Sunrise Communications AG Q1 FY2026 earnings call

Commercial Highlights

• Sunrise won 6 out of 7 tariff price-value profile tests conducted by independent Swiss publication Connect, earning top outstanding ratings across all tested categories, validating the company's price-value positioning.
• Fully launched the new Sunrise Rewards loyalty program for all consumer customers after a soft launch in March 2026. The program rewards customers based on tenure and number of products held, with points redeemable for experiences or product discounts. Management expects the program to reduce churn and increase average RGUs per customer over the mid-term, shifting the company's external communication focus from just new customer acquisition to retaining and growing the existing base.
• Launched a strategic partnership with PHOENIQS, a pioneer in sovereign cloud and AI solutions, to bring end-to-end data-sovereign cloud and LLM solutions to B2B customers in Switzerland. The partnership will launch products in H2 2026, with PHOENIQS owning the full end-to-end infrastructure stack and all customer data controlled within Switzerland, filling an unmet demand for secure, sovereign AI/cloud solutions among Swiss enterprises.
• Announced a general price increase effective August 1, 2026, driven by rising data usage and growing operating costs. The increase will average up to CHF 1.50 on the main Sunrise brand and up to CHF 1 on average for flanker brands, with bundled products receiving a 50% reduction in the increase for additional lines/products. The average increase equals CHF 0.05 per customer per day.
• The company's multi-brand strategy continues to operate as planned: value flanker brand CHmobile (launched Q4 2025) captured strong market attention during the Black Friday launch period, but now contributes less than 10% of total customer inflow in Q1 2026, with pricing matching competitor moves and limited cannibalization of the core Sunrise brand.

Operational & Market Update

• Management describes the Swiss telecom market as rational but promotional, with stable promotional price bands for entry tariffs and flat-rate plans over the past year, with no ongoing systematic price degradation. Sunrise offers value options in the lower price band via CHmobile, Yallo, and other flankers, and premium options in the upper band via the core Sunrise brand.
• Q1 2026 typically sees seasonally lower market liquidity due to Q4 holiday spillover effects, but sales momentum improved through March 2026, meeting management expectations.
• A 7% headcount restructuring focused on management layers was announced earlier in 2026, effective April 2026, with cost savings expected to flow through from Q2 2026 onwards.
• Continued focus on cost optimization: OpEx declined YoY driven by lower IT and professional services spending, with ongoing optimization of external wholesale access contracts.

Overall: Total revenue was flat (up 0.1% YoY), adjusted EBITDAaL grew 2.5% YoY driven by lower operating expenses, adjusted free cash flow was -CHF 111 million (flat YoY), and CapEx was CHF 10 million lower YoY with a CapEx-to-sales ratio of 18.5%.

• Consumer Mobile: 10,000 postpaid net additions for the quarter, compared to 12,000 YoY, in line with expectations. Revenue growth was recorded after accounting for FMC discount reallocation.
• Consumer Fixed (Broadband/Internet): Net adds were -1,000, showing gradual recovery post the Q3 2025 UPC migration completion. Fixed consumer revenue declined, with 60% of net fixed adds coming from FMC bundles, continuing a gradual upward trend in FMC penetration. ARPU is under pressure from back-book to front-book price convergence, though the gap is nearing closure.
• B2B: B2B recorded strong overall revenue growth, with both mobile and fixed subscription revenue growing, after lapping difficult year-ago comparables. B2B other revenue saw strong growth driven by equipment sales and project activity. Management expects SME segment growth to accelerate by the end of 2026.
• Infra & Support: Revenue was broadly flat (slightly down), impacted by phasing of BTS tower sales to Cellnex.

