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Senate pulls plug on Swisscom privatisation

Parliament has followed the House of Representatives in rejecting the privatisation of Swisscom Keystone

Parliament has buried for good the privatisation of Swisscom, the country's leading telecoms group, against the wishes of the cabinet and the operator.

This content was published on June 7, 2006 - 17:00

Wednesday's decision by the Senate ends months of heated political debate and crushes the cash-rich company's hopes of growth through acquisitions.

The vote comes a month after the other parliamentary chamber, the House of Representatives, also rejected the sell-off plans.

The government's plan, announced in November last year, to sell its 62.45 per cent stake in Swisscom and boost the state's coffers by up to SFr16 billion ($13.12 billion) is no longer up for discussion.

Last month 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.

Had the Senate backed the plan on Wednesday, the left – including the Social Democrats – had threatened to launch a referendum in order to call a nationwide vote to let the Swiss public have the final say.

Swisscom has always backed privatisation, with its preferred option being the government selling off its entire stake.

The company believes foreign expansion is the only way for it to survive in the longer term and to offset falling revenues in its saturated home market.

Reaction

On Wednesday Finance Minister Hans-Rudolf Merz, who had defended the government plan, didn't consider the rejection as a defeat. Mathematically the decision was clear, he admitted, regarding content however it was not.

He added he would now analyse the debate and decide with the cabinet on how to proceed.

Merz said ultimately Swisscom would have to be privatised, but it was above all a question of timing.

He said he was convinced however that the Senate's rejection of the planned sell-off would not have any negative effects on Swisscom, adding that relations between the government and the company remain good.

Swisscom for its part interpreted the Senate's decision as a political challenge to continue the discussion but in a new direction.

The operator said in a statement that solutions must be developed which took the discussed points of view into consideration.

It also said it would make sense for the government to give up all or at least some of its stake, especially in connection with Swisscom's essential expansion at home and abroad.

swissinfo with agencies

In brief

Swisscom announced last month that its net profit for the first three months of the year was SFr460 million ($377.1 million).

This was 11.5% less than for the comparable period in 2005. Turnover was SFr2.375 billion, down 2.9%.

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% to 3.81 million.

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Key facts

Chronology:
November 2005: Cabinet announces its intention to sell its majority stake in Swisscom.
May 10, 2006: House of Representatives rejects privatisation by 99 votes to 90.
June 7, 2006: A no from the Senate buries the proposal by 23 votes to 21.

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