EUR 850.00 For Business Accounts Only

Morningstar | Updated Swisscom AG

Swisscom has an enviable position as an incumbent telecom operator in a small, wealthy country with a benign regulator. While it has all the trappings of a great business, we see few opportunities for growth.Swisscom is one of the developed markets' most entrenched telecom providers. The firm carries more than 60% of fixed-line minutes and has 60% of the country's wireless subscribers. Swisscom's extremely high wireless market share numbers impress us. The firm has held a fairly steady market share since 1998 in a country with persistent, decades-long competition. Swisscom has increased its capital expenditures for the past several years in order to ensure its wireless network is the best in the country. This higher spend will continue at least through 2018. We believe Swisscom is the best European example of the importance of a high-quality network in driving subscriber value, which is a key piece of our telecom moat framework.On the fixed-line and broadband business front, competition is more intense. Switzerland houses several strong cable operators. Some of the cable companies boast upgraded networks that are capable of broadband speeds significantly higher than Swisscom's, and they've harnessed their faster networks to lure broadband subscribers away from Swisscom. However, many of the competitors' cable networks are still analog rather than digital, leaving them exposed to digital offerings. To attract customers, Swisscom has bundled its own pay-TV service with its telephony products, and it now has 33% of the digital TV market, the largest share in the category. Liberty Global became particularly aggressive in 2014 as it added wireless service as a mobile virtual network operator, but this hasn't had any material effect on Swisscom.In Italy, Swisscom's telecom holding, Fastweb, continues to perform well. Here, Swisscom is the small upstart rather than the entrenched competitor. Owing to the weak Italian economy, price competition has increased, but Fastweb has succeeded in expanding its subscriber base and improving its EBITDA.