Annual Report2014
Welcome
to the country
of possibilities
Swisscom is connecting Switzerland: Thanks to our
network, products and services, our customers have a sense
of independence and are able to use these in any way they
please, regardless of the location and time.
Swisscom assumes responsibility: Together with the Swiss
population, we are committed to our company.
Swisscom promotes skilled employees, i. e. people who
want to work together to make things happen for the
Switzerland of the future.
Shareholders’ letter
Dear Shareholders
Swisscom can look back on a successful year with strong customer
growth and stable core business. Targeted capital expenditure in network
and IT infrastructure is resulting in higher bandwidths and coverage.
Swisscom is tapping into new business areas through innovation and the
development of its core business, enabling it to guide its customers into
a future where the real and virtual worlds are blending into one.
The launch of Swisscom TV 2.0 and the ongoing trend towards bundled
offers and flat-rate fees are important success drivers. Despite continuing
competition and price pressure, characterised by general price erosion
and further price reductions for roaming services, operating income
increased compared with the previous year. Fastweb is also developing
nicely, with more than two million broadband customers.
Increase in Group revenue and operating income
In 2014, Swisscom’s net revenue rose by CHF 269 million or 2.4% to CHF 11,703 million, and oper-
ating income before depreciation and amortisation (EBITDA) grew by CHF 111 million or 2.6%
to CHF 4,413 million. Excluding one-off items, and at constant exchange rates, net revenue and
EBITDA increased by 1.9% and 0.9%, respectively. Net income increased by CHF 11 million or 0.6%
to CHF 1,706 million. The increase in EBITDA was offset in part by higher depreciation and amorti-
sation and higher income tax expense. Capital expenditure increased by CHF 40 million or 1.7% to
CHF 2,436 million due to the expansion of network infrastructure.
Solid business performance in Switzerland
In its Swiss business, Swisscom generated net revenue of CHF 9,586 million (+2.4%) and EBITDA
of CHF 3,788 million (+2.8%). Adjusted for one-off items, revenue and EBITDA were up 1.4% and
0.6%, respectively, year-on-year. Price erosion of CHF 360 million (of which CHF 170 million resulted
from reductions in roaming fees) in the Swiss core business was outweighed by customer and vol-
ume growth. Capital expenditure in Switzerland rose by CHF 65 million or 3.9% to CHF 1,751 mil-
lion. The higher capital expenditure is primarily due to the expansion and upgrading of mobile and
fixed network infrastructure with the latest technologies. At the end of 2014, Swisscom had con-
nected more than 1.4 million homes and offices to ultra-fast broadband. In Switzerland, headcount
increased by 910 full-time equivalents or 5.2% to 18,272 as a result of company acquisitions, the
hiring of new staff and the strengthening of customer service operations.
Fastweb developing nicely
As a result of the difficult economic situation, the Italian market is very challenging, but Italian
subsidiary Fastweb is developing nicely. The high capital expenditure of previous years is pay-
ing off in 2014. Excluding hubbing, Fastweb’s net revenue was EUR 63 million or 3.9% higher at
EUR 1,660 million. In 2014, Fastweb had more than two million broadband customers (+6.7%),
gained market share and improved its market position among both residential customers and
business customers. EBITDA increased by EUR 10 million or 2.0% year-on-year to EUR 515 million.
Capital expenditure remained on a par with the previous year at EUR 562 million (–0.5%). Fastweb
is continuing its expansion of the ultra-fast broadband network and by the end of 2016 aims to
have covered around 7.5 million homes and offices in Italy, i.e. 30% of the population.
Swisscom share performance in 2014
The Swisscom share price rose by 11% in 2014, which is 1.5 percentage points higher than the
average price gain of 9.5% posted by the 20 leading Swiss companies on the Swiss Exchange (SMI).
In terms of total shareholder return (share price movement and dividend payout), Swisscom out-
performed the SMI due to the high dividend yield. Payment of an unchanged ordinary dividend of
CHF 22 per share will be proposed to the Annual General Meeting of Shareholders. This is equiv-
alent to a total dividend payout of CHF 1,140 million. Swisscom is thus upholding the principle of
continuity in its dividend policy.
Always and everywhere online – in the country of possibilities
The digital world is increasingly becoming a part of all aspects of the economy and society. The three
trends “always online”, “Internet-based” and “global competition” grew stronger over the year.
