Shareholders' Letter

Net revenue
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%, primarily due to the economic recovery, company acquisitions
by Swisscom IT Services and the growth in mobile business and bundled offerings. At
Swisscom Switzerland, revenue from external customers increased by 1.5% to CHF 8,500 million.
Growth in customer numbers and volume of CHF 546 million more than compensated for price
erosion in Swiss core business of CHF 526 million. In comparison with the previous year, revenue
from mobile data traffic with Swisscom customers rose by 33.2% to CHF 435 million. Revenue from
external customers at Fastweb increased by 7.9% in Swiss francs to CHF 2,562 million, while in
local currency net revenue was up 1.3%. Fastweb consolidated its market position in the business
customer segment, while the residential customers and SME segments felt the effects of intensifying
competitive pressure. Revenue from external customers in other operating segments
increased by 10.3% to CHF 925 million, mainly due to the acquisition of subsidiaries by Swisscom
IT Services. Adjusted for acquisitions, revenue from external customers generated by other operating
segments increased year-on-year by 3.3%.
Goods and services purchased
Goods and services purchased rose slightly year-on-year by CHF 17 million or 0.6% to CHF 2,665
million. Excluding acquisition of subsidiaries, goods and services purchased fell by CHF 15 million
or 0.6%. Operating expense at Swisscom Switzerland increased; at Fastweb the fall is currencyrelated.
At Swisscom Switzerland the increase was largely due to an increase in goods purchased,
and was partially offset by lower termination rates. The fall in traffic charges was mainly the result
of lower roaming and termination rates. The increase in goods purchased is attributable to higher
sales of multifunctional mobile devices (smartphones). At Fastweb, operating expense increased
in local currency terms largely due to customer growth.
Personnel expense
Personnel expense decreased by CHF 57 million or 2.2% to CHF 2,520 million, largely due to lower
headcount at Swisscom Switzerland. At 19,547 full-time equivalent employees, headcount at 31
December 2010 was 68 full-time equivalent employees or 0.3% higher than in the prior year. An
increase at Swisscom Switzerland and Swisscom IT Services due to acquisitions was partly offset
by efficiency improvements.
Other operating expense
At CHF 2,510 million, other operating expense remained at the previous year’s level. Adjusted for
the EUR 70 million (CHF 102 million) provision recorded in the first quarter of 2010 for VAT proceedings
against Fastweb, other operating expense fell year-on-year by 4.0%. The fall is largely currency-related.
Capitalised self-constructed assets and other income
At CHF 304 million, capitalised self-constructed assets and other income were CHF 113 million or
27.1% lower year-on-year. Other income in the previous year included compensation payments
totalling EUR 20 million (CHF 30 million), received by Fastweb from Telecom Italia for unfair soliciting
of customers.
Operating income before depreciation and amortisation (EBITDA)
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, recognised in the first quarter of 2010.
Adjusted for this item and for currency effects, EBITDA rose by 1.7% or CHF 78 million year-on-year,
mainly as a result of the improvement in operating income at Swisscom Switzerland.
Depreciation, amortisation and impairment losses
Depreciation, amortisation and impairment losses fell by CHF 23 million or 1.2% to CHF 1,972 million.
Adjusted for currency effects, depreciation and amortisation increased by CHF 52 million or
2.6%, predominantly as a result of Swisscom Switzerland’s investment in a new customer relationship
management system, which is amortised over its estimated useful life using the straightline
method from the beginning of 2010. Depreciation and amortisation includes scheduled amortisation
related to business combinations in the amount of CHF 149 million (prior year: CHF 163
million), which were capitalised as intangible assets for purchase price allocation purposes.