Swisscom First-Quarter Revenue Falls on Fastweb Unit Decline
May 04, 2011, 7:14 AM EDTBy Chiara Remondini
(Updates share price in eighth paragraph.)
May 4 (Bloomberg) -- Swisscom AG, the phone company that owns Fastweb SpA, reported a 3.1 percent drop in revenue, dragged down by the Italian fixed-line unit, and said a turnaround of the division will help restore growth in 2012.
First-quarter sales fell to 2.86 billion francs ($3.3 billion), the Bern-based company said today. Analysts surveyed by Bloomberg had estimated revenue of 2.89 billion francs. Fastweb sales slumped 16 percent to 562 million francs.
Swisscom, which bought Fastweb in 2007 to offset slowing growth in the Swiss market, has failed to benefit from the acquisition. The company has been hurt by a legal probe into alleged value-added-tax fraud and money laundering at the Italian unit. Swisscom posted a drop in 2010 earnings before interest, taxes, depreciation and amortization because of a 102 million-franc provision for Fastweb.
“Fastweb was weaker than expected in local sales even as the Swiss business was partially able to compensate,” said Serge Rotzer, an analyst at Bank Vontobel.
The drop at Fastweb was led by lower revenue from residential customers, which fell 14 percent to 191 million euros ($284 million), Swisscom said. The stronger franc against the euro also sapped the value of revenue when translated into the Swiss currency.
The residential customer offer was streamlined, stopping “a number of product lines that were generating significant bad debts including PC sales, TV sales and phones,” Chief Executive Officer Carsten Schloter said on a conference call.
Second Half
“We expect improvements in the second half on all three metrics” of revenue, cash and Ebitda, Scholter said about Fastweb. “We put in place much stricter rules for credit checking, which means we refused a lot more customers.”
Swisscom was little changed at 396.8 francs as of 1 p.m. in Zurich. The stock has gained about 10 percent in the past year, giving the company a market value of 20.6 billion francs. Swisscom bought out a remaining stake in Fastweb this year and delisted the company in March.
In January, Fastweb and News Corp.’s satellite-broadcasting unit Sky Italia signed an agreement to jointly offer bundled television and broadband services.
Swisscom projected “a transitional year” in 2011. It reiterated today that revenue will be at least 11.8 billion francs, compared with 12 billion francs last year. Earnings before interest, taxes, depreciation and amortization are forecast at more than 4.6 billion francs. The outlook is based on exchange rate of 1.30 francs to the euro for the conversion of Fastweb’s results.
The company said if all targets are met, it will propose a minimum dividend of 21 francs per share for the 2011.
First-quarter net income rose to 469 million francs from 394 million francs a year earlier and Ebitda climbed 6.4 percent to 1.13 billion francs.
--With assistance from Leigh Baldwin in Zurich. Editors: Kenneth Wong, Jerrold Colten
To contact the reporter on this story: Chiara Remondini in Milan at cremondini@bloomberg.net
To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net
