Shareholders' Letter

Development of exchange rate CHF/EUR
2.00
1.75
1.50
1.25
1.00
See
www.swisscom.ch/
Investor/en
Swisscom took advantage of the favourable bond market conditions and, in August 2010, issued
two debenture bonds totalling CHF 750 million with maturities of 2 and 12 years. In addition, further
bank loans and private placements were raised in 2010. The funds were used to repay existing
bank loans. This refinancing served to further optimise the interest rate and maturity structure of
the Group’s financial obligations. The share of the Group’s variable rate financial liabilities
amounts to around 30%.
Market-based interest rates influence the valuation of various items in the Swisscom consolidated
financial statements such as goodwill related to Fastweb, accrued pension costs and the longterm
provision for dismantlement and restoration costs. The interest rate level also has a considerable
influence on the return potential and thus on the financial position of the Swisscom pension
fund.
Exchange rates
In 2010 the value of the Swiss franc rose sharply against other currencies which are important for
Swisscom’s operations, appreciating by around 16% against the euro and around 9% against the
US dollar.
1.61
2006
1.65
2007
1.49
2008
1.48
2009
Swisscom’s business activities in Switzerland are not significantly influenced by currency movements.
Only a small share of revenue is generated in foreign currencies. The procurement of handsets
and technical systems and fees for the use of fixed networks and mobile networks abroad by
Swisscom customers (roaming) give rise to transaction risks in foreign currencies (notably EUR
and USD), which are largely hedged by forward foreign exchange transactions.
Outstanding financial liabilities are almost exclusively denominated in Swiss francs. Currency
translations in respect of foreign Group companies, in particular Fastweb in Italy, affect the presentation
of the financial position and results of operations in the consolidated financial statements.
Cumulative currency losses recognised in Group equity rose by CHF 1.0 billion to CHF 1.8
billion in 2010.
Capital market
Although international equity markets performed positively in 2010, the SMI index fell by 1.68%.
Bond markets profited from a further drop in interest rates. Swisscom holds surplus liquidity in
the form of cash and cash equivalents and in short-term money-market investments. There are
no direct financial investments in equities, bonds or other non-current financial assets. Swisscom
pension fund assets of around CHF 7 billion, which are invested in equities, bonds and other investment
categories, are subject to capital market risks and therefore indirectly affect Swisscom’s
assets and financial position.
1.25
2010
Management Commentary 16 | 17
Environment, strategy and organisation