Swisscom's Earnings Guidance Cut: A Blessing in Disguise?

Swisscom, Switzerland's leading telecommunications operator, has lowered its core earnings guidance for 2024 following the early recognition of its acquisition of Vodafone Italia. The deal, which closed on December 31, 2024, is expected to reshape the Italian telecommunications market and expand Swisscom's presence there. However, the early recognition of the deal has led to a revision in Swisscom's earnings outlook, with the company now expecting earnings before interest, taxes, depreciation, and amortization (EBITDA) to be between 4.3 billion and 4.4 billion Swiss francs, down from the previously guided range of 4.5-4.6 billion francs.



The revision in earnings guidance is primarily due to the recognition of up to 200 million euros in costs in 2024, linked to the planned exit from existing mobile virtual network operator and mobile network-sharing agreements related to the migration of Fastweb mobile customers to Vodafone Italia's network. Despite this revision, Swisscom has maintained its guidance for revenue, capital expenditure, and dividend, and the revised EBITDA view does not impact free cash flow.

The early closing of the deal brings several strategic benefits to Swisscom, including expansion into the Italian market, the creation of a converged operator, synergies and cost savings, reduced competition, and diversification. These benefits are expected to translate into long-term growth for the company, as it gains access to new markets, increases revenue streams, and reduces competition.

However, the early recognition of the deal also means that Swisscom will incur additional costs in 2024, which will impact its financial results. The net impact on Swisscom's 2024 financial results will depend on the magnitude of the additional revenue and EBITDA compared to the integration costs.

In conclusion, while the revision in earnings guidance may seem like a setback for Swisscom, it is important to consider the strategic benefits that the early closing of the Vodafone Italia deal brings to the company. The long-term growth prospects for Swisscom remain strong, and investors should focus on the company's ability to execute on its strategic initiatives and deliver value to shareholders.