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Government blocks foreign Swisscom deals

In the dark: foreign firms with whom Swisscom wants to negotiate will have to wait

(Keystone)

The Swiss government says it will block all foreign acquisitions by Swisscom as long as it remains majority shareholder.

This announcement comes a day after the government said it wished to sell its majority stake in the country's leading telecoms group and privatise the company.

A spokesman for the finance ministry told swissinfo it was blocking acquisitions because the risks of a foreign takeover by Swisscom were too high for the government.

"Swisscom needs to take risks but we are not prepared to take the risks with our money," Dieter Leutwyler said.

The Swiss government's 66 per cent share in Swisscom is currently worth more than SFr17 billion ($12.9 billion).

Irish talks

Earlier this month, Swisscom confirmed it was in takeover talks for Ireland's former state monopoly and principal provider of fixed-line services, Eircom.

"We have instructed our representative on the board to speak against such an engagement," Leutwyler confirmed.

On the Dublin stock exchange shares in Eircom closed at €1.94 (SFr3) on the day, a drop of 15.65 per cent.

"The intervention of the Swiss government has put the whole Swisscom-Eircom deal into doubt," said Tricia McEvoy, a trader on the Dublin stock exchange.

In an initial reaction to the government's announcement, Pia Colombo, spokeswoman for Swisscom, told swissinfo: "We take note of this instruction by the government and our board of directors will look into it and see what this means and what the next steps will be."

Colombo said Swisscom could "neither confirm nor deny" whether talks with Eircom are continuing.

Swisscom's share price briefly rose after the announcement but closed the day 0.83 per cent down at SFr417.

Mixed message

When asked by swissinfo whether the Swiss government was crippling one of its top companies, Leutwyler answered: "That is your interpretation."

Matthias Finger, a professor at Lausanne's Federal Institute of Technology and an expert on the liberalisation of Switzerland's public-services network, believes the government is sending out a mixed message.

"Surely it would have made more sense to say that they intended to block Swisscom's foreign acquisitions on Thursday when they announced that they wanted to sell their majority share in the company," he told swissinfo.

In a joint statement on Thursday, the finance and communications ministries said privatisation would allow Swisscom to enter alliances more easily in the medium term.

"This is sending out a very confused message and I wonder if the government is speaking with one voice on this issue," said Finger.

Consequences

However, not all market experts think the government is pursuing the wrong strategy.

Claude Zehnder, an analyst at Zurich Cantonal Bank, thought the news was "positive".

"Swisscom's unconvincing acquisition plans have now been removed from the table," he said, describing Swisscom's synergy with Eircom as "modest".

But Finger said the latest announcement would likely have an adverse effect on share prices.

"The government is shooting itself in the foot because it wants to sell its shares. It makes no sense," he added.

swissinfo, Thomas Stephens

Key facts

The state currently holds 66 per cent of Swisscom, representing a market value of SFr17 billion.
Swisscom shares have earned the state SFr9 billion since 1998.
There are almost 64,000 other shareholders, the vast majority of them in Switzerland. Of these, 12 shareholders hold more than 100,000 shares.

end of infobox

In brief

The Swiss government has said it will block all foreign acquisitions by Swisscom, the country's leading telecoms group, as long as it remains majority shareholder.

This includes Swisscom's takeover talks with Ireland's former state monopoly and principal provider of fixed-line services, Eircom.

This announcement comes a day after the government said it wished to sell its majority stake in the country's leading telecoms group and privatise the company.

end of infobox


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