Profit leaps but sales sag at Swisscom

Swisscom is feeling the harsh winds of competition Keystone

Switzerland’s largest telecommunications company, Swisscom, has reported that its first-half net profit surged by 47.4 per cent to SFr1.1 billion ($870 million).

But due to increased competition, sales at the Bern-based group were down by 1.7 per cent compared with the same period last year to SFr4.9 billion.

Although lower, the sales figures were slightly above market expectations.

The company explained on Wednesday that net income had risen due to lower depreciation and a higher net financial result. But Swisscom’s outlook for 2005 remains unchanged.

In May, it had warned that it expected a drop in sales for the whole year to around SFr9.6 billion and a reduction in operating income before interest, taxes, depreciation and amortisation (Ebitda) to about SFr4.1 billion, primarily as a result of “intense competition and pressure on prices” at its Mobile and Fixnet (landline services) divisions.

Swisscom, in which the Swiss government has a 66.1 per cent stake, said in its interim figures statement that revenue from external customers dropped year-on-year by SFr87 million.

Broadband growth

Fixnet recorded a decline in sales of SFr61 million (-2.7 per cent). The increase in access charges following growth in broadband (ADSL) customers failed to compensate for the lower revenue from traffic.

Revenue for the Mobile division increased by SFr18 million (+1 per cent) mainly due to a rise in customer numbers.

Swisscom said higher net income and the lower than average number of shares resulting from the firm’s share buy-back programme had led to an increase of 58.8 per cent in net earnings per share to SFr18.21.

Earlier this year, Swisscom cut the fees it charges for calls from its landline network to other landline and mobile networks.

The former state monopoly has been feeling the heat from its competitors, including Cablecom, Switzerland’s largest cable-based communications provider. It launched a telephone service last year and has steadily increased the number of customers.

Saturated Switzerland

Cash-rich Swisscom, which failed to take over the Czech Republic’s Cesky Telekom and Austria’s Telekom Austria, is still looking to expand outside the saturated home market.

Last month, it won the bidding for Hungarian broadcaster Antenna Hungaria, valuing it at about $307 million in a move to diversify geographically and into media services to compensate for a lack of growth opportunities and increased competition in Switzerland.

Swisscom chief executive Jens Alder said on Wednesday that he saw continued price pressure in the mobile business in the text 12 months.

“The price pressure will stay strong but will not increase,” he told a conference call.

Alder also said that Swisscom would be on the lookout for further major acquisitions in the coming 12-18 months. If none were identified, the company would consider accelerating its share buy-back programme.

swissinfo with agencies

Key facts

Swisscom first-half figures

Sales: SFr4.91 billion
Ebitda: SFr2.199 billion (-2 per cent)
Ebit: SFr1.496 billion (+2 per cent)
Net income: SFr1.116 billion
Number of full-time employees: 15,307 (-2.6 per cent)
ADSL (broadband) connections: 948,000 (+44.5 per cent)
Number of mobile customers: 4,040,000 (+3.7 per cent)