Swisscom profit falls as sell-off is debated

To sell or not to sell: it's parliament's call Keystone

On the day that the controversial privatisation of Swisscom is debated in parliament, the company reported lower earnings and revenues for the first quarter.

This content was published on May 10, 2006 - 08:50

Switzerland's leading telecommunications company said on Wednesday that its net profit for the first three months of the year was SFr460 million ($377.1 million).

This was 11.5 per cent less than for the comparable period last year. Turnover was SFr2.375 billion, down 2.9 per cent.

As a result of a share buyback programme last year and the resulting decrease in the number of shares, earnings per share saw a more modest decrease than net income, falling by 4.1 per cent to SFr8.11.

The former state monopoly, which has been facing increasingly stiff competition in the domestic market, said customers had benefited from "substantial price cuts" in the first quarter of 2006.

Swisscom said it was seeing high levels of growth for broadband connections, with the number of customers rising by 35.4 per cent to 1.19 million.

Intense competition

But due to intense infrastructure competition with cable companies, in particular Cablecom, and the popularity of new mobile technologies, the number of digital connections decreased by 2.4 per cent to 3.81 million.

It repeated its full-year targets of revenues to fall to about SFr9.5 billion and earnings before interest, tax, depreciation and amortisation (EBITDA) to fall to SFr4 billion.

The government made a surprise move to sell its 62.45 per cent stake late last year, effectively blocking the company's expansion through foreign acquisition. In particular, it stopped Swisscom's plans to take over Ireland's Eircom.

In the aftermath, Swisscom's chief executive Jens Alder resigned.

Mounting opposition

Wednesday's debate in Bern comes as there is mounting opposition to the sell-off over fears that the sale could jeopardise basic telecommunications services or that Swisscom might be taken over by a foreign company.

"The probability of a privatisation, we assume, is less than 50 per cent," said analyst Thomas Hifling at Helvea, a part of the private Pictet bank.

Political parties are split over privatisation, which would boost the government's coffers by an estimated SFr16 billion.

Supporters include the centre-right Radical Party and most of the rightwing Swiss People's Party, while the centre-left Social Democrats, the centre-right Christian Democrats and the Green party oppose the plan.

According to a survey published last week, 56 per cent of the electorate would vote against the proposal in a nationwide ballot on the issue.

Only a quarter of the 1,220 people polled were in favour of a sell-off.

Recent polls indicate that only 25 per cent of the population would be in favour of a full privatisation and as such the government's intention seems far from becoming reality, the private bank Lombard Odier Darier Hentsch said in a note.

swissinfo with agencies

Key facts

Swisscom first-quarter:

Net revenue: SFr2.375 billion (-2.9% compared with comparable period in 2005)
Net income: SFr460 million (-11.5%)
Net earnings per share: SFr8.11 (-4.1%)
Fix lines at the end of March: 5 million (+4.6%)
Number of mobile customers: 4.37 million

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In brief

The government owns 62.45 per cent of shares in Swisscom. A sale of these shares could raise up to SFr16 billion, which the government aims to use to pay off some of its debts.

The government also wants to divest itself of the risks attached to the telecoms market and allow the company more freedom.

Opponents fear Swisscom could be sold to a foreign company and that provision of services and working conditions could be under threat.

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