Bart Morselt - Head, IR Urs Schaeppi - CEO Mario Rossi - CFO

Michael Bishop - RBC Vikram Karnany - UBS Nicolas Cote-Colisson - HSBC Luis Prota - Morgan Stanley Frederic Boulan - BofA Merrill Lynch Georgios Ierodiaconou - Citi Andreas Mueller - Zuercher Kantonalbank Jacques De Greling - Natixis Securities Usman Ghazi - Berenberg Bank Guy Peddy - Macquarie

This conversation will be recorded. Ladies and gentlemen good morning and welcome to the Swisscom first quarter results 2015 presented by Urs Schaeppi, Mario Rossi and Bart Morselt. Bart, the floor is yours.

Thank you and also good morning from my side. With me are Urs Schaeppi, CEO and Mario Rossi, CFO. The title of today, 'Up2date', basically refers to two chapters that Urs will present, the first one being an update on the commercial performance in the first quarter and how this ties in with the strategy and how we have executed also in our portfolio to fill in on our strategic goals. And secondly an operational update on Q1 to show that the market and Swisscom grows fast but continue to develop robustly. Mario will then takeover to discuss underlying revenue and margin dynamics before finishing with 2015 guidance. Thereafter there will be Q&A which will entirely operated by the operator directly. And with I would like now to handover to Urs to start his part of the presentation. Thank you Urs.

