Economic Environment

The 2015 macroeconomic situation in Switzerland was mainly driven by the pronounced strengthening of the Swiss franc in January following the removal of the currency peg by the Swiss National Bank. As of December 31, 2015, the CHF had strengthened 9.5% against the EUR and weakened -0.8% against the USD year-over-year (Deutsche Bank, London Branch).

The company’s predominantly CHF-denominated residential subscription base limits its exposure to exchange rate volatility. Nevertheless, changes in exchange rates must be taken into account, as certain business activities are conducted in cooperation with international operators effecting revenues, cost of goods and services and operational and capital expenditure. These activities include roaming and other international fee-based services as well as the purchase of hardware, network and other technological equipment and services. Exchange rates also have an impact on customer decisions to buy mobile devices abroad or in Switzerland and as such can impact Sunrise mobile phones revenue. Sunrise reduced its currency exposure in February 2015 by having refinanced its debt in CHF versus EUR previously. Swiss gross domestic product growth was solid at around 1% in 2015 but lower than the 1.9% growth achieved in 2014 (IMF World Economic Outlook – October 2015 – ­projection for 2016). With Switzerland being an export-­oriented country, the stronger CHF was one of the main reasons for this tempered growth.

Regarding inflation, currency appreciation led to a -1.1% decline in consumer prices in 2015 compared to no change in 2014. Deflation is expected to continue into 2016. (IMF World Economic Outlook – October 2015 – projection for 2016).