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Parliamentarians reject Swisscom sale

Radical Fulvio Pelli demanded in vain that Swisscom be freed from its cage Keystone

Swiss lawmakers have rejected the planned privatisation of Swisscom, the country's leading telecoms group, against the wishes of the cabinet and the operator.

This content was published on May 10, 2006 - 15:13

Late last year the government made a surprise move to sell its 62.45 per cent stake, a move that would boost the state's coffers by up to SFr16 billion ($13.12 billion).

In the House of Representatives, a slim majority of centre-right Christian Democrats, centre-left Social Democrats and Greens overcame the supporters of the project, the centre-right Radicals and members of the rightwing Swiss People's Party.

After five hours of debate, neither side was prepared to give any leeway.

Those opposed to the sale said the government had failed to consider properly the ins and outs of a privatisation.

Christian Democrat Doris Leuthard, who is expected to join the cabinet next month, said the government had failed to answer questions about why the state should give up its stake in Swisscom.

She called for a strategy that would allow the operator to invest abroad, the very reason the cabinet had decided to proceed with the sale. It decided to offload its shares after it blocked Swisscom's planned takeover of Ireland's Eircom and banned the former state monopoly from foreign acquisitions.

Arguments

A number of parliamentarians warned that any sale would be like getting rid of one of the nation's crown jewels and that Swisscom would most likely fall into foreign hands.

Green parliamentarian Franziska Teuscher said she feared that any purchaser would neglect to upgrade the telephone network as it tried to get the best return on investment.

Social Democrat Christian Levrat said there was no reason to give away a company that has contributed over SFr12 billion to the state coffers over the past seven years.

Other concerns included a lack of service in areas away from urban centres as well as the sale being just the first of many privatisations, including postal services and the electricity market.

Supporters of the sale pleaded in vain for complete privatisation.

It was too much of a risk to let the state continue to be Swisscom's main shareholder, said People's Party representative Peter Föhn.

Many speakers cited the collapse of the former national carrier Swissair as the perfect example of what could go wrong with state shareholdings.

Radical Fulvio Pelli warned that Swisscom needed to be free from the state to compete effectively with other operators.

Finance Minister Hans-Rudolf Merz, who defended the government plan, said he was not surprised by the outcome. He added that he hoped the Senate would reconsider the proposal in June, admitting that the cabinet had not considered other options.

Senate hopes

Swisscom, which announced on Wednesday that its net profit for the first three months of the year was SFr460 million, said it was also pinning its hopes on the Senate.

The operator has always backed the privatisation plan, with the government selling off its entire stake being its preferred option. The company believes foreign expansion is the only way for it to survive in the longer term.

Unions representing Swisscom employees hailed the rejection of the sell-off.

The communications union said the threat of a referendum had weighed on the parliamentary debate. It added that so long as the state kept its stake in Swisscom, proper service was ensured throughout the country.

swissinfo with agencies

In brief

Swisscom announced 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 in 2005. Turnover was SFr2.375 billion, down 2.9 per cent.

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.

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.

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Key facts

Swisscom financial year 2005
Revenue: SFr9.732 billion (-3.2% compared with 2004)
Ebitda: SFr4.171 billion (-4.9%)
Net profit: SFr2.022 billion (+26.7%)
Mobile customers : 4.28 million (+9.5%)
Employees at the end of 2005: 16,088 (+4%)

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