Swisscom’s net profit is up but operating income declines

Mixed fortunes for Swisscom Keystone Archive

The country's biggest telecommunications operator, Swisscom, has reported a healthy increase in net profits for 2000, but says operating income fell by more than a quarter.

Reporting results on Tuesday, the former state monopoly said net earnings rose by more than 32 per cent to SFr3.2 billion ($1.88 billion) but that operating income was down 26.2 per cent to SFr1.8 billion.

The healthy increase in net profit was due to asset sales such as the divestment of its Cablecom division. But increased competition since the telecommunications market was liberalised more than two years ago has led to strong downward pressures on operating revenues.

Tariffs for fixed line calls have fallen dramatically since the entry of competitors into the market and Swisscom has also had to subsidise its mobile sector.

Swisscom chairman, Marcus Rauh, told swissinfo that as part of the company’s efforts to become stronger in the face of increased competition it had embarked on a restructuring exercise, which had led to thousands of job cuts in a bid to concentrate on core activities.

To further improve its financial situation, Swisscom also recently sold much of its property portfolio in deals worth SFr2.55 billion. And it sold a 25 per cent stake of its mobile phone business to the worldwide market leader, Vodafone.

The company says its prospects for 2001 remain mixed in a very competitive market. Although it expects a modest increase in net income, it says there will be sustained pressure on margins resulting in significantly lower operating income.

“Our plans say that during this year we will reach the lowest point for operating income and from there on in we can stabilise our revenue levels,” explained Rauh.

This leaves Swisscom in an enviable financial position compared to many of its European rivals, which are saddled with huge debts after paying over the odds for licences for the next generation of mobile phones. Swisscom and three other bidders picked up their licences for a mere SFr50 million a piece.

At Tuesday’s results conference, Rauh took the opportunity to praise the Swiss government for its plans to sell its remaining stake in the telecom group. The necessary constitutional amendment permitting the sale is currently being drafted.

“We are very much in support of that and we hope that parliament and the Swiss people will support that,” added Rauh.

Looking to the future, Rauh noted that there “is no possibility to expand in this country provided we stick to our core business”.

He added that the company would therefore concentrate on expanding its operations in the rest of Europe. “One focus will be to shape our German subsidiary, debitel, into a stronger position; the other is to expand in data communications.”

Rauh added that a decision had yet to be made on the future of Swisscom’s Internet subsidiary, Blue Window. The company delayed a planned market flotation last year because of adverse market conditions.

swissinfo with agencies