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Press release

Swisscom focuses on growth and calls for more room for manoeuvre

13 April 2000

Rauh is also in favour of obtaining more room for manoeuvre and calls for the Telecommunications Companies Act (TUG) to be abolished.The Swisscom group anticipates increased revenues, lower operating income and higher net income for the year 2000.

Swisscom CEO Jens Alder was able to present good results for 1999 at the balance-sheet press conference. Net revenues rose compared to last year by 6.7% to CHF 11.16 billion, while operating income (before restructuring costs) at CHF 2.74 billion is around 4% lower than in the previous year. Intensive competition, price erosion and heavy losses in fixed-line communication could not be offset entirely by the boom in mobile communications. Thanks to extraordinary gains from affiliated companies and the elimination of losses from discontinued operations, net income was increased by around 54% to CHF 2.39 billion.

According to CFO Dave Schnell, operating expenses increased by CHF 38 million - if the acquisition of debitel is excluded - due to a sharp increase in costs in the areas of IT, advertising and sales. By contrast, human resources costs were reduced by 13% to CHF 2.2 billion as planned.

The Board of Directors will propose an increase in dividend from CHF 11 to CHF 15 at the Shareholders Meeting on May 30, 2000. As a reward for good performance and an incentive for the future, Swisscom is involving its employees in the company´s success in 1999 by presenting them with shares. In the next few days, Swisscom will purchase 60,000 shares on the open market.


E-business as a driving force and a new sector

Swisscom sees its future in its Swiss core business, in international business activities and in e-business. According to CEO Jens Alder, Swisscom will integrate its e-business activities into a new division: "We are aware of the potential of this growth market and aim to be one of the leading e-business providers in the Swiss market". The purpose of this new division is first and foremost to develop and build up promising new business and so take on an "incubator" role. In collaboration with CommerceOne, Swisscom is establishing a B2B online marketplace in which the first transactions have already been made. With Andersen Consulting and the Swiss Post, Swisscom was able to secure its first important strategic partners for the e-marketplace.

The Internet provider Blue Window was able to more than double its customer base to 322,900 in 1999 - and has since increased this number to over 450,000. Blue Window will be floated as a stock corporation on 1 May 2000 and a possible IPO is currently being prepared. Swisscom also enlisted another attractive partner for Blue Window by striking a deal with Bertelsmann Online Schweiz.


Abolition of the TUG to provide greater room for manoeuvre

To increase the company´s flexibility, in particular with regard to strategic partnerships, Markus Rauh calls for the removal of special legal conditions which restrict Swisscom´s room to manoeuvre as a company, and for the abolition of the Telecommunications Companies Act (TUG). At the moment, the TUG establishes the majority share holding of the government: "Only as a stock corporation in accordance with the Swiss Code of Obligations will we have the necessary room for manoeuvre to allow us to shape Swisscom´s future in the rapidly changing environment." This does not mean that the government must sell its shares immediately. "But it would enable Swisscom to take the initiative in pursuing new options. To ensure that negotiations run to schedule, the political process would have to get underway immediately".


Swisscom considers a floatation of the mobile division

With around 2.5 million mobile customers, the Swisscom group is the clear market leader in Swiss mobile communications. According to the Chairman of the Swisscom Board of Directors, Markus Rauh, mobile telephony is now valued much higher than fixed-line telephony and the high costs for acquiring a UMTS license and the construction of a UMTS network require special financing models. For this reason, Swisscom is examining the possibility of floating Swisscom Mobile on the stock market, with a share majority being retained by the group. Markus Rauh: "These new shares will provide us with currency for trading in the new economy and enable us to carry out other transactions".


Growth in mobile data communication and broadband fixed-line services

In Switzerland, other potential growth areas are Mobile & Data, broadband access and fixed-line broadband services. In the Swiss mobile telecommunications business, Swisscom retained a margin of 43% in operating income (EBIT) despite intensive competition. A broadband offer based on the fixed-line network (ADSL) is expected to be launched this summer. ADSL enables above all small and medium-sized companies and Internet customers to have even faster and less expensive data transmission over normal copper lines.


debitel with over 200,000 new customers a month

The purchase of debitel, Europe´s biggest network-independent telephone company, enabled Swisscom to double its customer base at a stroke. Last year debitel registered more than 200,000 new customers a month - they now have around 5.5 million customers. debitel will also apply for a UMTS license in the booming growth market in Germany.


Outlook 2000: higher net income thanks to extraordinary transactions

Swisscom anticipates a substantial increase in revenues in the coming year owing to the full consolidation of debitel. However, because of restricted domestic growth potential, operating income will be lower than in the previous year. Swisscom nevertheless expects an increase in net income as a result of extraordinary transactions such as the sale of its share in Cablecom and the planned divestiture of a part of our real estate - providing market conditions remain the same.

Berne, 13 April 2000


Swisscom AG
Media Relations
3050 Bern