Swisscom Third-Quarter Profit Rises on Settlement Payment
November 10, 2011, 1:42 AM ESTBy Chiara Remondini
(Updates with comment by CEO from fourth paragraph.)
Nov. 9 (Bloomberg) -- Swisscom AG, Switzerland’s biggest phone company, said third-quarter profit rose 5.2 percent because of a payment from a competitor to its Italian Internet service provider unit Fastweb SpA to settle a lawsuit.
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.
“The payment was a one-off but it’s also part of the business, as we’ve already had three or four payments of this kind in the past five years,” Chief Executive Officer Carsten Schloter said in a conference call today.
Swisscom lowered its full-year targets in August because of the franc’s strength, which is sapping the value of euro- denominated sales from Italy. 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.
Forecasts Confirmed
“We confirm forecasts for 2011. We’re working on the business plan for 2012 and the overall economy has an impact on our 2012 forecasts,” the CEO said on the call.
The company also reiterated that it expects to pay a minimum dividend of 21 francs per share for 2011.
“Swisscom remains one of the most defensive names in the sector,” Serge Rotzer, an analyst at Bank Vontobel, wrote in a note today. “Swisscom will be able to keep up its attractive dividend policy despite difficult markets.”
Swisscom fell 0.4 percent to 350.70 francs as of 9:19 a.m. in Zurich trading, giving the company 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.
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’s CEO 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.
--With assistance from Paul Verschuur in Zurich. Editors: Thomas Mulier, 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