• Management fully reaffirms all prior full-year 2026 guidance, with no upward or downward revision.
• Full-year adjusted free cash flow guidance remains at CHF 380 million to CHF 400 million.
• The company maintains its progressive dividend per share policy, and guides for a 2% full-year 2026 dividend increase to CHF 3.49 per share.
• Full-year adjusted EBITDAaL is guided around CHF 1 billion, with revenue expected to be broadly stable and slightly better than 2025 results.
• Management expects CapEx to continue declining year-over-year, with a full-year CapEx-to-sales ratio target of below 15%, and the higher Q1 2026 ratio reflects typical front-loading of annual investments.
• The general price increase will not have a material full-year 2026 impact due to its August 1 implementation, with most of the financial benefit expected to flow through in 2027; management will provide an updated impact assessment alongside Q3 2026 results.
• Service revenue and EBITDAaL are expected to follow a quarterly pattern: Q2 2026 will be the softest comparative quarter (due to lapping the 2025 Q2 price increase), followed by gradual improvement starting in Q3 2026 after the new price increase takes effect, with Q4 2026 seeing materially better performance.

• Customer reaction to the announced general price increase is still uncertain, as individual customer notifications and invoicing at the new price points will not occur until August 2026.
• The fixed consumer ARPU drag from back-book to front-book price convergence could last longer than currently expected, delaying the return to overall positive service revenue growth.
• B2B product launches from the PHOENIQS partnership have long sales cycles (3-9 months), so material financial contribution from the new offerings is not expected until 2027 at the earliest, creating uncertainty around near-term B2B growth targets.
• Ongoing geopolitical tensions continue to put upward pressure on general operating costs, which could offset some of the benefit from the 2026 price increase.
• Competitive promotional activity in the low-liquidity saturated Swiss market could lead to unexpected pricing pressure despite the current stable price band environment.

Q: Why did Sunrise shift from planned selective price increases to a broad general increase, does the existing guidance already price in this change, and what is the current fiber wholesale/HFC split for broadband gross adds? / A: Management shifted to a broad increase after seeing continued cost pressure from geopolitical issues, and observed that two major competitors had already moved forward with industry-wide price increases, making the market receptive to a broader change. The original guidance only included planned selective increases, which are now superseded; the net positive impact is partially offset by the later implementation timing in August. For broadband technology mix, fiber wholesale now makes up ~50% of gross adds, with HFC, FWA, and copper making up the remaining 50, with HFC accounting for most of the non-fiber share, showing only gradual change year-over-year.

Q: What makes the PHOENIQS B2B partnership unique, and will it generate new incremental business or just replace existing cloud contracts? / A: PHOENIQS' offering is unique because it is a fully end-to-end sovereign solution, with all infrastructure, data, and AI models controlled within Switzerland, unlike offerings that rely on foreign hyperscalers where customers cannot guarantee full data sovereignty. The partnership will capture both incremental new demand (especially from SMEs that have not yet moved to the cloud or adopted AI) and some substitution of existing non-sovereign contracts; the unique secure sandbox model that prevents customer data being used for public model training is a key unmet value proposition in the current Swiss market, with product launches planned for H2 2026.

Q: How much of the Q1 2026 IT and professional services OpEx savings are sustainable versus just phasing, and will marketing spend need to increase in coming quarters to hit volume targets? / A: A meaningful portion of the Q1 savings is sustainable, with mid double-digit percentage of the Q1 savings expected to remain for the full year, though full-year savings will not be as large as the Q1 outperformance. Q1 2026 marketing spend was stable YoY; a modest increase is expected in Q2 2026 to support the launch of the marketing campaign for the new Sunrise Rewards loyalty program, but no material increase in full-year marketing spend is planned. The 2026 restructuring charge reported in statutory results is a one-time recognition of future severance costs, with no similar charge expected in future quarters.

Q: What is the customer source breakdown for CHmobile, how much has it impacted group ARPU, and has Swisscom's April price increase driven meaningful customer inflows to Sunrise? / A: CHmobile currently contributes less than 10% of total group customer inflow, with the vast majority of its customers coming from competitors, and only minimal cannibalization from higher-price core Sunrise brand customers. CHmobile remains a very small portion of the total customer base, so its impact on group-wide ARPU is negligible, far smaller than ARPU dilution from multi-line mobile discounts. Management has only seen very minor incremental inflow from Swisscom's April price increase, and has not intensified promotional activity around the change, making it a non-event for the company so far.