10 April 2001
In contrast to many other European telecommunications providers Swisscom has produced a very strong balance sheet. Last year Swisscom reduced net debt by CHF 3.4 billion to CHF 2.9 billion and increased its equity ratio by 6.9 percentage points to 38.9%. These results provide the company with the necessary financial resources to forge ahead with its strategic objectives. Swisscom will continue to systematically implement measures to reduce costs and increase efficiency.
Swisscom´s Board of Directors will propose to the Shareholders´ Meeting of 29 May 2001 a dividend of CHF 11 (compared to CHF 15 in the previous year) and a reduction in share capital to CHF 1,250.35 million through a capital reduction of CHF 8 per share. Subject to the approval of the Shareholders´ Meeting, shareholders will receive a pay-out of CHF 19 per share. This will amount to a pay-out ratio of 44.2% of net income or approximately CHF 1.4 billion.
As a token of gratitude for good performance and as an incentive for the future, Swisscom is granting Swisscom shares to its employees. A share/option scheme for middle and senior management is also being launched. Swisscom will purchase up to 70,000 shares on the open market for the employee share issue and the share/option scheme.
In the year 2000 Swisscom´s revenues increased by 27.5% year-on-year to CHF 14,093 million. Excluding debitel, revenues remained practically unchanged. Operating income (EBIT) fell 26.2% to CHF 1,836 million. Swisscom posted income after taxes of CHF 1,575 million from the disposal of holdings (Cablecom, D Plus and tesion). Net income rose by 32.2% to CHF 3,161 million thanks to these transactions and the good financial result.
An agreement was made in November 2000 for a 25% participation by the Vodafone Group in Swisscom´s mobile communications business (Mobile Com) for a price of CHF 4.5 billion. Proceeds from the first tranche of the purchase price minus acquisition costs amount to CHF 2.1 billion. The remaining CHF 2.3 billion is to be paid within the next 12 months in cash or in Vodafone shares.
The results posted by Swisscom´s business activities varied considerably from segment to segment in 2000. Total fixed-network traffic increased by 30% thanks to strong growth in Internet and Wholesale business: call minutes totaled 40 billion.
In fixed telephony (Public Com) revenues fell by 18.6% to CHF 4,042 million as a result of price reductions and loss of market share. Swisscom also anticipates fierce competition and further pressure on prices in 2001. On 1 October 1999 Swisscom expanded the local area at the expense of the long-distance area which resulted in a fall in long-distance traffic. Thanks mainly to strong growth in Internet communications value added services traffic increased by 97.3%. ISDN continues to boom: Swisscom increased the number of ISDN channels by 29.6%.
Public Com recorded operating income before interest (EBIT) of CHF 677 million, representing a year-on-year decrease of 51.6%.Cost reductions were not sufficient to compensate for the decline in revenues because of the high proportion of fixed costs in fixed-network telephony (infrastructure costs, depreciation).
The level of market penetration in Swiss mobile communications advanced from 42% to 64% in the year under review. Swisscom took full advantage of this market growth, increasing revenues by 21.4% to CHF 2,847 million and growing its customer base by 886,000 in net terms to around 3.2 million. Average monthly revenue per customer fell in comparison to the previous year by 12.2% to CHF 72 principally as a result of charge reductions in June and November 1999. Increased revenues from roaming contracts also contributed to the growth. Revenues from Swisscom customers abroad and foreign customers who use the Swisscom network rose by 39.1% to CHF 693 million. At 651 million, SMS messages showed a three-fold increase year-on-year.
Operating income (EBIT) from Mobile Com amounted to CHF 1,192 million, 7.6% down on the previous year. The EBIT margin narrowed from 45.3% to 34.8% mainly due to higher costs for the acquisition (price reductions on equipment) of new customers.
Revenues at Business Com fell by 4.8% to CHF 1,383 million resulting in negative operating income of CHF 8 million which represents a fall of CHF 37 million in comparison to the previous year. Operating income was adversely affected by set-up costs for IP platforms (Internet protocol based networks) and e-commerce solutions.
