Shareholders' Letter

Group financial position
Free cash flow in CHF million
4,597
Financial position
Cash flows
In CHF million 2010 2009 Change
Operating income before depreciation and amortisation (EBITDA) 4,597 4,684 (87)
Capital expenditure in property, plant and equipment
and other intangible assets
Proceeds from sale of property, plant and equipment
(1,903) (1,987) 84
and other intangible assets 34 31 3
Change in defined benefit obligation (227) (124) (103)
Change in net working capital and other cash flow from operating activities 19 135 (116)
Dividends paid to minority interests (8) (54) 46
Operating free cash flow 2,512 2,685 (173)
Net interest paid (284) (236) (48)
Income taxes paid (365) (300) (65)
Free cash flow 1,863 2,149 (286)
Net cash flow from financial investments (6) 859 (865)
Issuance and repayment of financial liabilities, net (544) (1,965) 1,421
Dividends paid to equity holders of Swisscom Ltd (1,036) (984) (52)
Purchase of minority interests of Fastweb (246) – (246)
Other cash flows from financing activities (40) (484) 444
Net decrease in cash and cash equivalents (9) (425) 416
–1,903
34 –227
2,512
EBITDA Capital Proceeds Change in Change in Dividends to Operating
expenditure from sale defined net working minorities free cash
of assets benefit
obligations
capital
flow
19
–8
–284
Net interest
paid
Taxes
paid
–365
1,863
Free
cash flow
Operating free cash flow decreased year-on-year by CHF 173 million or 6.4% to CHF 2,512 million,
mainly due to the change in defined benefit obligations and to settlement of provisions for legal
proceedings totalling CHF 179 million. Settlement of provisions for interconnection proceedings
in Switzerland in 2010 amounted to CHF 116 million in 2010 (prior year: CHF 93 million). Operating
income before depreciation and amortisation (EBITDA) and the change in net working capital for
2010 reflect the recognition of a provision for the VAT proceedings against Fastweb in the amount
of EUR 70 million (CHF 102 million). Provisions of EUR 46 million (CHF 63 million) were made in
2010 in connection with the VAT proceedings at Fastweb. The decrease in capital expenditure by
4.2% to CHF 1,903 million is largely attributable to currency effects. Adjusted for currency effects,
capital expenditure decreased by 1.2%.
Free cash flow declined by CHF 286 million year-on-year to CHF 1,863 million, as a result of lower
operating free cash flow and higher net interest and income tax payments. Net interest payments
increased by CHF 48 million, income tax payments by CHF 65 million.