Operationally, the telecom group is reasonably on track. However, legacy competition law and the strength of the Swiss franc cloud the picture.
Swisscom has to accept a significant drop in profits.
The famous hundred days are not over yet. Christoph Aeschlimann has been in the executive chair of the country’s largest telecom group for around two months. On June 1, the former head of technology and network Urs Schaeppi replaced at the top. The direction of travel of a tanker like Swisscom can hardly be influenced in such a short time.
However, the half-year result published by the group on Thursday gives an indication of the legacy Aeschlimann has assumed after the almost ten-year Schaeppi era. At first glance, the figures do not bode well. Net profit fell by a quarter to CHF 785 million. However, that says very little about the form of the company. The diver can be explained with special factors.
Last year, Swisscom sold its stake in the Belgian telecom company Belgacom. In addition, in 2021, an appreciation of the stake held by the Italian subsidiary Fastweb in a newly founded fiber optics company artificially inflated profits. Because these one-time gains totaling 207 million francs are “missing” in the current year, net profit is almost inevitably reduced due to the base effect.
The strength of the Swiss franc “eats” the profit of the Italian subsidiary
However, Swisscom also has to report a dampener in the operational figures. Sales fell only slightly, by 1.6 percent, to just under 5.5 billion francs. Unlike in the surprisingly strong previous quarter, the “blue giant” was no longer able to overcompensate for the drop in revenue with cost reductions. Seen over the entire half year, the operating profit (Ebitda) fell by 5.4 percent compared to the same period last year and slipped below 2.2 billion francs.
This is also partly due to special effects. Fastweb’s contribution to the Group’s profit fell due to the weak euro. The 5 percent increase in the operating profit of the flourishing Italian subsidiary was completely “eaten up” by the change in the exchange rate. In addition, a fine from the Competition Commission (Weko) burdened the result with 72 million francs. Swisscom had already announced in June that this would have a negative impact on operating profit in the second quarter.
Swisscom sees itself on course despite the setback
The reason for this was the general confirmation by the Federal Administrative Court of a fine imposed by ComCo in 2016. Like the competition authorities, the judges came to the conclusion that Swisscom abused its dominant position in the field of TV sports rights from 2006 to 2013. Of course, the telecom group sees things differently. At the beginning of July, the judgment went to the federal court.
According to Swisscom, without the special effects mentioned, net profit would have increased by 8.2 percent. Despite the mixed result, Swisscom is not changing its outlook for the year as a whole. The company still expects sales of between CHF 11.1 and 11.2 billion. Operating profit (Ebitda) is also still being targeted at 4.4 billion francs.