Profit falls at Swisscom

Swisscom faces increasing competition Keystone

Switzerland's leading telecommunications company Swisscom has reported a 21 per cent drop in 2006 net profit, amid increasing competition on its home market.

Profit fell to SFr1.59 billion ($1.30 billion) while sales were down about one per cent to SFr9.59 billion, the company said on Tuesday.

“IT [information technology] outsourcing projects, as well as a reduction in mobile termination charges had a negative effect on income,” Swisscom said in a statement.

Earnings before interest, taxes, depreciation and amortisation (Ebita) fell nine per cent to SFr3.8 billion last year.

The company reported that strong growth in broadband access was continuing, but the number of its analogue and digital connections had dropped owing to intense competition from cable companies.

While the number of its mobile phone customers rose by 8.2 per cent, state-controlled Swisscom had to reduce prices.

“This is a solid set of results. But Swisscom does provide good guidance, so you don’t expect the big surprise,” said Helvea analyst Tomas Hilfing.

The company said it made no provision for a SFr333 million fine imposed by the country’s regulator in February for overcharging its competitors’ clients for mobile phone connections.

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Last year it bought back a 25-per-cent share in its own mobile unit from Britain’s Vodafone. The move is expected to boost profit from 2007 onwards.

Swisscom slightly raised its sales outlook to about SFr9.7 billion on Tuesday.

The annual results come just a day after Swisscom announced a friendly takeover offer for the Italian broadband operator Fastweb in a move to shore up weak revenue at home.

The €3.7 billion (SFr5.98 billion) bid would be the biggest acquisition in the history of the company, if it goes through.

Swisscom has a workforce of 18,240 people across the country. It is Switzerland’s leading telecoms provider with 4.6 million mobile customers and around 3.7 million fixed lines and 1.2 million fixed-line broadband connections.

swissinfo with agencies

In brief

Swisscom is the dominant player in the Swiss telecommunications market.

It had a monopoly until 1998.

In November 2005 the government announced it wanted to sell its 62% stake.

It also banned Swisscom from buying foreign companies that come with statutory service commitments.

Key facts

2006 annual results:
Net profit: SFr 1.59 billion (-20.9%)
Ebita: SFr3.78 billion (-9.2%)
Sales: SFr9.65 billion (-0.8%)