Good morning ladies and gentlemen, we had a strong first quarter despite also a big market dynamic in Switzerland. If you go to Slide 4 you see how we execute on our strategy. On the fixed business we had some innovation, we improved our bundling offering, we introduced a second brand, Wingo, I will come later to it. On the mobile business we improved or strengthened our Infinity offering. In the internet service business we get the agreement from the antitrust body to make the merge between local and search. And we were also able to strengthen our positioning in the B2 billion market especially in the banking and health sectors. So we have also from the executive level quite an intensive and good quarter. If you go to Slide 5 there you see what we have done in our fixed bundles. So the fixed bundling business is still a good growing business and to position ourselves in the market to strengthen our positioning and also get a better upselling proposition we increased the speed on our Vivo offering, triple-play offering. And you see that the high level product has a speed of 1 gigabit per second. But also on the TV side we made improvements. We have steps, our TV project is quite like an app so we make small improvement in the short-term and in April we introduced new functionality, for example the recording hours, they are now at 1,200 hours, recording hours, that means approximately six times more than the competition in the cable market. We also get awards on our TV product, and also development of our TV products is very successful, we have more than 440,000 customers on our new TV product. So good development in the bundling business. If you go on Slide 6, some information on our new second brand Wingo. This is a brand for, let's say for the market, digital natives. A more no-frills brand where you get performing broadband products for a good price. And you see the offering is for CHF75 you get 250 megabits download speed and then as options you can have also a TV product, the TV product with 150 channels and the voice is charged at pay per use. So this brand we introduced in the market because the market is becoming me mature in Switzerland and we are convinced that with this online offering, online-only offering, we will be able to increase our market share. This is an offering only in the fiber footprint, that means in 77 cities in Switzerland. If you go on Slide 7, then you see what we have done on our Infinity offerings. So shortly said we introduced or bundled in the roaming for Europe, so that means in the future depending on the tariff plan on Infinity you have days where you can use roaming in Europe in a kind of flat rate. And on the lower tariffs you have 30 days, in the upper tariffs, Infinity L 100 days, and on XL you can roam the whole year in Europe which is included. Why have we done this? Because we see a strong development in the market. The roaming business as it is today in our view is really not sustainable, the prices are in an area, or the transparency of the prices, are in an area where our customers switch off their handsets if they go abroad. And therefore we want to give security to our customers that they really can use the phone abroad. That's one point. The other point is that we want to transfer the roaming business in a more flat rate business, so in a [indiscernible] business and we are also convinced that with this move we are able to improve the positioning of Infinity and to keep the churn rate low, and even get better net-adds with this offering. The launch was very successful, after only two weeks we had more than 100,000 customers on this new tariff plan. If you go on Slide 8 then you see some more information about our online advertising space. With the merge of local and search we will be able to have a joint venture where we can compete against global companies like Google or Facebook in the advertising business mainly for small and medium enterprises in Switzerland. This is a business which we are convinced that we can increase the EBITDA through the merge. We expect an EBITDA increase of CHF20 million to CHF30 million mid-term and overall we will be able to have an EBITDA, a total EBITDA of CHF90 million per annum. So we are happy that the antitrust body gave us the green light to make this merge and to develop our advertising business in Switzerland. On Slide 9 you see the progress we made in our vertical strategy. To improve our position in the banking sector we get a 9% stake of Finnova, Finnova is a software company located in Switzerland in the banking business. And through this acquisition, or through this stake in Finnova, we will be able to increase our innovation power in the banking segment. But we also increased our positioning in the vertical market healthcare. Through the acquisition of H-Net we will be able to increase or to improve our value proposition in the healthcare market. A small acquisition but it will help us to really have a USP. Then on some companies we made and exit because they are not strategic for us. And this is Swisscom Hospitality Services which we sold to a Swedish company. And Alphapay which we sold to Otto Group, a German company. If you go on Slide 10 you'll see what are the developments of our key financials. So we had a solid first quarter, revenue is increased by CHF72 million year-on-year, Mario will come later to it. But also the EBITDA on an adjusted basis has increased if you take out special effects, mainly financial and currency effects, then you see that our EBITDA increased by CHF25 million on a year-on-year basis, though we have a solid operational performance in Q1. The free cash flow on a comparable base is slightly lower, CHF24 million. The reason behind this is higher CapEx because we have this investment in our fiber and also broadband metric in Switzerland So overall a good first quarter and also some words to the changes in our market. So the IPO of Sunrise was certainly a successful one and with Orange we have now also more visibility on the strategy of Orange in the Swiss market, the name is now sold. And if you look to the product offering and also to the positioning we see that they have a premium position in the Swiss market and therefore I think that the competitive dynamic in the next months will not totally change, so we will have quite stable conditions in Switzerland. And we are, certainly we have done all the measures to keep our position in the market. Let me give you some more details about the complex operational performance. And if you go to Slide 12 you will see that we were able to outperform in the wireless market. We have a total customer base at the end of Q1 of 