UPDATE: Swisscom Reiterates Targets Despite Profit, Sales Fall

Swisscom AG (SCMN.VX) Wednesday repeated its sales outlook for the year even though sales in the second quarter fell and its net profit missed analysts' expectations.

The Bern-based telecommunications company said it still expects sales in the full-year to be 9.15 billion Swiss francs ($8.8 billion), even though second quarter revenue fell 0.3% to CHF2.99 billion as Italian broadband unit Fastweb contributed lower sales.

Net profit for the three months fell 7% to CHF493 million, from CHF530 million a year earlier, below analysts' expectations for CHF503 million.

Swisscom repeated its outlook for the year, which is for revenue of roughly CHF9.15 billion, not including Italian broadband unit Fastweb SpA (FWB.MI); earnings before interest, depreciation and amortization of CHF3.75 billion and capital expenditure of roughly CHF1.3 billion.

Swisscom in the first quarter took a charge of CHF100 million in risk provisions for Fastweb after prosecutors placed the Italian unit's head Stefano Parisi under investigation for alleged tax fraud. Parisi voluntarily suspended himself in April, as part of an agreement with prosecutors to avoid placing the company under court-administration.

Fastweb's chairman and Swisscom Chief Executive Carsten Schloter is filling in as CEO of the Italian unit while the investigation is under way.

Swisscom shares, which have shed 0.1% so far this year amid a 6.1% drop in the Stoxx Telecom index, closed at CHF395.10 Wednesday, giving the company a market capitalization of $19.4 billion.

Swisscom, which is majority-owned by the Swiss government, has seen increasing competition in recent years as international brands such as France Telecom SA's (FTE) Orange and Danish TDC AS's (TDC.KO) Sunrise enter the Swiss market.

Swisscom said its full-year free cash flow, not including special payments such as provisions for legal proceedings, will be roughly CHF2.6 billion.

Swisscom shares are known as a defensive bet on regular shareholder payouts; in 2009, the company paid a CHF20-a-share dividend, which translates to a 5.1% dividend yield, according to Bank Vontobel.

-By Katharina Bart, Dow Jones Newswires; [phone]; [e-mail]