Always online: in a few years, we will be accessing all personal and professional applications and
data in real time, irrespective of the end device. And it’s not just people, but also intelligent applica-
tions and devices that are increasingly connected with one another and they will grow to be even
more integrated in future. Digitisation and mobility are changing business models and allowing for
better customer experiences.
Internet-based: in future, all products and services will be operated on the basis of Internet protocol.
Storage space, processing power and software will increasingly be sourced from a secure cloud.
Global competition: digitisation and the spread of Internet-based communication services are
creating international markets. Worldwide competitors benefit from global economies of scale
and are changing business models in the telecoms market. Technical feasibility and changes in user
behaviour are driving mobility. At the same time, the demands placed on our infrastructure with
respect to availability, performance and security continue to rise. In order to prepare for the merg-
ing of the virtual and real world, Swisscom has enhanced its customer promise: Swisscom is the
best companion in today’s networked world. Trusted, simple, inspiring – Swisscom puts people and
their relationships at the heart of all it does.
Targeted capital expenditure for high bandwidth – the best infrastructure
The importance of the Internet for both personal and professional use continues to grow, which
entails greater user demand for high-performance, secure and area-wide network access. In the
high-investment competitive environment for the provision of networks among cable network
operators, power utility companies and mobile network operators, Swisscom offers its customers
the best network. For this reason, Swisscom invested CHF 1.75 billion in its network and IT infra-
structure in Switzerland, most of which was used to expand the mobile network with 4G/LTE and
the ultra-fast broadband fixed network.
Swisscom offers its customers mobile network access with a wide variety of service attributes
at a fixed price, providing them with unlimited use of many communication services. The funda-
mental difference among Swisscom offerings is the access speed. The infinity mobile subscriptions
launched in 2012 are popular: 2.1 million customers have already switched to one of them.
Similarly, in fixed-line services the focus is increasingly being placed on package offers that differ
primarily in the bandwidth and range of services they offer. Swisscom has consistently focused on
meeting customer needs with its Vivo packages. The Vivo packages, ranging from light to XL, com-
bine TV, Internet and fixed-line access and offer the ideal subscription for individual needs.
Broader mix of the state-of-the-art ultra-fast broadband technologies
By the end of 2014, Swisscom had connected more than 1.4 million homes and offices with ultra-
fast broadband – from Fibre-to-the-Home (FTTH) to the latest fibre-optic technology such as Fibre-
to-the-Street (FTTS), Fibre-to-the-Building (FTTB) and vectoring technology. Thanks to vectoring and
the use of G.fast, a new transmission standard on FTTS and FTTB, bandwidths of up to 500 Mbps
will soon be possible on traditional copper connections. Swisscom will be supplying 2.3 million
homes and offices with ultra-fast broadband by the end of 2015. Its goal is to provide the entire
country with the highest possible bandwidth in the coming years.
More bandwidth in the mobile network
Swisscom has expanded and upgraded its entire mobile network in recent years. As the first mobile
network operator in Switzerland, Swisscom commenced the commercial operation of 4G/LTE, the
fourth-generation mobile network, in 2012. By the end of 2014, Swisscom had already provided
4G/LTE coverage to 97% of the Swiss population, and nearly a million Swisscom customers are reg-
ularly using the new high-speed LTE network. Around 99% of the Swiss population will benefit from
mobile bandwidths of up to 150 Mbps by the end of 2016. Since summer 2014, Swisscom has intro-
duced LTE-Advanced with speeds of up to 300 Mbps in major Swiss cities, and is already testing the
next step of 450 Mbps in the laboratory. In 2015, it will also introduce WiFi Calling and Voice over
LTE (VoLTE), which will improve the mobile communication experience and make customers easier
to contact at home. Since April 2014 customers have enjoyed an additional reduction in prices for
data roaming. New data packages for EU countries offer customers considerably cheaper surfing
rates compared to EU regulated prices.