Revenues at Wholesale and Carrier Services jumped by 56.8% to CHF 1179 million. An increasing number of telecommunications companies used national interconnection services which produced strong growth: Traffic volumes doubled in comparison to the previous year. Swisscom forecasts an increase in volumes and revenues in its national business.
The price reductions in national interconnection services resulted in a narrowing of the EBIT margin from 31.9% to 17.0%.
On 1 October 1999 Swisscom acquired a majority stake in debitel AG, Europe´s largest network-independent mobile service provider. In the year under review debitel increased its revenues by 26.3% to CHF 3,993 million. The increase in revenues in local currency amounted to 32%. This strong growth was mainly due to the increase in customer numbers. The level of market penetration in German mobile communications jumped by over 30 percentage points to 58%. Debitel succeeded in achieving disproportionately high growth in Germany. At end 2000 the company had a market share of 14%. The customer base in German mobile communications grew by around 116% to reach 6 million customers. Besides it home market Germany, debitel has operations in the Netherlands, France, Denmark and Slovenia. The customer base increased significantly in these markets too, to reach 40%. At end 2000 debitel´s total customer base stood at over 8.6 million. Growth at debitel created more than 600 new jobs in 2000, over 400 of which were in Germany.
Debitel increased operating income by 13.4% year-on-year to CHF 127 million before goodwill depreciation (as per IAS) despite higher sales costs for the acquisition of new customers.
Switzerland´s leading Internet provider Bluewin recorded strong growth in customer numbers. The number of active access customers soared by 79.2% to around 550,000 by end 2000. Start-up losses at Bluewin and Conextrade resulted in a CHF 60 million fall in operating income.
Excluding debitel the number of full-time equivalent employees fell by 9.3% to 17,459 in the year under review. Personnel expenses fell 7.1% to CHF 2,297 million. This includes staff reduction expenses at CHF 122 million (CHF 249 million in the previous year) as part of the social plan agreed with the employee associations. In 2000 such expenses were incurred for a total of 872 departures in comparison to 1822 in the previous year. Swisscom will implement further downsizing measures in 2001 as already announced in spring 2000 which will result in a reduction in personnel and extraordinary expenses.
Net cash provided by operating activities of CHF 4.2 billion allowed Swisscom to fully finance investment in non-current assets and the payment of profit distribution for the 1999 financial year and also to reduce net debt considerably. The disposal of holdings resulted in proceeds for Swisscom of around CHF 1.8 billion.
Investments remained stable at CHF 1450 million. In mobile communications Swisscom concentrated on building up the GSM network in preparation for the launch of GPRS data services. Over the next few years Swisscom will invest over one billion Swiss francs in the UMTS network.
In fixed-network operations Swisscom invested heavily in setting up a broadband infrastructure and migrating from today´s mainly voice-oriented network to an IP-based multi-service network. In 2001 this area of investment will become considerably more important as a result of strong demand for broadband services.
In 2001 Swisscom will continue to operate in a fiercely competitive market environment. Swisscom´s aim is to maintain and enhance its position as Switzerland´s leading full-service provider of telecommunications services. We anticipate a slowdown of market growth in mobile communications. Pressure on margins in fixed-network telephony and in mobile communications is set to continue.
The growth rate will also level off in Germany, the most important market for debitel. Debitel aims to achieve growth at a higher rate than the market as a whole. After withdrawal from the UMTS auction in Germany debitel will expand its existing business model for UMTS and market mobile services as an enhanced service provider. Debitel and D2 Vodafone signed an agreement on cooperation on UMTS. Negotiations are also underway with other UMTS license holders.
Possible acquisitions in European data communications offer further growth potential for Swisscom.
Swisscom forecasts slight growth in revenues for 2001. There will be sustained pressure on margins in 2001 which will result in significantly lower operating income (EBIT). Swisscom aims to stabilize the EBITDA margin (operating income before restructuring charges and depreciation) at between 22% and 25% in the next few years.
190 buildings were disposed of at a price of CHF 2.55 billion in March 2001. These transactions produced income after taxes of CHF 500 million. Swisscom will receive significant income of the agreement with Vodafone on its 25% shareholding in Swisscom Mobile AG. Thanks to these extraordinary transactions Swisscom expects to increase net income despite lower operating income.
Bern, 10. April 2001