Profit jumps but revenue falls at Swisscom

Profits are rising, but the future remains far from clear Keystone

Swisscom has reported that its net profit in 2005 increased by 26.7 per cent compared with the previous year to SFr2.02 billion ($1.54 billion).

But sales at Switzerland’s leading telecommunications company declined by 3.2 per cent, mainly because of two one-off charges, to SFr9.732 billion.

The company’s fortunes have been much in focus in recent weeks after the Swiss government – the major stakeholder in the company – crushed Swisscom plans to expand abroad, notably in Ireland.

The dispute and government intentions to fully privatise the cash-rich company led to the departure of chief executive Jens Alder in January. He was replaced by insider Carsten Schloter.

In another managerial move, the company said insider Mario Rossi would replace Ueli Dietiker as chief financial officer.

Swisscom, which faces increased competition from cable providers and mobile telephony, said in a statement on Wednesday that it expected 2006 revenues of about SFr9.5 billion.

In its comments on 2005, Swisscom said revenues had fallen by 3.2 per cent mainly because of the sale of International Carrier Services to Belgacom and a reduction in termination rates for mobile telephony.

Mobile termination rates are the fees mobile phone companies charge other carriers to terminate calls on their networks.

Price reductions

It added that customers had also benefited from “substantial” price reductions but these had been offset by growth in new businesses.

Cost savings could not fully compensate the decline in revenues, so that earnings before interest, taxes, depreciation and amortisation (Ebitda) also saw a drop of 4.9 per cent to SFr4.171 billion.

The company said it would return more than SFr3 billion to shareholders this year in the form of share buybacks and dividends.

It is proposing a dividend of SFr16, up from SFr14 in 2004.

“Total distribution to shareholders as well as the outlook are in line with market expectations,” analysts at Bank Julius Bär commented.

New strategy

Investors have been keen to hear how the new management will now run the group against a background of falling revenues at home.

The statement said the company’s new strategy would be based on three pillars – strengthening of core businesses, further growth in business customers’ solutions and targeted expansion projects.

It explained that it would strengthen core businesses by offering a comprehensive portfolio of multimedia services and “first-class” customer service.

Commenting on the government’s plans to give up its majority stake, Swisscom said it took a positive view of the proposal and favoured full or at least partial disposal of the government holding.

But it added any supporting measures taken for political reasons must not damage the company.

swissinfo with agencies

Key facts

Financial year 2005
Revenue: SFr9.732 billion (-3.2% compared with 2004)
Ebitda: SFr4.171 billion (-4.9%)
Net profit: SFr2.022 billion (+26.7%)
Proposed dividend : SFr16 (SFr14)
Mobile customers : 4.28 million (+9.5%)
Employees at the end of 2005: 16,088 (+4%)

In brief

Swisscom is the dominant player in the Swiss telecommunications market.

It had a monopoly of the market until 1998.

The government announced on November 23 that it wanted to sell its majority stake. The following day it banned Swisscom from buying foreign companies, pulling the rug out from under a proposed takeover of Ireland’s Eircom.

But it later clarified its ban on foreign acquisitions, saying it only related to fixed-line operators.

The finance ministry said in December that the government had a 62.45 per cent stake in the company.