Swisscom profits down as competition bites

Swisscom's profits are hit by stepped up competition. Swisscom

Net profits at Swisscom came in at SFr780 million ($518 million) in the first half - substantially lower than the same period last year when it boosted its bottom line with sell-offs.

Swisscom said it had met its objectives in the first half of the year despite difficult market conditions.

Sales climbed slightly to SFr7.1 billion, and its mobile phone unit performed well, with the number of subscribers increasing by 9.1 per cent to 3.49 million.

The company, one of the few telecom operators to turn a decent profit in the past year, last year chalked up net profits of well over SFr5 billion thanks to the sale of a 25 per cent stake in its mobile phone unit to Vodafone for SFr3,887 billion, as well as some property sales.

In the fixed network market, Swisscom lost market share to rivals TDC and Tele2.

Downturn

Swisscom said market conditions in the business-to-business segment had worsened because the economic downturn had left companies more reluctant to make investments. Nevertheless, it expects higher operating profits for the full year.

It added that sales were boosted by growth in broadband Internet access provision and the expansion into new markets of Swisscom’s German-based unit, Debitel.

Job cuts

The company also identified 450 jobs that would be cut, as part of restructuring plan announced two years ago to shed 3,000 jobs by 2003.

Unions reacted angrily to the news, saying the cuts could not be justified entirely by the economic downturn and were more likely the result of management failures.

Four hundred of the cuts will be at Swisscom Systems. The division’s CEO, Werner Steiner, has also been axed, reportedly because of disagreements about restructuring measures.

He will be replaced by René Fischer, a 37-year-old former head of finance at Swisscom.

Cash to spare

The company is pressing ahead with the redundancies despite having enough cash to consider acquisitions.

CEO Jens Alder told Reuters news agency that he was shopping around for some profitable activities from debt-laden European firms.

“I could imagine that operators may want to sell part of their activities and would prefer to do that to another operator and not to a bank or private equity firm.”

He added that Swisscom could afford to pay up to SFr10 billion.

Cash rich Swisscom, with SFr1.7 billion in its coffers, said in a statement that it was looking to invest abroad in growth areas such as data communications, information technology and mobile telephony.

It added that it would return money to shareholders if it failed to find suitable acquisition targets.

Last February the former state monopoly – still majority owned by the government – used its cash surplus to buy back ten per cent of its share capital for SFr 4.3 billion ($2.55 billion).

swissinfo with agencies

Key facts

Swisscom reports sales of SFr7.1 billion.
Number of mobile subscribers increases to 3.49 million.
Company identifies 450 jobs to cut.
Parts ways with CEO of Swisscom Systems.
Cash-rich Swisscom is shopping around for acquisitions.