21 December 2005
The Telecommunications Enterprise Act states that the Federal Council must specify the Swiss government's goals as majority shareholder in the company for a four-year period. This commits the Federal Council to longer-term, consistent goals and the publication of these goals establishes transparency for third-party investors. The main shareholder's strategic goals establish a framework for Swisscom's own strategy which is drawn up by the Executive Board and approved by the Board of Directors. After consulting with Swisscom, the Federal Council has now passed its goals for 2006 to 2009. Swisscom has acknowledged this and will accordingly determine its future corporate strategy in the months to come.
Parts of the Federal Council's goals also concern how profits and free reserves are used. The Swiss government expects Swisscom to follow a pay-out policy that returns all free funds remaining from a business year after any value-adding investments and loan repayments have been made to the shareholders via share buy-backs and dividend payments as usual. A decision concerning the use of profits and distribution of funds to shareholders as proposed by the Board of Directors, will be reached at the General Meeting of Shareholders.
The distributable reserves of Swisscom Ltd will amount to around CHF 3 billion at the end of 2005. The Swiss government expects these to be reduced to a maximum of CHF 1 billion over the four-year period. Currently, Swisscom has net funds of over CHF 1 billion and a pay-out to reduce the amount of reserves would incur net debt amounting to CHF 1 billion. According to the goals, the government has restricted permissible net debt to, at most, one and a half times EBITDA of around CHF 4.1 billion in 2005 as per the consolidated financial statements. On the back of current business, this would result in a financial framework with a maximum additional debt potential of around CHF 5 billion for acquisitions over the next four years.
Holdings abroad are still possible if they support Swisscom's core business within Switzerland or can be shown to follow another strategic-industrial logic. The Federal Council, however, expects Swisscom not to enter into any investments in foreign telecommunications companies with a universal service obligation (USO) mandate. Swisscom will also carefully examine these guidelines and provide an update at the annual press conference on 8 March 2006, at the latest.