6.5 million mobile subscribers, this is above the average market growth. And if you look to the market shares in our postpaid business we have the figures of our competitors from Q4, then you can see we had a strong development of net-adds in 2014 and in the fourth quarter 2014 we had a market share, a net-add market share, of 65%. Also the net-adds in Q1 2015 are plus 29,000 postpaid customers so, let's say, a bit lower than in Q4 but still on a good level, also if you compare it to 2014. If you go on Slide 13 then you see the development of Infinity and also some change in our churn. First to Infinity. Despite a flattening growth trend in Infinity we had still a net-adds acquisition in Q1 of Infinity of about 50,000 net-adds postpaid. And this leads to a total penetration of Infinity in our postpaid customer base of 65%. So it shows that we are still able to grow with Infinity. If you go to the churn figures then you see that we have a stable churn evolution, so very low churn figures postpaid and, you see the blue line, dotted blue line strongly below 10% growth in the churn figures, so very safe and good churn figures. If you go on the next slide, Slide 14, you will see some figures about the broadband market, so we are performing well in the broadband market. If you look to the subscriber base, retail and wholesale, you can see that we have the market share in the broadband market which is approximately two-thirds of the market, so we have a strong position in the broadband market. Our retail business in broadband is growing on a year-on-year basis 4.1%, so approximately in line with the whole market evolution. If you look to the net-adds in the broadband business you see that we have an increase of broadband subscription in the first quarter of 18,000 customers, so a solid growth. On the market share we see also a good picture. In 2014 we had an average market share of the net-adds of 54% in the retail market, so a solid performance also on broadband. Slide 15 shows you the development in our TV. The TV business is extremely important for us and we are happy that we have a solid business and an increasing market share in our TV business. Subscriptions of TV are now at 1.2 million, so that means we had an increase of subscription of 14% and in Q1 2015 we had an increase of 3%, so a good development also in the first quarter. And this leads to an overall market share in the TV business in 2014 of 26% and this an increase in percentage points of 3%. So you see that we are really successful with our TV products. The net-adds are also strong, in 2014 the average net-add market share was above 100%, 125%. We believe that we can further grow on TV and in two to three years I'm convinced that we will have a customer base of 1.5 million TV customers. On Slide 16 you will see the development of our fixed business, and you see that we are able to increase our revenue generating units in the fixed line business, mainly because of the growing broadband business and TV business. The voice line business is declining by 4% but TV and broadband is growing and therefore we are able to increase our revenue generating units fixed line by 1.8%. If you look to the product level of the revenue generating units you see the success of the bundling business. And we have a growth in our bundling business of 19% in the last 10 quarters and it shows the strong bundling proposition which Swisscom had. TV and triple-play offering is really crucial for our competitive positioning in the wireline market. If you go to Slide 17 then you see some figures about the TV penetration in the ultra-broadband or in the broadband customer base, it's interesting that 63% of our broadband customer base had a TV product. So here also the success of the bundling business you can see. Some information about our KPIs on Fiber To The Home, that's the chart below on Page 17. You see that today we have homes passed, that means fiber to the building but not with in-house cabling, so not ready for service, above which is approximately 900,000 customers. And from this 900,000 customers 38% have really a ready-for-service product. And then you can see that half of this 38% of customers are actually fiber customers. So we are really taking up in the penetration of the active customer base in the fiber footprint. So we are happy with the development in our broadband business. And coming to Slide 18 there you see the revenue generating growth and this is unbroken driven mainly by the bundling. And we have overall a revenue generating subscriber base of 12.4 million. And you see also on the chart below that a lot of customers are moving to bundles, more than 30% of our revenue generating units are in bundles, and the main driver behind it is triple-play. So let me come to some figures in Italy. On Slide 19 you see the development in Italy, we had a strong first quarter in Italy. 50% of the revenue comes out of the residential business and 50% of the revenue is coming from corporate. And you see that our estimation for our net-adds market shares in Italy for Q1 is 44%, so a strong positioning in the acquisition business and this leads to a subscriber base growth of 7%. But also the enterprise business we are on a good track, the revenues in the enterprise business increased by 7.9% year-on-year. And what is interesting but also good is that we were able to over proportionally our growth in the ICT business, cloud business and security business. The growth in this value-added service business is 22%. Overall we have also an increased gross margin in our Italian business. On Slide 20 we see some information about our ultra-broadband business. The investment in Fiber To The Street pays out. You see that with the investment in Fiber To The Street we are able to increase our speed on the network to 100 megabits or on average to 80 megabits per second. And the sales in the region where we have Fiber To The Street are strongly above the sales in areas where we have only LLU. And also to the Net Promoter Score on the Fiber To The Street is much higher, 17 percentage points better Net Promoter Score and 40% lower churn. So you see good operational figures on ultra-broadband. And if you make the calculation on Page 21 what does this mean to the lifetime value of a customer? You see that a lifetime value of a Fiber To the Street customer in Italy is the double of the lifetime value of a local loop, of a LLU customer, because we have a lower churn, because we have lower direct costs and an increased customer base. So we are happy with the development in the first quarter of Fastweb and I would like to hand over now to Mario for the financial figures.

