Swisscom Earnings: Domestic Margins Contract and Preliminary Italy Outlook Uninspiring

Narrow-moat Swisscom reported mixed full-year results and a tepid preliminary outlook for 2025. Swiss revenue and EBITDA came in a touch behind company compiled consensus, declining 1.7% and 4.0% in 2024, respectively. The main reason for the decline is the continued pricing pressure at the lower end of the domestic market. Fastweb revenue grew ahead of consensus at 6.7% in 2024, but Swisscoms guidance for Italy in 2025, including acquired Vodafone Italia for the first time, was somewhat disappointing; flat revenue, with EBITDAaL and operating cash flow declining 8% and 20% at the midpoint, respectively. The downwardly revised cash flow figure is primarily due to increased integration-related capital expenditures expected in 2025. After incorporating these results, we make no change to our CHF 440 fair value estimate and view the shares as overvalued. We remind investors that Swisscom’s additional financial leverage (now standing at 2.4 times net debt to EBITDA) and the highly competitive nature of the Italian telecommunications market, which does not grow, add significant uncertainty to Swisscom.