Bloomberg News

Swisscom Third-Quarter Profit Rises 5.2% on Settlement Payment

November 09, 2011

Nov. 9 (Bloomberg) -- Swisscom AG, the telephone company that owns Fastweb SpA, said third-quarter profit rose 5.2 percent because of a payment to its Italian unit as a settlement in a lawsuit with a competitor.

Net income advanced to 564 million francs ($629 million) from 536 million francs a year earlier, the Bern-based company said today in a statement. Sales fell 7.1 percent to 2.82 billion francs. Analysts expected profit of 505.2 million francs and revenue of 2.9 billion francs, according to the average of five and 13 estimates compiled by Bloomberg.

Following the settlement of litigation with another telecommunications company, Fastweb will receive a payment of 56 million euros ($77 million), which was booked in the third quarter under other income.

Swisscom, Switzerland’s largest phone operator, lowered its full-year targets in August because of the franc’s strength, which is sapping the value of euro-denominated sales from its Fastweb unit. Swisscom today repeated its forecast that 2011 sales will probably total 11.5 billion francs and earnings before interest, taxes, depreciation and amortization will be 4.6 billion francs. The forecast assumes a euro/Swiss franc exchange rate of 1.20.

The company also reiterated that it expects to pay a minimum dividend of 21 francs per share for 2011.

Swisscom yesterday rose 0.8 percent to 352.10 francs in Zurich trading, giving it a market value of 18.2 billion francs.

The Swiss National Bank on Sept. 6 imposed a ceiling of 1.20 francs per euro on Switzerland’s currency to aid exporters. This move “removes FX uncertainties from Fastweb and mobile roaming revenues, in addition to limiting concerns for Swisscom’s exposure to the success of exporting Swiss corporates,” Michael Zorko, an analyst at Exane BNP Paribas, said in a note this week.

Swisscom, which acquired Milan-based Fastweb in 2007 to offset slowing growth in the Swiss market, faces intense competition in Italy. Last year, the company took a 102 million- franc charge related to a probe into alleged value-added-tax fraud and money laundering at the unit.

Asked about a potential sale of Fastweb, Swisscom Chief Executive Officer Carsten Schloter said last month that the company is open to all options although it has no plan to leave Italy and wants to remain a long-term investor.

--Editors: Thomas Mulier, Jerrold Colten, David Risser

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


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