Thank you. Some words on the financial update from my side. On this slide we see revenue dynamics. Revenue for the group went up by CHF72 million or 2.6% year-over-year. We have two exceptionals, the M&A activities, that's the impact of the purchase of Veltigroup and the takeover of PubliGroupe, that brings revenues of CHF44 million so far with a limited EBITDA contribution. And the second exceptional is the weaker euro took away CHF55 million of the revenue. Without exceptionals we were able to increase revenue by 2.9% and I think that we have three key takeaways. One, the increase in bundled revenues in Switzerland, CHF91 million, over compensated the decrease in the single-play revenue, which is CHF65 million. Two, the service revenue retail increased by CHF32 million, that's high margin service revenue, mainly as a result of the increasing number of subscribers. Total ARPUs increased by 1.9%. And three, Fastweb was able to increase revenues on a like-for-like basis of CHF40 million and all three segments contributed to this increase in revenues, wholesale, enterprise and consumer. On the next slide you see that in Switzerland we increased revenues by CHF53 million and there we see we have a strong performance in the residential segment which increased service revenue by CHF33 million. That's, as I mentioned, due to the increasing number of RGUs compared to prior year. The segment enterprise and SME delivered more-or-less a flat revenue development which is, in our opinion, a very good performance regarding the fact that the customers in the segment are operating in an increasingly competitive environment and we feel price pressure in these two segments. Coming to the EBITDA also there, we have two exceptionals, one is the higher pension costs due to higher IAS 19, CHF20 million non-cash higher pension contribution. And, again, the currency impact on the translation of the Fastweb EBITDA which has a negative impact of CHF35 million on Group EBITDA. I would like to go directly to the breakdown by segments on Page 26. Swisscom Switzerland overall increased the EBITDA by CHF15 million year-over-year, as I mentioned, with a very strong performance in the residential segment. The EBITDA increase is driven by higher service revenue. Higher costs related on the other side to customer retention and indirect costs, we that increasing costs on customer support and marketing. This partially compensated the positive revenue effect. Of course the higher hardware revenue has had no impact on the EBITDA because it's a very lower margin business. The decline of CHF9 million in the SME segment is driven by higher costs. These higher costs are related to customer retention as well and to projects cost. Here we have projects mainly in the area of aligning our product portfolio to be prepared for the [whole IP] migration. Enterprise customers, CHF4 million below prior year, as I mentioned stable revenue and we have a change in revenue mix which led to a slight decrease of the margin. Fastweb, we can show an EBITDA which is CHF13 million better than in prior year, revenue driven, and the increase is, let's say, remarkable, 11% on an EBITDA level. Coming to the net result, below the EBITDA depreciation and amortization remained more-or-less stable, we have higher depreciation in Swisscom Switzerland which is compensated by lower depreciation in Fastweb due to the currency translation. We come to an EBIT of CHF444 million, (sic - see slide 27 "CHF544 million") or 18.8%. Net interest CHF47 million, there we felt the benefit from very variable refinancing conditions. The other financial result is minus CHF57 million, this has two main reasons. We have to make, to book a fair value adjustment of old and long running interest rate swaps that had an impact of CHF25 million and then we had to evaluate our hedging activities for the dollar and the euro that had an impact of CHF27 million. This impact is because of the decision of the Swiss National Bank end of January. Income taxes of CHF94 million show a tax rate of 21% which is in line with our expected long term tax rate. And that brings us to a slightly lower net income of CHF351 million in the first quarter. On the CapEx side, we have higher CapEx in Switzerland, CHF46 million higher than last year, that's driven by the expansion of the ultra-broadband footprint in Switzerland, so the FTTS rollout is now running at full steam. In CapEx we had slightly higher CapEx compared to 2014, that has two reasons. One is customer driven, we have a higher number of new customers, the second is phasing in the FTTS rollout. For the full year the CapEx [indiscernible] level will be below 2014. I'm afraid there's not much to say on the free cash flow, it's more-or-less the same evolutions like 2014, it remains stable compared to 2014. Then if you go on the next slide on the new segment reporting. So we delivered the restated 2014 figures on April 23, just a few words on the changes. The main change is the integration of Swisscom IT Services into Swisscom Switzerland, basically it's a combination of the IT Service and the former division corporate business into the new enterprise customers. To be mentioned in the transfer of IT and billing for large accounts into IT networks and innovation. Then Swisscom Directories with local.ch is located new to the division SME, last year, or formerly is was in the division residential. And then we had some adjustment with the allocation of centralized marketing unit and real estate [indiscernible]. If you have any questions on the restatements investor relations is happy to explain you all the restatements. Then on the financing side we [tapped] the Swiss domestic bond market at the end of Q1 with two tranches of a total CHF400 million. The 0.25% group bond in the eight year tenor was the lowest group bond we ever did. And the 20 year maturity is the longest bond we even achieved by Swisscom. The transaction was part of our refinancing program 2015 and we plan to do further transactions at the Swiss and/or the Eurobond market. We also have below an overview of the current financing mix and the maturity profile and I think the highest share of fixed interest of 80% brings us in a very favorable situation. I come to the outlook. So after Q1 we confirm our guidance. We leave the exchange rate of [1.1] for the Swiss franc/euro parity, I think we can change this after we have more visibility on the evolution of the exchange rate after Q2. But overall we feel confident that we will meet our targets in 2015. With that I would like to conclude the presentation and hand over to start the Q&A to the operator.

