Swisscom CEO Expects Decline In 2013 Earnings

By John Revill

ZURICH--Swisscom AG (SCMN.VX) Thursday said it expects its 2013 earnings to decline as it increases investment to upgrade its mobile phone and internet network in Switzerland and at its Italian subsidiary Fastweb.

"We think 2013 will be very much in line with 2012--stable revenues with slightly lower EBITDA--because we need higher costs for the ramp-up in infrastructure," Chief Executive Carsten Schloter told The Wall Street Journal.

The telecoms operator expects operating profit of 4.25 billion Swiss francs ($4.66 billion) in 2013, down from CHF4.38 billion in 2012.

Mr. Schloter said he expects earnings and sales to improve in the longer term.

"We expect growth in the horizon of three years and we will see that," he said. "This level of capital expenditure will not stay the same for the next 20 years."

He was speaking as Swisscom reported earnings slightly ahead of expectations. Annual net profit attributable to shareholders rose 156% to 1.76 billion Swiss francs, while annual revenue fell 0.7% to CHF11.38 billion.

Like many telecoms operators, Swisscom has been battling declining revenues as mobile phone users move to cheaper flat- rate tariffs and bundled contracts which combine home internet, TV and fixed-telephone services.

Swisscom's capital expenditure will increase to CHF2.4 billion from CHF1.99 billion in 2012 as the company expands its high-speed internet network across Switzerland.

As a result, the company, which is majority owned by the Swiss government, said it will hold its 2012 and 2013 dividend at CHF22, same as 2011. Mr. Schloter said this isn't a sign that Swisscom doesn't believe in the future.

If that were the case, he said, "we would cut our dividend as many other operators have done."

"Maintaining a stable dividend which has a yield of 6% in today's interest world is phenomenal," he added.

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