Shareholders' Letter

Provisions for interconnection and other access services of Swisscom Switzerland pursuant to
the revised Federal Telecommunications Act (FMG)
Various proceedings are in course in connection with the setting of prices for interconnection and
other access services. Swisscom has raised provisions on the basis of its own estimate of the
expected financial outcome thereof. As of 31 December 2010, the provisions for interconnection
and other access services aggregated CHF 159 million. Further developments in the proceedings
or a decision by the competent court may result in a revised assessment of the financial outcome
in subsequent years, thereby necessitating an increase or decrease of the recorded provisions. See
Note 28.
Proceedings conducted by the Competition Commission
The Competition Commission (ComCo) is currently conducting various proceedings against
Swisscom. The individual proceedings are described in Note 29. In the event that Swisscom is
deemed to have violated Antitrust Law, ComCo is entitled to impose sanctions. On the basis of a
legal opinion, Swisscom considers it unlikely that ComCo will impose direct sanctions. Accordingly,
no provisions were recognised in the 2010 consolidated financial statements in connection with
these proceedings. Further developments in the proceedings may result in a revised assessment
of the financial outcome in subsequent years and lead to the need to record provisions.
Allowances for doubtful receivables
Allowances for doubtful receivables are recorded in order to cover foreseeable losses arising from
a customer’s insolvency. As of 31 December 2010, the carrying value of allowances for trade and
other receivables totalled CHF 262 million. In determining the appropriateness of the allowance,
several factors are considered. These include the ageing of receivables, the current financial soundness
of the customer and the historical experience with receivable losses. The actual level of receivable
losses may be higher than the amount recognised if the actual financial situation of the customers
is worse than originally expected. See Note 18.
Deferred taxes
The recognition of deferred tax assets and liabilities is based on the judgment of management.
Deferred tax assets on tax loss carry-forwards are only recognised if it is probable that they can
be used. Whether or not they can be used depends on whether taxable profits can be achieved
which can be offset against the available tax loss carry-forwards. In order to assess the probability
of their future use, estimates must be made of various factors such as future profitability. If the
actual amounts differ from the estimates, this can lead to a change in the assessment of recoverability
of the deferred tax assets. On 31 December 2010, recognised deferred tax assets amounted
to CHF 285 million. See Note 15.
Useful lives of property, plant and equipment
As of 31 December 2010, the carrying amount of property, plant and equipment totalled CHF 7,899
million. In assessing the useful life of an item of property, plant and equipment, the expected use
of the asset by the company, the expected physical wear and tear, technological developments as
well as past experience with comparable assets are considered. The assessment of useful lives is
based upon the judgment of management. A change in the useful lives may impact the future
level of depreciation and amortisation recorded. See Notes 3.7 and 23.
Consolidated financial statements 154 | 155
Notes to the consolidated financial statements