Why Alder had to go

New CEO Carsten Schloter (left) heads to Friday's press conference with Jens Alder Keystone

Swisscom CEO Jens Alder, who resigned on Friday, had no choice but to throw in the towel after the cabinet vetoed his expansion plans, two experts tell swissinfo.

This content was published on January 20, 2006 - 18:35

They agree that Alder's vision for the company no longer matched that of Swisscom's majority stakeholder, the Swiss government.

Swisscom was instructed at the end of last year by the government not to make any significant acquisitions outside the country while plans were made to sell off the state's stake in the firm.

Matthias Finger, a telecoms-liberalisation specialist at the Federal Institute of Technology in Lausanne, said the change at the top would "put the strategy of the company more in line with that of the government".

He added that Alder's successor, Carsten Schloter, would have to prove himself "capable of pleasing the government while at the same time making the company prosper".

Finger believes that a certain amount of government interference is no bad thing – and points to the example of state-owned Electricité de France, which he says has been "tremendously successful at thriving on the global market".

Thomas von Ungern-Sternberg, a professor of economics at Lausanne University's School of Commercial Studies, agrees that Swisscom is better off in government hands.

swissinfo: How much of a disadvantage is it for Swisscom to be majority owned by the government, given that the CEO has resigned over the state's refusal to allow him to pursue an expansion strategy abroad?

Thomas von Ungern-Sternberg: Swisscom is a very profitable company, and there are potentially two explanations for this: either because it has some kind of monopoly power, which the cartel authorities believe, or because it is exceedingly efficient.

My personal view is that as long as it has a dominant position in the market, it is probably better that it is a company that is controlled by the government.

swissinfo: But the CEO resigned because the government hindered his ability to pursue the company's strategy.

T.v U-S.: I never understood why Swisscom wanted to buy Eircom, and I am very happy that the government prevented this waste of money.

You should not forget that Swisscom has already lost SFr3.5 billion in its acquisition of Debitel, which was also a hare-brained scheme, and I can well understand that the government – in the taxpayer's interest - would want to prevent that kind of accident from happening again.

swissinfo: So the government did the right thing by refusing to allow significant overseas acquisitions?

T.v U-S.: I think that's a very sensible restriction. Many of these acquisitions turn out to be loss-making enterprises and we have already had the experience of Swissair. That company was operating fairly well, and had too much money, and then went on to waste literally tens of billions by acquiring companies abroad without thinking.

I think it is a perfectly viable strategy to be an efficient producer of telecommunications services in Switzerland and that I think is the role Swisscom should play.

swissinfo: The government says it wants to privatise Swisscom. Is that a good idea?

T.v U-S.: The arguments I have heard so far are not very convincing. And I am almost certain that there will be a vote on this issue, and I am fairly convinced that the government will lose the vote, so I don't think Swisscom is going to be privatised in the near future.

swissinfo: If Swisscom were privatised it would likely be swallowed up, since it's likely that the telecoms market will consolidate – particularly in light of new competition from internet telephony?

T.v U-S.: As long as the government is holding a majority stake – currently 66 per cent of the shares - there won't be a takeover, for sure.

The day that Swisscom is privatised I don't see that the government could even try to prevent a takeover, and Swisscom would immediately become a foreign-owned company. There is a large packet of shares of the market and I'm almost certain that [Spain's] Telefonica, or the French or Deutsche Telekom will buy up Swisscom.

But I think Swisscom can pursue a strategy of being an efficient supplier of telecommunications services in Switzerland, and make money. Whether it can grow or not is not that relevant. What is important is: is it viable? And the answer for me is yes.

swissinfo-interviews: Jonas Hughes

Key facts

Jens Alder joined Swisscom in 1998 and was appointed CEO in December 1999.
He stepped down on Friday and will be replaced with immediate effect by Carsten Schloter, currently CEO of Swisscom Mobile.
Alder will receive a payoff of SFr1.54 million ($1.2 million), comprising a year's salary and bonus.
The Swiss government announced on November 23 that it intended to sell its majority share in Swisscom. The following day it banned Swisscom from buying foreign companies, pulling the rug out from under a proposed takeover of Ireland's Eircom.

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