Thank you, sir. [Operator Instructions] First question Michael Bishop.

Hi, good morning, it's Michael Bishop from RBC. Just a couple of questions please. Firstly, on the line losses, it seems to be sequentially a touch higher and could you give us some commentary as to what you think is driving that because clearly the RGU growth and the triple play subscriber additions are still very strong and secondly, just looking at the SEC and the SRC cost, they seem stable in the quarter on a year-on-year basis. So given the changes in the market recently, can we expect this trend to continue? And then thirdly, just on the Swiss Fiber roll out, could you give us -- I think you have given this in the past, just an indication of what your market share of growth adds in fiber areas is versus outside of the fiber areas? Thank you very much.

First, to the line losses, in wireline business, so as you mentioned, we are able to increase our revenue churn rate, right? The unit in the wireline business. Overall, we have this small growth there. On the other side, what we seem to [indiscernible] is that their market is becoming more mature and we have the [substitution] in the fixed telephony business by the mobile business and by IP telephony. So that leads to our - to this decrease in the line losses. And the -- subscriber acquisition cost, we had high subscriber acquisition cost in Q4 2014, mainly driven by iPhone 6 Launch and we have now slightly decreasing subscriber acquisition cost and we think that we will be able to keep them approximately on the level, but the subscriber acquisition costs are always driven by the competitive dynamic and if we see that the -- we are not good position, we will adopt the [drops] that I think that the market rate will stay quite stable in the next month. Mario, maybe to the home owner.

Yes, as we said, we don’t have the [normal procedure] to [indiscernible] to get them with the utility -- the competition of the utilities, and I think that the important slides, Urs, presented in his presentation on slide 17, is [indiscernible] and there you see that we can increase the growth of our share of fiber connection in the footprint and in the host connection and currently, you see about between 1,500 and 2,000 fiber connections per week that means that this trend will continue in 2015. So right now, we are trying to [quantify] this evolution of the fiber business. And what we also can say is that actually, in the fiber footprint, the acquisition of really new customers is bigger than in the normal footprint so we are able to gain a big market share in the fiber footprint.

Next question is from Vikram Karnany of UBS.

Yes, hi, thanks. Vikram from UBS. So a couple of questions. Firstly on mobile pricing, you know, do you think the infinity propositions are really competitive in the high end segment of the market and considering that you raised prices recently so the XL offers, where you included more roaming but at the same time, you know, competition have followed the move in our roaming but they broadly less their pricing and changed also have improved network quality. So I just want to understand your thinking around your pricing as such and related to that, you know, if you could update us on the progress you have made with those M-Budget offers at the low end of the market, is it changing your thinking around [Sim only] or are you still thinking you know, the market will be subsidy driven? And the second question with the -- on the enterprise segment, you know, the ARPU trend seem to have worsened slightly in Q1, can you update us on the pressure that you are seeing in the corporate segment as more on repricing of the competition over there? Thanks.

To the first question, our position in Infinity mainly on the high end and that means Infinity XL, and yes, the [strong] proposition in the high end is attractive and the real first to market -- you know, first to market if you are competitive on the high end and I think that we are competitive there. And so we don’t have it in our plans to make changes on the high end Infinity and also if I look to the net adds we have on the Infinity XL in the last week and so we are quite satisfied. But we will observe it. And then the second point, it is M-Budget 1, that means our MVNO offering is -- it is quite aggressive offering and it is not our intention to really be price aggressive with the MVNO. It is not our intention because the market in Switzerland is still looking for quality and that is our strategy and the development of M-Budget 1 is actually not very impressive. And so we will think about the positioning of M-Budget 1 and I think we will certainly not increase that activity of this product. And then the last point is the development of the ARPU in our corporate business. What we see actually is the connectivity business in the enterprise segment is not -- we have -- let us say a bit less pressure on the connectivity business at last year but with the foreign exchange rate, we have certainly -- customers which are coming into work and say now, where we should talk about prices. And so the market will stay competitive in the enterprise business. And maybe to add on that, the number of sales in the enterprise segment went up by 7% and the ARPU at a blended wireless ARPU went down by 12% and so one reason is that I don’t mention the price pressure and the second reason is the mix of the new sims area, the more data calls and M2 million calls. That is the impact on the ARPU.

Next question Nicolas Cote-Colisson of HSBC. Nicolas Cote-Colisson: Yes, hello. Nicolas from HSBC. Two questions, one on Switzerland and one on Italy. On Switzerland, back to your strategy regarding fiber to the home, it looks like you are testing G.fast at the present and I was wondering if you could put a [halt] on your FTTH deployment and also if you are seeing any [neutral price] competition coming from the co-investor to fiber and so Italy, we heard from news report that there was a meeting between the Italian Prime Minister and some CEOs, including Fastweb to discuss the government plan to accelerate broadband. Any insight on that? How do you see the broadband market shaping up in the near future? And is Fastweb interested in being a shareholder of Metroweb beyond Milan?