All IP – Internet protocol as a uniform language
Internet protocol (IP) is the most successful technology for data transmission in the world. The
transition from traditional fixed-network technology to the new IP-based system environment is a
global development. Swisscom, too, is gradually converting its infrastructure and driving the tran-
sition to All IP. This will create the basis for a more flexible and cost-effective market entry with
the latest products and services, as well as for new customer experiences thanks to the ability to
access data (images, voice, music, etc.) irrespective of time, device used and location. For Swisscom,
operation and processes will also be simpler and more cost-effective. Swisscom will thus secure its
own competitiveness as well as the competitiveness of its business customers and Switzerland as
a business location. More than 588,000 customers already use the comprehensive IP technology.
The aim is to migrate the entire Swisscom network to IP by the end of 2017.
Further development of core business and innovations – best experience
In a dynamic market environment, Swisscom continues to develop the traditional product portfolio
in the private and business customer market. The marketing of bundled products and cloud-based
Swisscom TV 2.0, which is already used by more than 300,000 customers, are important drivers.
Swisscom’s Teleclub Play video flat-rate service offers customers unlimited access to TV series,
films, children’s programmes, documentaries and a large sports archive at a fixed price. Swisscom
also uses innovations to tap into new business areas. It inspires its customers, provides them with
support in the digitised world and has successfully introduced new products to the market, e.g.
Docsafe, a platform for digital file exchange. The iO communication app has been enhanced and
now includes iO@home, which renders the fixed network mobile and ensures that users can be
contacted free of charge on their fixed-network number anywhere in the world.
New opportunities for growth for Swisscom
The cloud is becoming increasingly important for both residential and business customers, which
is why Swisscom opened a data centre in Berne Wankdorf in September 2014. It is one of the most
modern data centres in Europe and sets a new standard in terms of its energy efficiency, reliabil-
ity and availability. Any and all data stored in this data centre is and will remain in Switzerland.
The new data centre is part of Swisscom’s response to the growing demand for data protection
and security among its customers arising in connection with increasing connectivity. New techni-
cal capabilities also offer vertical growth potential, for example through industry solutions in the
banking, energy and healthcare sectors.
Internet-based services, such as search services and the marketing of advertising, are growing. In
September 2014, Swisscom assumed control of PubliGroupe SA. The main goal of this takeover
was to fully acquire and further develop the local group and thus to confront global competitors
with a strong Swiss provider. Swisscom and Tamedia have agreed to a partnership in the directories
business and are merging local.ch and search.ch into a joint subsidiary, of which Swisscom will hold
69% and Tamedia 31%. The merger is subject to the approval of the competition authority.
Bundling in the business customer market – ICT from a single source
The boundaries between our private and working lives are disappearing. The smartphone is a con-
stant companion, and telecommunication and IT are coalescing into one information and commu-
nication technology (ICT). To boost the level of effectiveness in the business customer area, as well
as to actively push ahead with convergence and single-source cloud-based solutions, Swisscom
bundled the telecoms and IT corporate business into Enterprise Customers at the start of the year.
This made Swisscom one of the largest integrated ICT providers in Switzerland. Since the beginning
of 2014, corporate customers have received the full range of ICT portfolio services from a single
source – Enterprise Customers. Christian Petit took over as head of the division Enterprise Custom-
ers as of 1 April 2014.
The best in the networked world – always and everywhere
The Board of Directors and management of Swisscom looked closely at the company’s strategy
and mission statement in 2014. This resulted in the new Swisscom mission statement. As the best
companion in today’s networked world, Swisscom wants its customers to feel secure and at ease,
allowing them to concentrate on what is essential to them and discover new possibilities. In doing
so, the focus is on people and their relationships. Customer focus, passion, sustainability, curiosity
and reliability are the values that guide us in offering our customers the best in the networked
world – always and everywhere.
Sustainability as an integral component of the corporate strategy
Swisscom’s commitment to the environment, society and the economy is an integral component
of its business strategy. The sustainability strategy is based on six core areas: climate protection,
working and living, media skills, attractive employer, fair supply chain and networked Switzerland.
Derived from these areas, Swisscom has set itself specific targets it aims to reach by 2020, such as
saving twice as much CO2 emissions as it produces throughout the company including the entire
supply chain through the use of ICT services. As a leading company in the area of data security,
Swisscom aims to provide a million people with support in using media in a safe and responsible
manner. Another goal is to enable 99% of the Swiss population to benefit from ultra-fast mobile
broadband connections and to provide 85% of homes and offices with ultra-fast internet access
by 2020. Swisscom therefore indirectly contributes around CHF 30 billion to the country’s Gross
Domestic Product and helps to create and maintain some 100,000 jobs.
