Sunrise Communications AG Q2 FY2026 earnings call

Commercial & Loyalty Updates

• Launched the Sunrise Rewards loyalty program, soft-launched in April and fully rolled out in May. The program is designed to drive cross-selling/upselling, increase customer stickiness and reduce churn by rewarding loyal customers, addressing the prior paradigm that only new customers received preferential pricing. Early results are encouraging: 60% customer awareness after 3 months, 60,000 redemptions, higher NPS, lower churn, and incremental sales. No material financial contribution yet, but management expects long-term monetization.
• Expanded the discount Yellow retail footprint and completed a main Sunrise brand refresh campaign.

Consumer Performance

• Posted 21,000 postpaid mobile net additions (a material improvement from Q1) and 3,000 fixed internet net additions, turning around prior soft subscriber trends. Improvements were driven by both higher inflow and lower churn across mobile and fixed segments.
• Fixed-mobile convergence (FMC) penetration increased 0.6 percentage points to 61.1%, with plans to use the Sunrise Rewards program to drive further gains.
• Mobile ARPU experienced year-over-year pressure from mix shifts (more lower-priced secondary SIMs from family plans, varying brand price points) and temporary pressure on roaming and prepaid revenue. Fixed ARPU declined to 54.5 Swiss francs, driven by narrowing spreads between front-book and back-book pricing, despite stable-to-improving front-book inflow prices.

B2B Updates

• Launched new SME-ready bundled offers, including new insurance bundles, and closed gaps in partner portal functionality to expand the partner ecosystem, resulting in growing partner participation.
• An exclusive sovereign AI partnership with Phoenix for the Swiss market will launch in H2 2026, offering LLM, chat, and GPU-as-a-service products, positioning Sunrise with a unique, attractive offering for enterprise clients.

Operational & Management Updates

• Reduced OPEX by 8 million Swiss francs year-over-year, driven by lower external costs for IT, marketing, and support. Labor costs were broadly stable as cost savings from earlier reorganization were offset by lower share program benefits and salary inflation indexation.
• Completed a management team transition: outgoing CFO Jany Fruytier will step down at the end of August, with new CFO Andreas Tolpeit transitioning smoothly in September. New leadership has also joined for the main brand and flanker brand divisions.
• Refinanced near-term debt: issued a 500 million euro senior secured note maturing in 2033 to repay over 90% of 2029 maturities, leaving no maturities before 2031 and a weighted average cost of debt of 2.8%. All debt is hedged for interest and currency risk.

Overall Q2 2026 total revenue declined 2.6% year-over-year, with EBITDA down 3.8% due to gross profit pressure that was partially offset by OPEX improvements. Capex fell to 102 million Swiss francs (14.3% of revenue), driving higher adjusted free cash flow, which reached 204 million Swiss francs in Q2, on track to hit the full-year target of 380-400 million Swiss francs.

• Residential Subscription: Revenue saw a net reduction in Q2, as the benefit of 2025 price increases lapped, and the new August 2026 price increase had not yet impacted results. Residential fixed revenue continued to experience pressure from narrowing ARPU between front-book and back-book customer pricing.
• Residential and B2B Non-Subscription: Revenue increased, driven by higher hardware/handset sales and fee changes implemented at the start of 2026.
• B2B Subscription: Revenue was approximately flat, after a significant ramp up of the large MIGO contract in the prior year period that created tough comparisons. B2B RGU growth remained strong at 5% year-over-year.
• Inference Support: Revenue was in line with full-year expectations of slight growth, with results impacted by differing phasing of tower sales compared to the prior year.

