Swisscom’s Fiber Rollout Plans Face Higher Uncertainty; 2021 Guidance Slightly Downgraded

Swisscom shares are down 7% because of regulatory hurdles to its fiber-to-the-home rollout ambitions, which have caused a slight downgrade to its 2021 guidance. The company now expects revenue of CHF 11.2 billion compared with CHF 11.3 billion previously, with EBITDA guidance unchanged at between CHF 4.4 billion and 4.5 billion, and capital expenditures at the higher end of initial guidance of CHF 2.2 billion to 2.3 billion. Although from a short-term fundamental perspective, the share price reaction could seem exaggerated (CHF 2 billion decline in market capitalization), we believe the market is concerned by the uncertainty on FTTH plans. The Swiss Competition Commission is investigating the way in which Swisscom is deploying fiber, which has caused the company to put its deployment and its partnership with Salt on hold. New information is expected in February 2022. We are maintaining our fair value estimate of CHF 470 per share.