Financial outlook for 2015
Swisscom expects to close 2015 with net revenue in excess of CHF 11.4 billion and EBITDA of
around CHF 4.2 billion. This outlook is based on an assumed euro exchange rate of CHF 1.00. It does
not take account of the possible negative implications of the currency situation for the economy.
The negative effects of the lower euro exchange rate will amount to almost CHF 400 million on net
revenue and around CHF 100 million on EBITDA. In the case of EBITDA, the All IP transformation,
higher pension costs and lower gains from the sale of real estate, will result in a reduction of more
than CHF 100 million. At CHF 2.3 billion, capital expenditure is expected to be some CHF 100 mil-
lion lower than in 2014, due to the lower euro exchange rate and a slight reduction in investment
in Fastweb. Capital expenditure in Switzerland will remain unchanged at CHF 1.75 billion. Subject
to achieving its targets, Swisscom will again propose a dividend of CHF 22 per share for the 2015
financial year at the 2016 Annual General Meeting.
Thank you
We can look back on a successful year. We owe our achievements in 2014 to the trust of our customers
and the loyalty of our shareholders. A huge thank you to all of you. Special thanks also go to our
employees again this year: it is thanks to your creative ideas, wholehearted dedication and commit-
ment that Swisscom is able to offer its customers the very best every day of the year.
Yours sincerely
Hansueli Loosli
Chairman of the Board of Directors
Swisscom Ltd
Urs Schaeppi
CEO Swisscom Ltd
Triple bottom line
Swisscom reports about the ecological, economic and social aspects and factors that shape its business
activities and its role as a corporate citizen.
Table of contents
Introduction
Management Commentary
Corporate Governance and Remuneration Report
Financial Statements
Further Information
8–19
20–87
88–127
128–211
212–224
“Confidential data
is being transmitted
more frequently via
the smartphone.
Our new app encrypts
the data being trans-
ferred via public WLANs
and blocks access to
dangerous websites.”
Carolin Latze
Team Lead Security
IT, Network & Innovation
Introduction
The best in
today’s net-
worked world –
everywhere
and anytime.
11,703 million CHF
net revenue in 2014, which
represents an increase of 2.4%.
21,125
employees
were employed by Swisscom as at the
end of 2014. Swisscom’s workforce includes
97 different nationalities.
26.4 %
Swisscom has been increasing
its energy efficiency in Switzerland
since 1 January 2010.
Topics
Introduction
14 KPIs of Swisscom Group
16 Key events 2014
18 Business overview
KPIs of Swisscom Group
In CHF million, except where indicated
Net revenue and results
Net revenue
Operating income before depreciation and amortisation (EBITDA)
EBITDA as % of net revenue
Operating income (EBIT)