Okay, maybe I am -- to Italy first. Yes, there are a lot of talks about accelerating the ultra-broadband network in Italy and that is my personal view. I don’t think that there will be really a big changes in the next month on this level. We have [talks] with our investing in ultra-broadband. We will have a footprint of 7.5 million ultra-broadband connections at the end of the next year which is 30%. So we are investing in ultra-broadband but I don’t think that from the government side and from the [firm] side, there will be big dynamics in the next month. On Metroweb, we have a stake in Metroweb and we are satisfied with the stake in Metroweb. And on the fiber to the home business in Switzerland, we don’t see too much competition from the utilities on fiber to the home, we have -- or we are quite satisfied with our net adds in the fiber to the home footprint. Nicolas Cote-Colisson: And about G.fast, could it put a [halt] on your FTTH deployment?

Yes, the G.fast, we are [piloting] now G.fast and the intention is to deploy it in 2016. And then the pilot which we do today is really to see if we are able to get speed of 300 to 500 megabits per second on our fiber to the [street] network. So that is the intention, we are still in a very early phase with G.fast and we are actually the first operator in Europe which is piloting this technology. But we are convinced that there is a potential to have a fast ultra-broadband footprint in Switzerland.

Thank you Nicolas. Luis Prota, next question please.

Yes, hello. It's Luis Prota from Morgan Stanley. Three quick questions please. First is on the domestic revenues, my sense is that they were above the expectations. I just wanted to confirm whether that was driven by hardware sales mostly and if you could confirm why it was so strong this quarter. The second question is on the verticals and the acquisitions and divestments you made and whether you could give us some insight or order of magnitude on the payment and proceeds you are expecting from this acquisitions, with Finnova, H-Net and Hospitality. And finally, could you comment on the new tariff from Orange and competitive dynamics could be useful. Thank you.

On the domestic revenue, so the increase in [hardware] revenues was only 10 million and the loss that we had more higher end [interest] sold, and that [rate] was as we explained, created a strong performance in the residential segment, that is mainly because of the increase in number of revenue generating units. And then on the verticals that -- the sale of the Swisscom Hospitality and Alphapay debt collection company, we agreed with the purchase of that -- we don’t disclose the price but you can expect the positive impact on the financial line in Q2 on -- if you consider that [low number].

Modest.

Modest, yes. A modest number. And then in our -- you know, the [9%] that is it depends on the dividend payout of that will be very modest number and on H-Net, you know, we always like this [group] because in health, there are [small sets] especially of [H-Net] that small [ladder] acquisitions which brings up [tough runs] and [indiscernible] ahead in our world to [indiscernible] and also there, the impact on the revenues net gain is a couple of million [normal].

Then to the competitive dynamic with the launch of [SOUL] and so it is too early to say, but if you look to the positioning of [SOUL] to the offerings they announced, I think there will be no really [demand] to change in the market but we have to look to it, Swisscom is well prepared to keep the market position and I don’t think that we will have a big change in the next month.

Next question Frederic Boulan.

Hi there. It's Frederic Boulan from Bank of America. A couple of questions. Firstly, to follow up on the enterprise segment, can you discuss if you are seeing more pressure intended from other operators to [Sunrise] as you are mentioning your buyers asking for price discounts and the current environment. And secondly, on Fastweb, we had a very good [share of that] in Q1, if you can comment on the seasonality of that trend and in particular, with [STI and Strada] and a follow up on the good Q1 as well here on the EBITDA level. Your outlook, I think, is stable for the year and is the growth so far this year, sustainable or this -- should be aware of a specific item that would impact performance in the coming quarters? Thank you very much.

Maybe to the first question, enterprise and Fastweb, and outlook, and maybe Mario will answer it. And the development in the enterprise market in Switzerland, what we see from [Sunrise] is that they are on some customers, quite aggressive on the pricing side. And so they try to get market share in the corporate market but really actually limited on some specific customers, our churn rate in the core business are really low and we are also able to make some [rate back] but the competition is -- in enterprise was increased in the first quarter. On the pricing side, the customers which are asking for discounts is also not really broad and there we have some customers on it but it is really not a big factor. The main reason why the ARPU is going down, that was the reason of Mario, because we have some machine to machine [indiscernible] and this leads to lower ARPU in the corporate segment.

And on Fastweb, if you really see that as you mentioned, the [indiscernible] paid off as [indiscernible] explained, many see a strong performance in the corporate segment going on and that means that we expect a successful 2015 for Fastweb meaning higher EBITDA and compared to 2014 lower CapEx compared to prior year and producing form the first time, free cash flow.

