweb brand over coming years; relaunch planned H1 2027. - Telco stabilization: - Revenue: stable in Q3, but EUR -121m YTD (structurally lagging due to earlier quarters). - B2C telco service revenue Q3: -EUR 20m (improving vs earlier quarters: -EUR 55m in Q1, -EUR 35m in Q2). - B2B telco service revenue in Q3 almost stable (only -EUR 3m), helped by lower SME churn and redeeming large customers in corporate. - Synergy phase-out detail: synergies become weaker QoQ because MVNO migration largely completed in H2 last year. - Risk/challenge: wholesale margin headwinds (postbacks like Lyca-related impacts; wholesale turned negative YoY in Q3 as expected) and energy/indirect cost phasing.