Swisscom AG

What they do

Swisscom operates through three main segments: Fixnet (fixed-line telephony, broadband internet, and data services), Mobile (mobile voice and data services), and Solutions (IT and network solutions for business customers). The company also has an 'Other' segment and holds participations in other entities. It is headquartered in Bern, Switzerland, and its shares are listed on the New York Stock Exchange.

Revenue drivers

• Fixnet — Provides fixed-line voice, broadband internet, and data services to residential and business customers. It is a major revenue contributor, with revenue of CHF 6,255 million in 2006.
• Mobile — Offers mobile voice and data services to consumers and businesses. Revenue for 2006 was CHF 4,128 million.
• Solutions — Delivers IT and network solutions, including managed services, to enterprise customers. Revenue for 2006 was CHF 2,558 million.
• Other — Includes other operations and participations, contributing CHF 1,133 million in revenue in 2006.

Recent performance

For fiscal year 2006, Swisscom reported total revenue of CHF 14,074 million, an increase from CHF 13,447 million in 2005. Net income attributable to shareholders was CHF 2,295 million, up from CHF 2,194 million in 2005. The Fixnet segment saw a decline in voice revenue due to competition, while Mobile and Solutions reported growth. Operating expenses increased, but overall profitability improved.

Strategy

Swisscom's strategy focuses on expanding its broadband and mobile data offerings, enhancing its IT solutions portfolio, and investing in network infrastructure. The company aims to maintain its market leadership in Switzerland while pursuing growth opportunities in adjacent markets. It also emphasizes cost efficiency and innovation in products and services.

Risks

• Regulatory Risk — Swisscom faces stringent telecommunications regulation in Switzerland, which could lead to price controls or obligations that impact margins.
• Competition — Increased competition in fixed-line and mobile markets, including from cable operators and alternative providers, could erode market share and pricing power.
• Technological Change — Rapid technological developments, such as VoIP and mobile data, require significant investment and could disrupt existing services.
• Dependence on Swiss Market — Swisscom's revenue is heavily concentrated in Switzerland, making it vulnerable to domestic economic downturns or regulatory changes.

Outlook

Management expects continued revenue growth driven by mobile data and IT solutions, offset by ongoing declines in fixed-line voice. Capital expenditure is planned to support network upgrades, including fiber and mobile broadband. The company anticipates regulatory decisions to impact its wholesale pricing and market strategies.