Next question Georgios Ierodiaconou.

Hi, everyone. I just had a couple of questions. The first one is around the new offers, the new Vivo packages that you are launching. Is it possible to give us an idea of the mix you have currently if you can give that much granularity, you can give us an idea of the ARPU that you have now in Vivo packages so we can understand what kind of ARPU you can deliver. And perhaps a second question around the outlook following from the question asked previously, in your comments, you said that it looks like Orange is going to remain a premium brand and not much with changing the market. When you give your guidance a couple of months ago, did you expect that to be the case or were you a bit concerned at the time. Thank you

Okay, so we don’t disclose the mix of [indiscernible] our bundling offering but what we can say is actually that we are able to make small upsells in our Vivo portfolio, in the Franc, the Swiss Franc area, so we are -- but we are able to have smaller upsells on Vivo. To the second point, [sold], yes that is clear -- in Q4, we were -- we had more uncertainties on the competitive dynamic but it was always my message that France is not Switzerland, the conditions of Orange in Switzerland is another one than [to offer] for Italian -- in France, and so that is why we were a bit also relaxed but I am happy to see that they go for the [indiscernible] I think that is the right thing because Switzerland is estimating the quality of [indiscernible].

Maybe an additional remark, just to the Vivo ARPU on side 36, you see the ARPU - the revenue generating unit and you see on the line [we replaced] that is mostly sold in the Vivo packages and ARPU for revenue generating unit -- the [underlying drawback] of CHF48, that is an increase of CHF2 to CHF3 compared to Q1 2014. And for the full year 2014, the underlying revenue -- the revenue for the underlying product is 47 so you -- as was mentioned, you see the impact on the ARPU is a slight increase with sort of this mix and [upselling] the [indiscernible].

If I could follow up on your comments on [SOUL], I mean what I was trying to get to is in February when you gave a guidance, did you leave yourselves with some room just in case, they ended up being a bit more aggressive?

You know, the aggressiveness of - usually in telecommunications, that is a short-term impact and s that was in our opinion, more mid-term risk. So if you think if they announced in April, and would have announced a very aggressive pricing in April on revenue and EBITDA most probably, you don’t see a huge impact in the remaining three quarters. The risk would have been for 2016 and onwards.

And Andreas Mueller is next.

Yes, good morning. I have two questions. One on roaming. Can you give us an indication on what is the current contribution in Swiss Francs on the installed Infinity page and what do you expect it to be in one or two years, certainly going down this contribution. The second question will be the nine percent stake in Finnova, do you stay agnostic to the banking facing the customer have installed or in other words, is the -- all right the new customers mainly around the Finnova ecosystem or can you provide basically also, you know, services for other banks in the future.

Okay, on the development on roaming. So we made now a big step in the roaming business. And I think that we have now for you, really a solid solution that there will be no big price moves anymore for Europe. And so we will have a limited -- maybe a limited dynamic in some of the countries - but shortly said, I think that the decline of our contribution margin is really flattening. And so we had it this year, this is in our guidance, but now, it is flattening. The second point is Finnova -- we will be a service provide proposals for both [indiscernible] for [Avaloq] and Finnova. But in Finnova, with Finnova, we have the possibility to let's say -- to have more influence on the innovation roadmap and the -- at the end, it is the decision of the customer if you decide for Finnova or Avaloq. But we will support both solutions.

Next is Jacques De Greling.

Good morning. First, how could you -- could you give us a flavor on what you expect in terms of handset sales in the coming quarters, i.e., whether or not iPhone 6 was part of the slight increase in the quarter? The second thing, regarding the pension, could you confirm that the pension liability have increased by CHF500 million? Thank you.

Mario will take the pension topic, to the handset sales, what we see actually today is that with the new Samsung offering, Samsung S6 is really a very successful product and Samsung is gaining market share in Switzerland. And on the ARPU side, I don’t think that the -- we will have a strong increase on the handset sales in 2Q, then it depends on the new product offering of the -- the manufacturer. It doesn’t look that the iPhone or that Apple will bring in new products in the next month, so at Samsung, we have some dynamic on the portfolio and I think at Samsung, we will have quite a good performance in the Swiss market in the next month.

