Shareholders' Letter

Summary
Swisscom’s net revenue fell by CHF 13 million or 0.1% to CHF 11,988 million. At constant exchange
rates this represents an increase of 2.1%. The Italian subsidiary Fastweb increased net revenue in
local currency terms by 1.5% to EUR 1,880 million. Excluding Fastweb, revenue rose by CHF 208
million or 2.3% to CHF 9,426 million, primarily due to the economic recovery, acquisition of subsidiaries
by Swisscom IT Services and growth in mobile communications and bundled products.
Growth in customer numbers and volume of CHF 546 million more than compensated for price
erosion in Swiss core business of CHF 526 million.
Operating income before depreciation and amortisation (EBITDA) fell by CHF 87 million or 1.9% to
CHF 4,597 million. The decrease in EBITDA was primarily attributable to a provision of EUR 70 million
(CHF 102 million) for VAT proceedings against Fastweb. The provision was created following
an investigation report against Fastweb and other persons and companies relating to VAT fraud
and criminal association, published by Italian investigating authorities on 23 February 2010.
Adjusted for the provision recognised in the first quarter of 2010 for the VAT proceedings against
Fastweb and currency effects, EBITDA increased year-on-year by 1.7%.
Net income declined by 7.1% or CHF 137 million to CHF 1,786 million, largely as a result of the provision
for the VAT proceedings against Fastweb, as well as higher income tax expense. The share
of net income attributable to equity holders of Swisscom Ltd decreased year-on-year by 6.0% to
CHF 1,811 million. This resulted in a fall in earnings per share from CHF 37.18 to CHF 34.96.
Capital expenditure declined by 4.2% to CHF 1,903 million and amounted to 15.9% (prior year:
16.6%) of net revenue. The decrease in capital expenditure was mainly due to currency effects.
Adjusted for currency effects, capital expenditure fell by 1.2%.
Operating free cash flow fell by CHF 173 million or 6.4% to CHF 2,512 million, mainly due to the
settlement of provisions in respect of interconnection proceedings in Switzerland. A dividend of
CHF 21 per share (prior year: CHF 20 per share) will be proposed at the Annual General Meeting
on 20 April 2011. This will represent a total dividend payout of CHF 1,088 million.
Net debt declined during the reporting period by CHF 293 million to CHF 8,848 million. The ratio
of net debt to EBITDA fell from 2.0 to 1.9. Two debenture bonds were issued and long-term bank
loans and private placements totalling around CHF 2,200 million were raised in 2010 and used in
full to repay existing bank loans.
Headcount increased during the reporting period by 68 full-time equivalent employees or 0.3% to
19,547 FTEs. Headcount in Switzerland increased year-on-year by 69 to 16,064 full-time equivalent
employees.
Swisscom expects to close 2011 with net revenue of at least CHF 11.8 billion, EBITDA in excess of
CHF 4.6 billion and capital expenditure below CHF 2.0 billion. Swisscom expects marketing initiatives
and efficiency enhancements at Fastweb to generate strong revenue and cash flow growth
in the years following the transition year of 2011, which is expected to end with stable revenue
but slightly higher EBITDA. The capital expenditure outlook does not include expenses in connection
with the mobile frequency auction planned for 2011, since it is not possible at this point in
time to reliably estimate the outcome and the prices that will ultimately be paid. For the same
reason, Swisscom is also not making any projections concerning operating free cash flow. The outlook
is also associated with uncertainty regarding currency movements. Fastweb's financial results
are based on an assumed exchange rate for the euro of CHF 1.30 (prior year: CHF 1.37). If all targets
are met, Swisscom will propose a minimum dividend of CHF 21 per share for the 2011 financial
year.