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Press release

Interim report at 30 September 2000: sustained growth in mobile communications

29 November 2000

In fixed-network telephony (Public Com), loss of market share and price reductions caused revenues to fall by 19.4% to CHF 3145 million. The main declines in revenue were in national long-distance and international phone traffic. On 1 October, 1999, the local area was expanded at the expense of the long-distance area. Value-added services continued to post strong growth in volume thanks to the Internet boom. In contrast, national and international traffic volumes each fell by around 10%. The number of ISDN accesses was again increased in the third quarter. At end-September Swisscom reached 1.68 million ISDN channels, which corresponds to growth of 22.6% since the start of the year.

Massive price reductions in fixed-network telephony resulted in a deterioration in the EBIT margin to 17.8% from 29.5% in the corresponding period of 1999. Public Com contributed CHF 594 million or 37.4% to the group´s operating income compared with just over 50% in the same period last year.


High new customer acquisition rates in mobile communication - SMS boom

Mobile Com acquired 681,000 net new customers in the first nine months of 2000, 256,000 of which in Q3. With market share of around 67%, the number of customers stood at around 2.97 million as at September 30, 2000, of which 37.3% are prepaid card (Natel easy) customers. Revenues rose by 21.0% on the previous year to CHF 2114 million. This rate of growth will inevitably slow to some extent in view of increasing market saturation. Average revenue per user (ARPU) per month amounted to CHF 73 compared to CHF 85 in the same period of the previous year. A total of 418 million SMS messages were sent in 2000, more than three times the number sent in the first nine months of the previous year.

Mobile Com´s EBIT margin fell from 47.4% to 37.6% on the same period of 1999. This decline was caused by lower prices and higher customer acquisition costs.


High IP platform set-up costs - growth in interconnection

Business Com achieved revenues of CHF 1017 million by September 30, 2000, a decline of 3.3% on the same period of the previous year. Operating loss (EBIT) amounted to CHF 18 million as against operating income of CHF 33 million in the first nine months of 1999. The set-up of IP (Internet protocol) platforms resulted in exceptionally high costs. Furthermore, revenues from PBXs fell by 10.9% to CHF 388 million. With revenues of CHF 420 million and an increase in revenues of 7.1% on the previous year, leased-line business continued to exceed expectations. However, price reductions in the second half of 2000 will cause growth in revenues to slow.

Revenues from Wholesale and Carrier Services increased dramatically by 70.5% to CHF 880 million. National interconnection services and international carrier´s carrier services contributed to strong growth. Operating income was increased by 11.3% from CHF 309 million to CHF 344 million thanks to increased volumes. Interconnection price reductions on the basis of regulatory guidelines resulted in a narrowing of the EBIT margin from 30.3% to 18.6% despite higher volumes.


debitel increases customer base to 7.4 million in Europe

debitel was fully consolidated as of 1 October 1999 and is therefore not included in last year´s income statement. In the first nine months of 2000 debitel grew the number of its customers to 7.4 million. In Germany alone customer acquisitions of 2.3 million so far this year have taken the total number of customers to 5.4 million. At CHF 2865 million, revenues are 30.9% up on the previous year. EBIT before amortization of goodwill is CHF 87 million. debitel´s EBIT fell slightly in Germany because of increased customer acquisition costs. debitel´s business abroad also affected EBIT negatively.


High operating expenditure and reduced personnel expenditure

Operating expenditure including depreciation expanded by CHF 3577 million to CHF 8954 million in the first nine months compared with the same period of 1999. CHF 3026 million of this increase relates to debitel including the amortization of goodwill. The rise in operating expenditure is mainly due to higher costs for terminating calls on the networks of other operators, the cost of roaming and customer acquisition costs in mobile communications (dealer commissions). Excluding debitel, personnel expenditure was cut by 3.0% compared with the same period of the previous year and staff levels were reduced by 1480 employees or 7.6%.

The year 2000 has seen the successful sale of a number of holdings. The sale of the holding in Cablecom generated a profit of CHF 1335 million after tax. The liquidation of the shareholding in D Plus realized income of CHF 196 million, while the sale of an interest in the German company tesion in Q3 generated CHF 176 million.


Outlook for 2000: Swisscom anticipates a slight increase in net income

Thanks to the first-time consolidation of debitel, the Swisscom group will grow revenues considerably in the year 2000. Furthermore, revenues at Mobile Com will considerably exceed those of the previous year. Pressure on margins in fixed-network telephony continues which means that operating income at Public Com will be markedly lower than in 1999. Further job losses will be necessary in Switzerland in the period 2001 - 2003. This will be reflected in restructuring costs in Q4 2000 which will be lower than in the previous year. Operating income (EBIT) will be considerably down on last year. A slight increase in net income is anticipated in comparison to the previous year thanks to the successful one-time sales of holdings and the positive financial result.

With regard to third-generation UMTS, an agreement was signed with the British company Vodafone on a strategic partnership at the beginning of November 2000. Vodafone will take a 25% holding at a cost of CHF 4.5 billion in Swisscom Mobile AG when it is set up. In addition, a non-exclusive agreement as an enhanced service provider has been concluded for debitel with the Vodafone subsidiary D2 Mannesmann. This agreement secures access to UMTS technology for debitel in Germany.

Bern, 29 November 2000


Swisscom AG
Media Relations
3050 Bern