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Press release

Second Shareholders' Meeting in Zurich: Swisscom calls for fair play

30 May 2000

Die zweite Swisscom-Generalversammlung vom 30. Mai 2000 im Zürcher Hallenstadion stand im Zeichen der neusten Branchenentwicklungen. Gemäss Konzernchef Jens Alder will Swisscom die sich neu bietenden Chancen im E-Business entschlossen anpacken und den Wert des Unternehmens nachhaltig steigern. Skeptisch äusserte sich der Präsident des Verwaltungsrates, Markus Rauh, zu den bevorstehenden Auktionen der UMTS-Mobiltelefonlizenzen in Europa, die sich als indirekte Steuer für die Konsumenten entpuppten. Um gleich lange Spiesse wie die Konkurrenz zu erhalten und den Handlungs-spielraum zu erhöhen, forderte Rauh eine rasche Überführung von Swisscom in eine Aktiengesellschaft nach Obligationenrecht.

Swisscom increased the number of registered shareholders in the second year after floatation to around 63,000. The government holds 48,175,250 shares, which correspond to 65.5% of the total share capital - 15.4% more than the legal minimum. The free float of 25,374,750 shares (34.5% of the total share capital) is divided between Switzerland (11.2%), Great Britain (11.4%), North America (5.6%) and the rest of the world (6.3%).

Customer base doubled thanks to debitel - increased dividend proposed

Markus Rauh, Chairman of the Board, assessed Swisscom´s current position in a highly competitive market with over 250 new providers engaged in tough price wars as positive: "Despite the rigours of tough regulatory provisions and aggressive competition, we have succeeded in maintaining our leadership position. This is primarily due to the introduction of new products, active development of the market, and strategic exploitation of our strengths as a provider of mobile communication and Internet services, and doubling our customer base by acquiring debitel."

Extraordinary transactions helped Swisscom achieve a very good end-year result for 1999. The Board asked shareholders to approve an increase of the dividend from 11 to 15 francs per share.

New economy sets new standards - e-commerce, the business of the future

Markus Rauh mentioned the emergence of numerous new Internet firms and the many partnerships among them. He also noted that the financial markets gave the companies very high ratings. "E-business is the key word and the crucial motor driving the new economy. The new economic order is forcing companies to adapt to a completely new ball game with a completely different set of rules. One of the main characteristics of the new economy is the fact that companies are only assessed to a certain extent according to profitability and cash flow. Investors and analysts rate sales growth, the number of customers and innovative services based on Internet protocol very highly. E-commerce, and above all mobile commerce, are the high flyers at the moment. Big is better, irrespective of scale and synergies that can be achieved in operational terms."

According to CEO Jens Alder, the future of Swisscom lies in three business areas: Swiss core business; international services, and e-business. Swisscom intends using these three business areas to position itself in the growth markets mobile & data and Internet. Alder: "There is great potential in the increasing demand for broadband access and broadband services in the fixed-line network. Swisscom will be meeting that demand with new services such as ADSL technology."
Swisscom is clearly the market leader in its successful Swiss mobile telephony business, and already has approximately 2.6 million customers. By acquiring a UMTS licence in Switzerland and Germany, Swisscom intends to capture a strong position in the third-generation mobile communication market - the market of the future.

UMTS licence fees: taxes for the Swiss Confederation

Markus Rauh looks with scepticism on the coming auctions of UMTS licences in Europe. "The figures attained at auction in Britain have raised hopes of a money-spinning operation in this country: an estimated 8 to 10 billion francs could flow into state coffers. But the dream of the auction as a licence to print money is not realistic. For in the end, its´s the customer who foots the bill! The government may well have a ball in the short term - but the celebrations will be short-lived when the rebound brings annul prices in the order of 600 francs per year for each customer. The massive auction prices may well turn out to be an investment hurdle that effectively puts the brake on innovation. An auction recently held in Britain turned out to be nothing other than an indirect tax without any kind of economic benefit."

According to Rauh, the expected auction costs involved in acquiring a UMTS licence and establishing a UMTS infrastructure require separate financing models. An IPO of Swisscom´s Mobile division is currently being considered as one way of financing this extremely ambitious project. However, the majority of the stock capital will remain with Swisscom.

A possible IPO of the rapidly growing Internet provider Blue Window in the second half of 2000 is already being planned. With 500,000 customers, Blue Window is the undisputed number one in Switzerland. An IPO of Swisscom´s Austrian subsidiary, UTA, is also being considered.

Swisscom should be transformed into a joint-stock corporation under the Swiss Code of Obligations

At the moment, Swisscom - unlike its competitors - is a special-status joint-stock corporation. The special statute stipulates, among other things, that the state hold a majority of the shares. Swisscom´s Board of Directors sees this special law and the way it is interpreted as a major reason for the disappointing development of Swisscom´s share price in comparison with other European telecommunications companies.

As Markus Rauh put it at the Shareholders´ Meeting: "In light of the fast pace of industry consolidation, Swisscom needs to grasp the initiative now and take advantage of our position of strength at an early stage in order to join forces with competent partners who look to the long term. Having the freedom to take such a step is vitally important to the company, its customers, staff and shareholders - and is in the interests of the Swiss economy as a whole. Only a strong Swisscom capable of action can ensure that the value it creates can be preserved; that jobs are not lost and that decision-making power is not taken out of the country. To be able to use the opportunities presented by a rapidly changing market, Swisscom must be transformed into a private-law joint-stock corporation under the Swiss Code of Obligations. This is the only way we can attain the freedom of movement we so desperately need to be in a position to shape the future. Time is running out, and it is measured in Internet years."

Rauh emphasised that basic nationwide services in Switzerland are linked neither to a change in status nor to the law governing telecommunications companies (TUG). Basic services are governed by the Telecommunications Act (FMG) and will not be called into question. Rauh: "Nor would civil status mean that the state - which we appreciate highly as a stable and reliable majority shareholder - would have to sell its shares immediately."

Swisscom expects a marked increase in revenues for 2000

According to CEO Jens Alder, Swisscom expects a marked increase in revenues for the current year thanks to the consolidation of debitel. However, due to limited opportunities for growth in Switzerland, the operating income will probably be lower than in 1999. Thanks to extraordinary transactions, net income is expected to increase.

These prospects will force Swisscom to take far-reaching steps aimed at increasing efficiency and reducing costs, which include the job cuts effective from 2001 announced earlier in the year. Together with debitel, cost structures and performance should be improved; growth outside Switzerland should be further encouraged, hence consolidating and expanding Swisscom´s position as one of the leading Value-Added Service-Providers in Central Europe.

Zurich, May 30, 2000


Swisscom AG
Media Relations
3050 Bern