Q1 with acceleration in gross profit growth

Olaf Swantee, CEO of Sunrise, comments: "In Q1'18 we successfully refreshed our 'Freedom' mobile tariffs and improved our B2B financial performance. The accelerated gross profit growth of the quarter confirms our strategic focus on quality across our network, service and products."

Strong customer growth in Q1 and highest postpaid net adds since 2011

Momentum in subscriber additions continued in Q1'18. Sunrise added +7.6% net new mobile postpaid customers YoY, an acceleration compared to +7.3% in Q4'17. Total customer numbers now stand at 1.63m. 31,100 new postpaid customers were added in Q1 alone, which represents the strongest net add since 2011. It includes 20,200 primary SIM net adds, compared to 13,300 in the same period last year. This solid performance was supported by B2B, strong network quality, the Sunrise multi-brand approach, diversified distribution channels, and a broad product portfolio at competitive prices. The mobile prepaid customer base decreased YoY as customers continue to migrate to postpaid tariffs. Q1 internet subscribers rose by +11.6% YoY to 430,700, while TV subscribers grew by +25.7% YoY to 220,900. These substantial increases were supported by the converged 'Sunrise ONE' tariff, improved TV sports content (Sky, Teleclub), and dedicated promotions.

Accelerated service revenue growth

Total revenue increased by +6.4% (incl. IFRS 15 +6.3%) YoY to CHF 459m, driven by service and hardware revenue. Service revenue alone increased +3.0% (incl. IFRS 15 +2.6%) YoY, with customer growth more than offsetting the impact of lower average revenue per user (ARPU). This represents an acceleration compared to Q4 (+0.9% MTR adj.), supported by improving B2B trends and growth momentum.

Accelerated gross profit growth

Gross profit rose by +2.9% (incl. IFRS 15 +2.4%) YoY to CHF 295m. This represents faster growth compared to Q4 (+0.3% YoY) supported by improving trends in B2B and growth momentum. Adjusted EBITDA fell -3.5% (incl. IFRS 15 -1.9%) to CHF 138m, driven by higher network service fees after the tower disposal in August 2017. Excluding this impact, adjusted EBITDA would have increased by +2.7% (incl. IFRS 15 +4.2%), with gross profit improvements partially reinvested into growth momentum. Net income slightly improved to CHF 17m, driven by lower depreciation and financial expenses.

Leverage ratio slightly improved

Equity free cash flow (eFCF) decreased from CHF 29m last year to CHF 1m in Q1'18, in line with company expectations. This was mainly driven by tax payments. The latter are expected to be subject to a different seasonal calendar from last year (month end cut-off) and are based on a higher taxable income. Net debt saw a slight improvement in Q1, to CHF 1,137m vs. CHF 1,147m at YE'17. Net debt to adj. EBITDA ratio (pro forma) reduced from 1.97x at YE'17 to 1.94x at Q1'18.

2018 guidance reiterated

FY'18 revenue and adjusted EBITDA continue to be expected between CHF 1,830-1,870m and CHF 580-595m, respectively. These numbers do not yet include impacts of IFRS 15. FY'18 Capex is reiterated in the range of CHF 283-323m. Upon meeting its FY'18 guidance, Sunrise expects to propose a dividend in the range of CHF 4.15-4.25 per share for FY'18, paid out of capital contribution reserves in FY'19.

Please see http://corporate.sunrise.ch/ir/reports-and-presentations for the IFRS report, the investor presentation, and further information.