Net income
Earnings per share
Balance sheet and cash flows
Equity at end of year
Equity ratio at end of year
Operating free cash flow
Capital expenditure in property, plant and equipment
and other intangible assets
Net debt at end of period
Operational data at end of period
Fixed access lines in Switzerland
Broadband access lines retail in Switzerland
Swisscom TV access lines in Switzerland
Mobile access lines in Switzerland
Revenue generating units (RGU) Switzerland
Unbundled fixed access lines in Switzerland
Broadband access lines wholesale in Switzerland
Broadband access lines in Italy
Swisscom share
Number of issued shares
Closing price at end of period
Market capitalisation at end of year
Dividend per share
Environmental key figures in Switzerland
Energy consumption
Energy efficiency increase since 1 January 2010
Direct CO2-emissions
Reduction of direct CO2-emissions since 1 January 2010
Employees
Full-time equivalent employees at end of year
Full-time equivalent employees in Switzerland at end of year
%
CHF
%
in thousand
in thousand
in thousand
in thousand
in thousand
in thousand
in thousand
in thousand
in thousand
CHF
CHF
GWh
%
tons
%
number
number
2014
2013
Change
11,703
11,434
4,413
37.7
2,322
1,706
32.70
5,457
26.1
1,860
2,436
8,120
2,778
1,890
1,165
6,540
4,302
37.6
2,258
1,695
32.53
6,002
29.3
1,978
2,396
7,812
2,879
1,811
1,000
6,407
12,373
12,097
180
262
2,072
51,802
522.50
27,067
22.00 1
497
26.4
21,380
17.0
21,125
18,272
256
215
1,942
51,802
470.90
24,394
22.00
498
21.1
23,835
3.9
20,108
17,362
2.4%
2.6%
2.8%
0.6%
0.5%
–9.1%
–6.0%
1.7%
3.9%
–3.5%
4.4%
16.5%
2.1%
2.3%
–29.7%
21.9%
6.7%
–
11.0%
11.0%
–
–0.2%
–10.3%
5.1%
5.2%
1 In accordance with the proposal of the Board of Directors to the Annual General Meeting.
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Net revenue in CHF million
EBITDA in CHF million
11,384
2,116
9,268
11,434
2,076
9,358
11,703
2,117
9,586
14,000
10,500
7,000
3,500
0
6,000
4,500
3,000
1,500
0
Other countries
Switzerland
4,477
613
3,864
4,302
617
3,685
4,413
625
3,788
2012
2013
2014
2012
2013
2014
Net income in CHF million
Capital expenditure in CHF million
1,815
1,695
1,706
3,000
2,250
1,500
750
0
2,529
535
1,994
2,396
710
1,686
2,436
685
1,751
3,000
2,250
1,500
750
0
2012
2013
2014
2012
2013
2014
Number of employees in full-time equivalent (FTE)
Energy efficiency increase in Switzerland
since 1 January 2010 in %
19,514
3,245
16,269
20,108
2,746
17,362
21,125
2,853
18,272
30,000
22,500
15,000
7,500
0
40
30
20
10
0
Other countries
Switzerland
26.4%
21.1%
15.1%
2012
2013
2014
2012
2013
2014
Other countries
Switzerland
Other countries
Switzerland
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Key events 2014
Market
> More than 1.4 million homes and businesses in Switzerland are already connected to ultra-fast
broadband. Thanks to a mixture of fibre-optic technologies, customers are benefiting from more
bandwidth – even outside the major conurbations.
> Fastweb expands its ultra-fast broadband network in Italy even further and has more than
2 million broadband customers.
> Swisscom is the first mobile provider in Switzerland to introduce LTE Advanced.
> Swisscom wins Connect magazine’s network test for the sixth year in a row.
> Swisscom reduces mobile phone rates for calls in Europe. Mobile surfing rates in Europe and in
many other countries are once again reduced for Swisscom customers.
> Swisscom customers use data packages with increasing frequency for mobile surfing abroad.
Attractive roaming tariffs contribute to a doubling of data volumes transmitted abroad.
> The Swiss Federal Office of Energy includes Swisscom Energy Solutions’ smart storage network in the
list of its flagship projects. The solution, which now carries the name “tiko”, is thus a forward-
looking and important component for the implementation of the Swiss Confederation’s
2050 energy strategy.
Products and services
> The completely new Swisscom TV 2.0 offers seven-day replay on over 250 channels.
Thanks to a cloud-based solution, customers can record any number of programmes in parallel.
> Thanks to the flat-rate video service Teleclub Play, Swisscom TV 2.0 customers have access
to several thousand hours of TV series, classic films, children’s programmes, documentaries and
sports content.
> The communications app iO makes fixed network numbers mobile. The new iO@home feature
allows fixed network customers with a Vivo package to make calls at no charge via their fixed-line
number to all Swiss networks, no matter whether they are phoning from Switzerland or abroad.
> Swisscom simplifies its prepaid products and offers phone service, SMS and mobile surfing at a
single prepaid tariff.
> Tapit is the first smartphone app on the Swiss market that allows users to make payments, collect
loyalty points and open doors in a single, neutral ecosystem.
> Swisscom launches Docsafe, the Swiss cloud storage solution for residential customers that enables
them to store their documents simply and securely online.
> Business users can use Vidia, the cloud-based videoconferencing solution for companies, to attend
meetings without being physically present.
> The Safe Connect app allows users to surf securely and easily, even when using other WLAN
networks. It does so by encrypting the data traffic sent via the mobile phone network.
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Sustainability
> The newly opened business park in Ittigen offers space for 2,000 employees.
