Sunrise Communications : Q3 with strong financials and record postpaid customer growth

Revenue (CHF m)	Q3'19	Q3'20	YoY
Mobile services	325	321	(1.2%)
Landline services	72	65	(10.1%)
Landline internet	76	85	11.3%
Total revenue	474	471	(0.5%)
Service revenue (total excl. hubbing & hardware)	392	400	1.9%
Gross profit	316	320	1.2%
EBITDA	175	175	0.3%
Adjusted EBITDA	173	176	2.0%
Net income	48	28	(41.3%)
Equity free cash flow	88	(13)	(114.6%)
Customers (in k)
Mobile Postpaid	1,854	2,006	8.2%
Mobile Prepaid	591	503	(14.9%)
Landline Voice	497	518	4.1%
Internet	490	524	6.9%
TV	269	302	12.0%

André Krause, CEO of Sunrise, comments: 'Our last quarter as an independent group has been extraordinary successful: Sunrise continued to win market share and achieved solid financial growth, despite challenging circumstances. Strong execution and our strategic focus on quality across networks, services and products have ultimately supported a total shareholder return of +90% since our IPO in 2015.This success would not have been possible without the outstanding engagement of all our employees and partners.'

Strongest mobile postpaid customer growth in 10 years

Momentum in subscriber additions continued, with Sunrise achieving 46,300 mobile postpaid net adds in Q3'20. This represents the strongest net adds since 2010 and drives a solid +8.2% YoY increase in the mobile postpaid customer base. The strong performance was driven by residential and B2B customer growth, and a focus on going the extra mile for customers. Sunrise's mobile prepaid customer base decreased YoY as customers continue to migrate to postpaid tariffs. Internet and TV subscribers rose by +6.9% YoY and +12.0% YoY, respectively. These substantial increases were supported by bundled offers, attractive TV content (including Netflix, Sky Sports and Sky Show), a focus on service excellence, demand for the OTT TV product, and dedicated promotions.

Service revenue growth accelerated in Q3

Solid customer growth led to a service revenue increase of +1.9% YoY to CHF 400m, after a slight YoY decrease in Q2. This rebound was supported by customer momentum, less intense headwinds in roaming and project driven 'Integration' business, as well as an improving trend in postpaid value mix. Total Q3 revenue slightly decreased to CHF 471m, as service revenue growth was offset by less hubbing business (low margin).

Adjusted EBITDA up +2%

Q3 gross profit increased by +1.2% YoY to CHF 320m, driven by service revenue. Service gross margin contracted slightly as a result of roaming and MTR. Adjusted Opex remained roughly stable YoY (+0.2%) as continued investments in commercial momentum were counterbalanced by careful cost management. Adjusted EBITDA gained momentum and increased +2.0% YoY. Net income decreased from CHF 48m in 2019 to CHF 28m, driven by higher depreciation and amortization. Furthermore, last year's net income benefited from a significant reduction in deferred tax liability.

eFCF and leverage as expected

Q3 equity free cash flow (eFCF) decreased from CHF 88m to CHF-13m YoY, primarily due to accelerated investments in the mobile network and a landline access payment to Swisscom, in line with guidance. Net debt to adjusted EBITDA ratio stood at 2.56x at the end of Q3. This represents a slight increase compared to 2.35x in Q3 2019, also predominantly driven by investments in the mobile network, along with expenses related to last year's cancelled acquisition of UPC Switzerland.

FY'20 guidance confirmed

Sunrise reiterates its FY'20 guidance supported by a solid Q3 financial performance: Revenue and adjusted EBITDA continue to be expected between CHF 1,840-1,880m and CHF 675-690m, respectively. FY'20 Capex remains to be expected between CHF 410-450m. Upon meeting its FY'20 guidance, Sunrise expects to propose a dividend in the range of CHF 4.55-4.65 per share for FY'20, to be paid out of foreign capital contribution reserves in FY'21. As communicated on August 12^th, Liberty Global has made a tender offer to the shareholders of the Group to acquire Sunrise. After closing of the transaction, Liberty Global intends to delist Sunrise shares from trading on the SIX exchange. As such, Sunrise would like to make shareholders aware of potential future changes to its current dividend policy.

Complementary 9m'20 results table

Revenue (CHF m)	9m'19	9m'20	YoY
Mobile services	929	932	0.3%
Landline services	218	206	(5.4%)
Landline internet	229	249	8.8%
Total revenue	1,375	1,387	0.8%
Service revenue (total excl. hubbing & hardware)	1,146	1,165	1.6%
Gross profit	933	943	1.1%
EBITDA	506	496	(1.9%)
Adjusted EBITDA	496	507	2.1%
Net income	109	71	(34.3%)
Equity free cash flow	92	101	10.1%

Please seewww.sunrise.ch/reportsfor the IFRS report, the investor presentation, and further information.