Swisscom AG (SCMN), Switzerland’s biggest phone company, reduced its full-year earnings forecast on costs related to cutting jobs after third-quarter profit missed analysts’ estimates.
Net income declined to 458 million francs ($485 million) from 564 million francs a year earlier, the Bern-based company said in a statement today. That missed the 480 million-franc average estimate of analysts surveyed by Bloomberg. Sales fell 0.4 percent to 2.81 billion francs, matching the estimate.
“The Swiss business was weaker than expected mainly due to the residential market,” said Serge Rotzer, an analyst at Bank Vontobel AG. “Domestic business has been weak in many countries in Europe this year. The main difference is that Swisscom has new tariff plans, which should lead to better earnings in the future.”
Swisscom cut its prediction of 2012 earnings before interest, taxes, depreciation and amortization to 4.35 billion francs from an earlier forecast of 4.4 billion francs. The phone company cited non-recurring costs of 50 million francs in connection with changes in headcount.
The stock fell 1.3 percent to 381.90 francs at 10:15 a.m. in Zurich trading, giving the company a market value of 19.8 billion francs. The shares gained 8.7 percent this year through yesterday compared with a 9.7 percent drop of the 23-company Bloomberg Europe Telecommunications Services Index.
Swisscom repeated its full-year sales forecast, which it had lowered in August after the rise of the franc against the euro weighed on revenue from Italy. Swisscom expects revenue to decline to 11.3 billion francs this year.
Swisscom bought Italian fixed-line and Internet operator Fastweb SpA in 2007 to compensate for slowing domestic growth. The operator has also suffered from competition in Italy. The Swiss National Bank has pledged to enforce the franc ceiling of 1.20 per euro since September 2011 to fight deflation and help exporters.
Third-quarter Ebitda fell 9.8 percent to 1.13 billion francs. The carrier repeated that if all 2012 targets are met, it plans to propose a dividend of 22 francs per share to be paid next year.
The company said Oct. 31 that it will eliminate about 100 managerial positions and 300 other jobs, while at the same time creating about 300 jobs in growth areas.
“Price erosion over the past year has accelerated slightly,” Chief Executive Officer Carsten Schloter said in a conference call today. “The acquisition of new clients is excellent, in all businesses.”
Swisscom’s domestic operations reported a 0.3 percent decline in revenue.
“Price erosion in the Swiss market amounting to 280 million francs was almost offset by growth businesses worth about 255 million francs,” the company said in a statement.
Swisscom is introducing new offerings to attract customers and compensate for falling sales resulting from competition, pressure on prices and changes in consumer behavior. In June the company started new flat-rate mobile and Internet plans and it has begun bundled offerings such as Vivo Casa, which combines fixed-line access with telephony, Internet and TV.
“Swisscom is continuing to struggle with price erosion as customers move to flat-rate tariffs,” brokerage Espirito Santo said in a note today.
Fastweb added 31,000 users in the third quarter. Third- quarter net revenue at the business fell 2.9 percent to 408 million euros ($520 million). CEO Schloter said Fastweb is “doing really well” and has booked the highest growth in customer numbers in Italy over the past three months.
To contact the reporter on this story: Chiara Remondini in Milan at firstname.lastname@example.org
To contact the editor responsible for this story: Kenneth Wong at email@example.com