Swiss operator Sunrise said that its profits and underlying service revenues increased in the third quarter and maintained its full-year outlook. The company also confirmed that it's terminated the agreement with Liberty Global to acquire UPC Switzerland, triggering a payment of CHF 50 million to the seller.
Quarterly service revenues, excluding hubbing and hardware, rose by 2 percent to CHF 393 million thanks to mobile postpaid, internet, TV and B2B revenue growth. This, however, represents a slowdown year-on-year compared with a 3.1 percent growth in Q2 2019, primarily due to project-driven 'Integration' business. The rise in service revenue was partly offset by reduced hubbing and mobile hardware sales, which both carry low profitability.
For the fiscal year 2019, Sunrise continues to expect revenue between CHF 1.86-1.90 billion and adjusted EBITDA at CHF 618-628 million. This guidance does not yet include the effects of IFRS 16. Capex will be in the range of CHF 420-460 million. Sunrise expects to propose a dividend in the range of CHF 4.35-4.45 per share for 2019.
In Q3, its total revenues, including IFRS 16, increased by 1 percent to CHF 474 million compared with CHF 469 million in the same period last year, excluding IFRS 16. Revenues in the mobile service increased by 1.3 percent to CHF 325 million. Landline service revenues fell by 5.7 percent in Q3 this year to CHF 72 million and landline internet revenues were up by 6.8 percent to CHF 76 million in the period.
Gross profits increased by 1.9 percent to CHF 316 million compared with CHF 310 million in Q3 last year, due to service revenue growth, while service gross margin decreased slightly, mainly due to promotions and a high level of roaming use by customers. EBITDA jumped by 13 percent to CHF 175 million, adjusted EBITDA by 9.4 percent to CHF 173 million and net income by 51.7 percent to CHF 48 million in Q3.
Equity free cash flow rose by 52 percent to CHF 88 million this quarter from CHF 58 million one year ago, as a result of EBITDA growth, different capex and NWC seasonality.
Sunrise added 41,400 mobile postpaid customers in Q3 this year to reach a total of 1.85 million. The number of mobile prepaid customers decreased by 12.7 percent to 591,000 in Q3 compared with 677,000 in the same period last year, while landline customers rose by 8 percent to 497,000 and the number of internet customers was up 9.1 percent to 490,000. TV customers jumped by 14.4 percent to 269,000 in Q3 this year compared with 236,000 in the same quarter last year.
Liberty Global deal cancellation
Sunrise has to pay a fee of CHF 50 million after cancelling the share purchase agreement with Liberty Global. Total costs for the transaction to buy UPC Switzerland from Liberty Global will amount to CHF 70-75 million. The costs include underwriting fees for CHF 19 million, advisory and legal fees, as well as already incurred integration costs for CHF 24 million.
Liberty Global said in a statement that it understood Sunrise's decision. "We look forward to continuing our conversations with either the board or [Sunrise shareholder] Freenet about a potential transaction that creates significant value for both sets of shareholders and Swiss consumers," Liberty Global said. "There is no question that UPC remains the fulcrum player in Switzerland’s converging telecom market."
