Shareholders' Letter

Measures are in place for most risks facing Swisscom. Strategic risks are entered into according to
defined criteria.
Swisscom also deploys a Group-wide internal control system in the area of financial risks. The system
aims to ensure reliable internal and external financial reporting and safeguard against misreporting
(disclosure violations or errors) of business transactions. Internal policies and instruments
such as the Accounting Manual or the whistle-blowing platform support this goal. The
internal control system incorporates all responsible units at the appropriate level, including the
Audit Committee and the Group Executive Board. Swisscom sees the internal control system as
an ongoing task and an opportunity to continually improve processes in bookkeeping, accounting
and financial reporting.
Measures are also taken to mitigate operational risks in the areas of security, business continuity
management, crisis management and financial risk management.
Opportunity and risk management
2010 saw the launch of a six-monthly coordination process between the Strategy department and
the Risk Management department, in which opportunities and risks relating to short- and longterm
strategic projects are discussed and possible risk scenarios drawn up and entered in the risk
profile. The Risk Management department also provides the risk input information for the business
planning process.
This process serves to ensure that new strategic options match the risk profile of the Swisscom
Group.
Risk factors
Political and regulatory risks
For Swisscom, telecommunications and antitrust legislation entail risks which could have a serious
and sustained impact on the company’s future financial position and results. In particular, public
authorities can issue rulings on prices and impose penalties which could reduce Swisscom’s profitability
and lead to an outflow of funds. Regulatory decisions regarding access prices could also
influence the range of products and services as well as investment decisions.
A decision by the Federal Court on proceedings relating to sanctions under competition law in the
mobile termination area is expected in 2011. This decision could have an impact on ongoing and
future proceedings and can have important financial implications. Besides financial damage,
Swisscom’s reputation could also come under pressure.
Most of the issues contested by Swisscom concerning the new Telecommunications Act have been
resolved. However, new parliamentary initiatives to revise the Act are once more increasing uncertainty.
Swisscom also faces antitrust investigations, which primarily concern allegations of abuse of its
market-dominant position. In cases where such practices are deemed by the competition authorities
to be unlawful, the companies in question face the threat of sanctions.
The outcome of proceedings currently under judicial consideration could lead to a revised assessment
in the coming year. A key priority is to avoid antitrust legal proceedings. Swisscom operates
an internal compliance scheme to ensure that its business activities adhere to the provisions of
antitrust legislation.
Sector-specific risks
Telecommunications market
A change in the structure of the telecommunications market in Switzerland could have a prolonged
impact on the structure of competition and on market behaviour. Swisscom mitigates this risk by
ensuring that it remains efficient and competitive.
Management Commentary 70 | 71
Risks