Shareholders' Letter

14 Financial income and financial expense
In CHF million 2010 2009 restated
Interest income 46 48
Capitalised borrowing costs 12 15
Foreign exchange gains – 14
Dilution gain in connection with associated companies – 44
Other financial income 35 23
Total financial income 93 144
Interest expense (307) (329)
Present-value adjustments on provisions (30) (22)
Foreign exchange losses (58) –
Costs for termination of hedges (34) (96)
Other financial expense (29) (46)
Total financial expense (458) (493)
Financial income and financial expense, net (365) (349)
In the second half-year of 2010, hedging relationships designated as cash flow hedges in connection
with the early repayment of bank loans were terminated. The cumulative revaluation losses
amounting to CHF 34 million were taken out of other reserves within equity and recorded as other
financial expenses in the income statement. In connection with company acquisitions, options
were recognised and an amount of CHF 14 million was recorded as other financial income during
the first quarter of 2010. In 2010, settlements were reached with various telecommunication service
providers regarding regulatory proceedings. As a result of the settlements, provisions for interest
aggregating CHF 18 million were released and credited to other financial income. See Note 28.
In 2009, the associated company Belgacom International Carrier Services undertook a share capital
increase. Swisscom did not participate in this capital increase. As a result of this, a profit on dilution
of CHF 44 million was recorded as financial income. See Note 25. In the second half of 2009, hedging
relationships designated as cash flow hedges were terminated in connection with the early
repayment of bank debt. The cumulative revaluation losses aggregating CHF 96 million were transferred
out of other reserves within equity and recognised as financial expense in the income statement.
See Note 33. In 2009, as a result of the early termination of various cross-border lease agreements,
previously unrecorded financial assets and liabilities were recorded for the first time. The
revaluation difference from the initial recording of CHF 16 million was reported as other financial
income. See Note 26.
In CHF million 2010 2009 restated
Interest income on cash and cash equivalents 1 2
Interest income on held-to-maturity financial assets – 20
Interest income on other financial assets 45 26
Total interest income 46 48
Interest expense on bank loans, debenture bonds and private placements (244) (249)
Interest expense on financial liabilities from cross-border lease agreements – (26)
Interest expense on finance lease liabilities (46) (44)
Interest expense on other financial liabilities (17) (10)
Total interest expense (307) (329)
Net interest expense (261) (281)