Profit collapses at Swisscom

Swisscom said it had managed to weather a difficult economic climate in 2002 Keystone Archive

Switzerland's leading telecommunications firm, Swisscom, saw net profit plunge more than 80 per cent in 2002 to SFr824 million ($595 million).

The figure was substantially down on the previous year’s SFr4.96 billion profit, which was boosted by more than SFr4.4 billion from sell-offs.

Earnings before interest, taxes, depreciation and amortisation (EBITDA) came in at SFr4.41 billion ($3.21 billion) for 2002, showing virtually no gain on the previous year.

The figure fell short of the SFr4.45 billion forecast by analysts.

The company blamed last year’s flat performance on what it described as a “difficult environment”.

“The Swisscom Group continued to steer a successful course in 2002 despite an unfavourable economic climate,” the company said in a statement.

Below expectations

Earnings before interest and taxes (EBIT) rose to SFr2.41 billion from SFr2.24 in 2001, but also came out below estimates which on average had called for SFr2.44 billion.

Revenues rose by 2.5 per cent to SFr14.53 billion.

Reporting their 2002 figures on Wednesday, Swisscom stressed that the 2001 profit had been inflated by the sale of a 25 per cent stake in Swisscom Mobile to Vodafone and the sale of real estate, resulting in gains of SFr3.84 billion and SFr584 million respectively.

Further pressure

Swisscom said a further decline in future growth in mobile communications and intense competition would again lead to pressure on margins and revenues.

The firm forecast core pre-tax earnings in 2003 would be at the same level as in 2002 but it announced earlier this year that it would be cutting 1,050 jobs in an effort to remain competitive.

At the company’s annual general meeting on May 6, the board of directors will propose a dividend of SFr12 per share – an increase of SFr1 on 2001.

Overall financial expense decreased SFr254 million to SFr517 million “as a result of impairments on financial assets in 2001 of SFr418 million.”

The firm reassured shareholders saying, “with net debt of SFr642 million and a year-end equity ratio of 43 per cent, Swisscom’s financial position remains extremely sound”.

Takeover talk

“Since growth in Switzerland is strongly inhibited by regulation, Swisscom is continually examining ways of strengthening its position in Europe,” it said.

Talk of a takeover has centred on Telekom Austria (TA), and while Swisscom has refused to be drawn on the issue, analysts believe Swisscom is the only firm interested in TA shares due to be offered soon as part of Austria’s privatisation programme.

TA is seen by some analysts as a stepping stone into Eastern Europe for Swisscom, which already owns 13.5 per cent in Czech Cesky Telecom and where loss-making Dutch KPN is expected to sell its 20 per cent stake.

swissinfo with agencies

Key facts

Net profit plummeted more than 80 per cent in 2002 to SFr824 million ($595 million).
Swisscom stressed that the 2001 profit of SFr4.96 billion had been inflated by the sale of a 25 per cent stake in Swisscom Mobile to Vodafone and the sale of real estate.
EBITDA for 2002 came in at SFr4.41 billion for 2002, falling short of the SFr4.45 billion forecast by analysts.
A further decline in growth in mobile communications and competition would again put pressure on margins and revenues, Swisscom said.
Earlier this year, the firm announced that it would be cutting 1,050 jobs in an effort to remain competitive.