Shareholders' Letter

Since 2000, several telecommunication service providers have filed petitions with the Federal Communications
Commission (ComCo) for the reduction of the interconnection prices charged to them
by Swisscom. As a result of various rulings and decisions, the interconnection prices for the years
2000 to 2008 were fixed in a legally binding manner and the payments for these years were made
in 2009. As a consequence of the decision of the Federal Court of 21 April 2006, the risk exists that
those telecommunication service providers having accepted the charges will demand retroactively
a reduction in their interconnection prices from Swisscom. In 2006, provisions were therefore
raised to cover this risk of claim. With two rulings of 9 October 2008, ComCo recorded the fact that,
by virtue of law, the price rulings are valid retroactively for all telecommunication service providers
(retrospective third-party clause). Swisscom contested these rulings with its appeal of 10 November
2008. With its decisions of 1 and 19 February 2010, the Federal Administrative Court allowed
the appeals of Swisscom as it is of the opinion that the price rulings shall apply only to the parties
to the proceedings and not additionally to third parties by virtue of law. In two rulings of 21 June
2010, ComCo laid down retrospective third-party clauses without limiting the period for their retrospective
application. ComCo thus left the decision as to the period of application of the retrospective
third-party clause to the civil courts. In the second half of 2010, settlements were reached
with different telecommunication service providers in an aggregate amount of CHF 104 million,
which was paid in the fourth quarter of 2010. As a result of the settlements, provisions totalling
CHF 46 million were released in the fourth quarter of 2010. Of this amount, CHF 18 million relates
to interest and thus was released to financial income. The remaining portion of the release of CHF
28 million was recorded in other operating expense. In 2009, in related additional petitions, three
telecommunication service providers applied to ComCo to rule on a reduction in interconnection
prices charged by Swisscom for 2009. In its ruling of 13 December 2010, ComCo laid down the
interconnection prices for 2009 and 2010 and lowered the prices each by some 5%.
Proceedings are still pending with ComCo in respect of other access services pursuant to the
revised Federal Telecommunications Act. Other access services encompass collocation, subscriber
connections, cable ducts and rental lines. With its ruling of 13 December 2010, ComCo lowered
the prices for subscriber connections for the years 2009 and 2010 by 8% to 9%. On the other hand,
the prices for collocation were largely reconfirmed. In rulings of 10 March 2010, ComCo established
the Swisscom’s position of market dominance regarding all transmission technologies capable of
being used for rental lines of all bandwidths throughout Switzerland. The only exception was the
connection between various locations where connections of at least two alternative service
providers are possible. On 26 April 2010, Swisscom appealed against these rulings. In the fourth
quarter of 2010, these proceedings were reappraised and the provisions were increased by CHF
39 million.
As of 31 December 2010, the provisions for the proceedings concerning interconnection and other
access services of Swisscom (Switzerland) Ltd totalled CHF 159 million. Payments made in 2010
amounted to CHF 116 million. Payment of the remaining claims is dependent of the timing of the
respective legally binding rulings and decisions.
Provisions for interconnection – Fastweb
In earlier years, Fastweb recorded provisions for legal action initiated by Telecom Italia regarding
interconnection services. In June 2008, a settlement with Telecom Italia could be reached and the
legal action terminated. Provisions as of 31 December 2008 of EUR 11 million (CHF 16 million)
were used in 2009 to settle the outstanding liabilities.
Provisions arising from cross-border lease agreements
In 2008, Swisscom raised provisions of CHF 258 million for costs in connection with the early termination
of three quarters of the volume of cross-border leases. The consummation of the early
contract termination and the compensation payment of CHF 258 million occurred in the second
quarter of 2009. See Note 26.
Other provisions
Other provisions include provisions for environmental, contractual and tax risks, as well as provisions
for insurance claims. The non-current portion of the provisions will most likely be settled
between 2012 and 2015.
Consolidated financial statements 188 | 189
Notes to the consolidated financial statements