Its environmentally sustainable construction makes it one of the largest Minergie-P-Eco office
buildings in Switzerland.
> Swisscom opens one of Europe’s most advanced and efficient data centres in Berne Wankdorf.
As one of very few data centres in Europe, it receives Tier-IV certification.
> Swisscom expands its course offering to promote media competency by more than 30%.
More than 25,000 parents, teachers and students take advantage of the course offering in 2014.
> As the third issue of the JAMES study shows, smartphones are becoming more and more important
for young people. This is because young people use their mobile phone to surf more than to make
phone calls.
> Swisscom builds three new photovoltaic plants in Les Ordons, Haute Nendaz and La Chaux-de-Fonds:
thus, Swisscom now operates seven photovoltaic plants in its transmitter locations and meets
its entire energy consumption needs through renewable energies.
> Swisscom opens a Swisscom Shop in Düdingen that has an innovative new concept:
the company’s first Junior Shop is run independently by trainees.
Business review
> Frank Esser, a member of the Vivendi Group Board of Directors until 2012, is now a member
of the Swisscom Board of Directors. He succeeds Richard Roy, who stepped down from the Board
of Directors after 11 years.
> Theophil Schlatter takes over as Vice-Chairman of the Board of Directors.
> Christian Petit takes over as head of Enterprise Customers and thus becomes a member
of the Swisscom Group Executive Board. Andreas König decided to resign his position and to leave
the company for personal reasons.
> Swisscom takes over PubliGroupe SA. Its primary aim is to further develop the directories business
of local.ch.
> Swisscom expands its ICT competence with the acquisition of Veltigroup.
> Swisscom bundles all workplace and collaboration competences in Enterprise Customers.
It merges subsidiary Axept Webcall with the Solution Center Workspace & Collaboration.
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Business overview
Swisscom provides financial reporting for the three operating divisions
Swisscom Switzerland, Fastweb and Other operating segments
as well as Group Headquarters.
Swisscom Switzerland
Swisscom Switzerland comprises the customer segments Residential Customers, Small and Medium-
Sized Enterprises, Enterprise Customers and Wholesale as well as the IT, Network & Innovation
division.
Residential Customers
The Residential Customers segment is the contact partner for mobile and fixed-line retail customers.
It provides Switzerland with broadband access lines, serves a growing number of Swisscom TV
customers and operates www.bluewin.ch, one of Switzerland’s most frequently visited Internet
portals. The Residential Customers segment offers all telephone, Internet and TV services, pay TV,
transmissions of sporting events and video on demand from a single source, as well as the sale of
end devices. In addition, Cinetrade operates one of the leading cinema chains in Switzerland.
Small and Medium-Sized Enterprises
The Small and Medium-Sized Enterprises segment offers a comprehensive range of products and
services – from fixed-line and mobile telephony to Internet and data services to IT infrastructure
maintenance and operation. Small and medium-sized enterprises receive integrated solutions
tailored to their needs: suitable connections, secure access, professional services and intelligent
networks. It also includes the directories business.
Enterprise Customers
Whether voice or data, mobile or fixed network, individual products or integrated solutions, as a
leading provider in the field of business communications, the Enterprise Customers segment supports
customers with the planning, implementation and operation of their IT and communications
infrastructure, including the provision of cost-efficient solutions and reliable services. Enterprise
Customers ranks as one of the leading providers specialising in the integration and operation of
complex IT systems. In addition, its core competencies are in the fields of IT outsourcing services,
workplace services, SAP services and services for the financial industry.
Wholesale
The Wholesale segment provides various services for other telecommunications providers, such as
regulated access to the “last mile” as well as commercial voice, data and broadband products. The
Wholesale segment also covers roaming with foreign providers.
IT, Network & Innovation
The IT, Network & Innovation (INI) segment builds, operates and maintains Swisscom’s nationwide
fixed network and mobile communications infrastructure in Switzerland. It is also responsible for
the development and production of standardised IT and network services for the entire Group and
for the operation of all IT systems. INI is also driving forward the migration of the networks to an
integrated IT- and IP-based platform (All IP). The segment also includes the support functions for
Swisscom Switzerland and Swisscom Real Estate Ltd. The expenses that are incurred are not
charged to the individual segments. The IT, Network & Innovation segment therefore only reports
expenses but no revenue.