• Management fully reaffirms all 2026 full-year guidance: broadly stable full-year revenue, ~1 billion Swiss francs EBITDA, capex as a percentage of revenue below 15%, and adjusted free cash flow of 380-400 million Swiss francs.
• Management maintains the planned 2% year-over-year dividend per share growth, resulting in a dividend of 3.49 Swiss francs per Class A share and 35 cents per Class B share.
• Management expects sequential revenue and performance improvement in H2 2026 compared to Q2, with most of the improvement from the August 1 price increase coming in Q4 rather than Q3, due to pricing adjustment lags, summer seasonal effects, and timing of new B2B product launches. Early indications from the price increase are encouraging: lower churn than expected and smaller negative NPS impact than prior increases, though management notes full trends will not be clear until September after the summer vacation period.
• The medium-term structural growth outlook remains flat to low single digits for revenue and EBITDA, which management expects to be reflected in 2027 performance, though full 2027 guidance will not be provided until Q4 2026.

• Full post-price increase customer reaction may be delayed by the summer Swiss vacation period, and churn or customer pushback could emerge in September that is not yet visible to management.
• Continued ARPU pressure on the fixed segment from narrowing front-book / back-book price spreads, and limited headroom for front-book price increases in the current competitive environment, could prevent ARPU from returning to growth even after stabilization.
• Upcoming spectrum license auctions have not yet had final rules released, and higher reserve prices set by regulators could increase the cost for Sunrise to retain its current spectrum portfolio.
• Structural mix shifts to lower-priced flanker brands and lower-priced secondary SIMs could create ongoing downward pressure on consumer mobile ARPU that requires ongoing price increases to offset.
• Satellite broadband and mobile providers could capture small niche market share in hard-to-reach rural Swiss areas, competing with Sunrise's fixed wireless access offerings.

Q: How will commercial improvements and the August price increase phase into H2 2026 results, and can Q4 2026 trends be used as a guide for 2027 structural growth? / A: Most of the full run-rate benefit from the August price increase will come in Q4, not Q3, because the price increase launched mid-quarter, requires short-term customer adjustment and retention activity, summer travel impacts Q2/Q3 roaming comparisons, and new B2B products launch in late Q3. Q4 trends do provide a reasonable indicator of underlying performance for 2027, with price increase effects being non-recurrent but improved commercial and churn trends becoming structural. Management confirms gradual improvement through H2, with the largest gain coming in Q4, and reaffirms the medium-term flat to low single-digit growth outlook.

Q: How have competitive dynamics changed after all major providers implemented price increases, when will ARPU stabilize, and what is the threat of satellite services in Switzerland? / A: Competitive pricing dynamics have not deteriorated, and competition has become more rational as providers have raised both back-book and front-book prices, with net price points trending slightly upward. ARPU stabilization is expected as front-book and back-book price spreads narrow, though full stabilization is not complete, and management is cautious about a return to fixed ARPU growth. Satellite is not seen as a major threat: Swiss fixed and mobile networks already have strong coverage, satellite struggles with indoor coverage and seamless mobility that customers expect, and it will only be a complementary niche technology, competing only slightly with fixed wireless access in the most remote areas.

Q: What is the brand split of customer inflow between main and discount flanker brands, and do you need new mobile towers for coverage or capacity? / A: Management does not disclose granular inflow splits for competitive reasons. All brands contribute to net customer growth, with flanker brands adding to overall net adds but not contributing a disproportionate share. Sunrise's existing mobile network grid is already sufficiently dense for current coverage and capacity needs, with no urgent need for new tower infill for either coverage or capacity at this time.

Q: With down-trading to flanker brands limiting main brand price increases, can you offset ARPU pressure via the rewards program, and how sustainable is B2B growth? / A: Segmentation by brand is intentional, with different product and service offerings matching different price points. Down-trading cannibalization is much smaller for Sunrise than for the incumbent, and volume gains from flanker brands offset any ARPU impact. Ongoing cost pressure from factor costs (site rentals, energy, salaries, hardware) may require future price increases to maintain profitability. B2B growth remains sustainable: Sunrise has low relative market share, and has multiple growth avenues from winning new customers and cross-selling new product categories like AI services to existing clients.