Flush Swisscom buys into European niche

Swisscom's new venture targets businesspeople on the go Keystone

Switzerland's flush telecoms operator, Swisscom, has set up a new company to provide wireless broadband Internet access to business travellers across Europe.

The new unit, Swisscom Eurospot, has bought stakes in Europe’s main wireless operators so it can offer web access in hotels, airports, conference centres and other public places.

Swisscom bought the leading pan-European operator, London-based Megabeam Networks, and the German market leader, WLAN in Munich, to form the backbone of its new unit.

Swisscom’s CEO, Jens Alder, said on Friday the venture was relatively small and the impact on the company’s results would be negligible in 2003. The new unit builds on services already offered in Switzerland.

The company has invested a “double-digit million Swiss franc sum” in the new venture, according to Alder. He added that he expected the market to be worth hundreds of millions of euros within a few years.

Marc Schulthess, an analyst for Pictet bank in Geneva, said it was too early to judge whether Swisscom had made a good investment, since the technology involved was still fairly new.

Small risk

“They have taken a small risk, though, since they invested less than SFr100 million [$75 million] in this venture,” he told swissinfo. “They will have thought it through, too, since Jens Alder is not known for rushing into decisions.”

Schulthess said one reason for the acquisitions might have been Swisscom’s desire to get its hands on so-called roaming deals. These agreements allow a Swisscom customer to access networks outside Switzerland.

“Swisscom would have been able to get hold of pre-existing agreements though its acquisitions, so it won’t have to negotiate new roaming deals to provide a Europe-wide service,” said Schulthess.

The new venture was made public at a time when speculation is rife about possible Swisscom acquisitions. The company, contrary to many other telecom operators, is flush with cash, and observers believe it could invest up SFr12 billion.

The telecoms operator is expected to post slightly higher revenues for 2002, when it releases its annual results later this month.

Profits

It expects stable core profits of around SFr4.4 billion, but lower net income because of the absence of big asset gains.

Alder confirmed Swisscom was on the lookout for acquisitions in 2003 after two years of fruitless searching.

“We were, we are and we will be looking for acquisitions,” said Swisscom’s CEO. “We are working on it.”

But he refused to give further details or to comment on speculation that his company was eyeing a stake in Telekom Austria.

The Eurospot venture came as a surprise to analysts since Swisscom had said until now it wanted to make a financial investment.

“They had always said they would rather not invest in hardware,” Schulthess told swissinfo. “This could be a precursor to a change in strategy, but this would have to be confirmed given the small size of the investment.”

Pressure

The move also comes at a time when Swisscom is feeling considerable public and political pressure.

Last week the Swiss government announced it was dumping Swisscom’s “last mile” monopoly, effectively freeing up the fixed line market for all operators.

Consumers currently have to pay Swisscom a monthly fee for the use of its network, even if they are not its customers.

The government decision has not gone down well with the operator, which said it would appeal to the courts to block any change in the status quo.

Politicians on the left, who fear the disappearance of Swisscom’s monopoly will hurt consumers and threaten universal service, are also threatening to appeal the decision.

Swisscom sparked public outrage in January, when it announced it would be cutting over 1,000 jobs this year, far more than had been planned in 2000.

The company said at the time the job cuts were due to the economic slump and pressure on prices in the telecommunications market.

swissinfo, Scott Capper