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Fastweb
Fastweb is one of Italy’s largest broadband telecoms companies.
The Italian subsidiary is a leader in the development of multimedia and broadband communication
services. It operates the second-largest network in Italy and offers voice, data, Internet and IP TV
services. In addition, its offer includes comprehensive VPN and mobile services. Fastweb offers its
services in all large towns and cities in Italy and in all market segments. The services are provided
directly via the company’s own fibre-optic network or via unbundled fixed access lines and whole-
sale products of Telecom Italia.
Other operating segments
Other operating segments includes, in particular, the Participations unit.
Other operating segments comprises the Participations, Health, Connected Living and Swisscom
Hospitality Services units. Participations manages a portfolio of small and medium-sized enter-
prises whose activities are mainly related to or help support Swisscom’s core business. Swisscom
Health offers innovative ICT solutions for physicians, hospitals and insurers. Connected Living
develops and operates intelligent solutions for energy management. Swisscom Hospitality Services
supports the hotel industry worldwide with innovative network and communication solutions.
Group Headquarters
Group Headquarters chiefly comprises the Group divisions Group Business Steering, Group Strategy &
Board Services, Group Communications & Responsibility and Group Human Resources as well as
employment company Worklink AG.
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“We install, splice and repair
fibre-optic cables. We are
constantly expanding the
fibre-optic network in order
to ensure that the whole
of Switzerland can count
on being able to use the best
network.”
Adrian von Jenner
Network construction technician
cablex
Management Commentary
Helping customers
find their way
and enjoy the best
experiences in the
networked world.
Every 16 months
the volume of data
used in the fixed network
increases by 100%.
Every 12 months
the volume of data
used in the mobile network
increases by 100%.
Topics
Strategy, organisation
and environment
Business model and
customer relations
Employees
Innovation and
development
Financial review
Capital market
Risks
24 Group structure and organisation
26 Corporate strategy and objectives
30 Value-oriented business management
31 General conditions
43 Business activities
48 Products, services, sales channels
49 Customer satisfaction
50 Headcount
51 Employment law in Switzerland
53 Staff development
54 Staff recruitment
54 Employee satisfaction
55 Employment law in Italy
56 Open innovation: a success factor
57 Specific areas of innovation
58 Current innovation projects
59 Key financial figures
60 Introduction
60 Summary
61 Results of operations
64 Segment revenue and results
70 Quarterly review 2013 and 2014
73 Cash flows
74 Net asset position
76 Net debt
77 Capital expenditure
78 Statement of added value
79 Energy efficiency and CO2 emissions
80 Financial outlook
81 Swisscom share
83 Payout policy
83 Indebtedness
85 Risk management system
86 General statement on the risk situation
86 Risk factors
Strategy, organisation
and environment
The corporate strategy “Swisscom 2020” is aimed at maintaining
Swisscom’s position in the ICT market and offering customers only
the best. Trusted, simple, inspiring.
Group structure and organisation
Management structure
Swisscom has merged the corporate customer activities of its Corporate Business, Network & IT and
Swisscom IT Services divisions so it is able to provide business customers with one-stop offerings
and speed up the delivery of cloud-based solutions. Since 1 January 2014, all corporate customers
have been served by the new Enterprise Customers division, making it one of the biggest integrated
ICT providers for large companies in Switzerland. The IT, Network & Innovation division is now
responsible for the operation of all IT systems, including the IT platforms previously managed by
Swisscom IT Services, and for the development and production of standardised IT and network ser-
vices for the entire Swisscom Group. Swisscom IT Services will be integrated into Swisscom Switzer-
land, which will result in a simplified Group structure and shorter decision-making paths.
The Group organisation is based on the following management structure: the Board of Directors of
Swisscom Ltd is responsible for overall management and for determining the Group’s strategic,
organisational and budgetary principles. It delegates day-to-day business management to the CEO of
Swisscom Ltd, Urs Schaeppi. The heads of the business divisions Residential Customers, Small and
Medium-Sized Enterprises, Enterprise Customers and IT, Network & Innovation, along with the heads
of the Group divisions, report directly to the CEO of Swisscom Ltd. Swisscom’s Italian subsidiary,
Fastweb, is managed via the Board of Directors chaired by Swisscom’s CEO.
