Swiss operator Sunrise said that its service revenues grew by 3.1 percent in Q2 as a result of an increase in the number of subscriptions for mobile postpaid, TV and internet, and B2B revenue growth. However, total revenues fell by 1.7 percent year-on-year to CHF 455 million, due to reduced hubbing and mobile hardware sales, both carrying low profitability.
Sunrise expects revenues between CHF 1.8-1.9 billion in 2019. It is tightening its adjusted EBITDA guidance range from CHF 613- 628 million to CHF 618-628 million. This guidance refers to the standalone business and does not yet include the effects of IFRS 16. The operator confirmed plans for capex of CHF 420-460 million this year and expects to propose a dividend in the range of CHF 4.35-4.45 per share for the fiscal year 2019.
In Q2, Sunrise added 40,300 postpaid subscribers compared to 30,300 in the same period last year. This strong performance was supported in particular by B2B customers wins (including TCS and The Global Fund). Sunrise grew net new mobile postpaid customers by 9.5 percent year-on-year, up from growth of 9.0 percent in the previous quarter.
The mobile prepaid customer base decreased year-on-year as customers continued to migrate to postpaid tariffs. Internet and TV subscribers rose by 9.4 percent and 14.8 percent respectively. The increases were supported by 2-4P bundle offers, attractive TV content including ‘Netflix’, ‘Sky Sports’ and ‘Sky Show’, and a focus on service and promotions.
Adjusted EBITDA increased by 3.4 percent to CHF 155 million, while net income in Q2 slightly improved to CHF 27 million. Gross profit rose by 2.6 percent year-on-year to CHF 311 million thanks to service revenue growth. Service gross margin decreased slightly, mainly due to revenue mix effects. Adjusted opex increased by 1.8 percent as a result of variable onboarding and operational momentum costs, driving service revenue growth.
Equity free cash flow decreased from CHF 33 million to negative CHF 29 million in Q2 as a result of the company’s CHF 91 million investment in the 5G spectrum. Net debt saw an increase to CHF 1.6 billion from CHF 1.4 billion in Q1, driven by dividend and spectrum payments. Pro forma IFRS 16 net debt stood at 2.49x adjusted EBITDA. Excluding IFRS 16, the ratio amounted to 2.24x, a year-on-year increase from 2.19x, driven by spectrum payment.
Sunrise also increased its forecast for the total annual synergy run rate from the planned acquisition of UPC Switzerland, from CHF 235 million to CHF 280 million. This includes CHF 230 million of cost and capex synergies to be achieved by 2023 compared to CHF 190 million by 2022 calculated previously, and CHF 50 million of revenue synergies to be achieved by 2023 (previously CHF 45 million by 2023). One-off integration costs are expected to increase from CHF 140-150 million to CHF 230-250 million in order to achieve the higher synergies.