On the [net equity] we have two [practical] impact, one is the [feed check] conflict of translation [indiscernible] of Fastweb with the weak euro that impacted 194 million and the pension impact is 460 million, the reason is we had to lower, again, the discount rate for calculating our pension liabilities, and these rates, it was the end of 2014, 1.1% and the end of Q1 is now 0.87% so it is technically maybe [able] to mention that on the [free flow] the pension fund which is a separate legal entity is fully funded, the coverage ratio is about 110%.

We have the next question coming from Usman Ghazi.

Good morning, gentlemen. Thanks for taking my question. I have two questions, please. The first one was just on the Fastweb and the corporate segment, you know, I can see that the revenues really picked up in the second half of last year. And I wanted to make sure that this is not, you know, one -- kind of a contract that is now annualizing and we should expect the run rate to slow in the second half of 2015. That is the first question. The second question was just on mobile, you mentioned that post the Infinity Plus launch, you have seen 100,000 customers in those tariffs, but in the first two weeks, I just wanted to understand if you have actually -- if these are actually migrations or have you seen your net adds, run rate, accelerate post that launch? And then the third question was just on the Fiber wholesale pricing from the utilities and [I expect] Q4 as also you have mentioned that you did those deal with [Sunrise] because you were afraid that the utilities might [down] pricing wholesale fiber pricing? Are you seeing any signs of that right now or are things quite stable? Thank you.

To Fastweb, yes, they have a good development of the revenue side, it is not a one off, it is not one deal, if you look to the pipeline also and the order intake, in the corporate business of Fastweb, it is quite solid so it is not a onetime effect. Then on our Infinity plan --Plus plans, the majority of the new customers are migration, but we see and that is a good thing, we see also new customer on it. So we were able to get a bit more customers and also to increase a bit the migration pre to postpaid. So also a positive impact on the [impact]. And on the [site to the roaming] we don’t see too much dynamic on the pricing side on the [site to the roaming] from the other wholesale providers and a deal which was done with Sunrise was also done to be competitive against the cable operator.

There’re actually no further questions [Operator Instructions]. There is a next question coming from Guy Peddy.

Yes, good morning, Urs. Just a quick question on Fastweb firstly, the business model this year was showing for a good growth for all the EBITDA you are generating is effectively going to go into CapEx. And so do you think you can actually generate sufficient scale in that asset to make a long--term return because clearly, it is probably several years away before we are going to get close to covering your cost of capital? Another secondary point, you did mention earlier a little bit about the competitive environment with a change in ownership of Orange and I just wondered if there had been anything else from Sunrise's perspective that we should be aware of or your comments referring to the entire market not really changing discernibly so far in 2015? Thank you.

Maybe Mario can go to the Fastweb CapEx and --

Okay, as I mentioned earlier, the CapEx in Q1, they are higher compared to the prior year and because of two reasons, the [flat pricing] of the FTTH rollout and some higher cost related to new customers. If I look at our forecast for the full year, I think we are now at the inflection point where we see the increasing EBITDA and low CapEx, that means that Fastweb has now reached scale in which it can produce healthy cash flows and then as we mentioned several times in 2015 is the year of growth for Fastweb to grow, we have scale, and reach the inflection point.

Good, then to the market dynamic in Switzerland, what we see actually is that the competition in Switzerland is really turning to a more quality oriented competition. And Sunrise has the strategy which is going more for value and they make investments in the network, [SOUL] has a quite similar strategy. The competition is on a quality level, the competition is more dynamic than in 2014. That is clear. But I think it is in a stable environment and we at Swisscom, we make the moves to be in a good position -- so I am quite confident that we will be strong in the market.

Thank you, sir [Operator Instructions]. Mr. Georgios Ierodiaconou again.

Just a quick follow up. Is it possible - I remember last year when you launched the Cloud TV service, I believe part of the cost of replacing set top boxes is taken as subscriber retention cost. Is it possible to give us an idea of how much it cost you last year on the migration from the normal to a cloud TV for your base link?

The set top box on the TV business is [indiscernible] our CapEx, they are booked as CapEx.

So there was no impact on the [SRC] from the Cloud TV launch?

You are right, of course, some commissions to [dealers] of the set top box is booked as CapEx and the commission to [dealers] in the TV business is not material, a couple of million.

As there are no further questions, I would like now to turn over back to you, sirs.

All right, well, ladies and gentlemen, thank you for your time and your interest to questions. If there is anything else, feel free to ask us at investor relations. Our contact details are on the last slide.