Board of Directors
CEO Swisscom Ltd
Group
Communications
& Responsibility
Group Strategy
& Board Services
Group Security
Residential
Customers
Small and
Medium-Sized
Enterprises
Enterprise
Customers
IT, Network
& Innovation
Group Business
Steering
Group Human
Resources
Member of the Group Excecutive Board
Group Functions
Group Companies
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Group structure
The holding company Swisscom Ltd is responsible for overall management as well as the strategic
and financial management of the Swisscom Group. By law, the Swiss Confederation must hold the
majority of shares in Swisscom Ltd. At 31 December 2014, the Confederation held 51.0% of the
shares in Swisscom Ltd.
At 31 December 2014, 28 Swiss subsidiaries (prior year: 27) and 32 foreign subsidiaries (prior year: 33)
were fully consolidated in Swisscom’s consolidated financial statements, while 7 associates (prior
year: 7) were accounted for according to the equity method. Swisscom also holds various non-
controlling interests in growth companies active in the IT, communications and entertainment
markets. Swisscom Ltd mainly holds direct shareholdings in Swisscom (Switzerland) Ltd, Swisscom
Broadcast Ltd and Swisscom Directories Ltd. Fastweb S.p.A. (Fastweb) is held indirectly via Swisscom
(Switzerland) Ltd and intermediate companies in Belgium and Italy. Swisscom Re Ltd in Liechten-
stein is the Group’s own reinsurance company.
In September 2014, Swisscom acquired PubliGroupe Ltd for a purchase price of CHF 474 million.
PubliGroupe Ltd mainly operates in the Swiss directory market. Prior to the takeover, it held half of
the Local Group (Swisscom Directories Ltd, LTV Yellow Pages Ltd and local.ch Ltd), with Swisscom
holding the other half. The main objective behind the acquisition of PubliGroupe is to gain full con-
trol over the Local Group and to develop it further. Following the takeover, LTV Yellow Pages Ltd and
local.ch Ltd were merged with Swisscom Directories Ltd. Swisscom and Tamedia now intend to
merge their directories business. The planned partnership between Swisscom and Tamedia is sub-
ject to the approval of the Competition Commission. Swisscom will hold 69% of the joint subsidiary
and fully consolidate the company. PubliGroupe holds other interests in media companies and pro-
viders of media services. Swisscom is planning to sell the interests in the media companies and will
evaluate all options for the other interests.
In January 2015, Swisscom acquired Veltigroup, thus expanding its ICT portfolio for business
customers and its presence in western Switzerland. Veltigroup is domiciled in Lausanne and is a
leading ICT service provider in western Switzerland. Veltigroup has around 480 employees in
Switzerland and offers companies a comprehensive ICT range, from infrastructure to end-client
services and solutions.
Segment reporting
For financial reporting purposes, the business divisions of Swisscom are allocated to individual seg-
ments based on the management structure. For practical reasons, segment reporting has not been
changed for the 2014 financial year. Consequently, as in the past, the 2014 consolidated financial
statements refer to the segments “Residential Customers”, “Small and Medium-Sized Enterprises”,
“Corporate Business”, “Wholesale” and “Network & IT”, which are grouped together as “Swisscom
Switzerland”. Swisscom IT Services is accounted for under “Other Operating Segments”. Segment
reporting will be adjusted in line with the management structure from 2015. It will comprise the
following: Swisscom Switzerland, Fastweb and Other Operating Segments. Swisscom Switzerland
covers the segments Residential Customers, Small and Medium-Sized Enterprises, Enterprise Cus-
tomers, Wholesale and IT, Network & Innovation. Group Headquarters, which primarily includes
the Group divisions as well as the employment company Worklink AG, will continue to be reported
separately.
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Structure of 2015 segment reporting
Swisscom Switzerland1
Fastweb
Other operating segments2
Group Headquarters
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> Swisscom (Switzerland) Ltd3
> CT Cinetrade Ltd4
> DL-Groupe GMG AG
> Swisscom Banking Provider Ltd
> Swisscom Directories Ltd
> Swisscom ITS Custom Solutions Ltd
> Swisscom Immobilien Ltd
> Veltigroup
> Wingo Ltd
> Fastweb S.p.A.
> Alphapay Ltd
> BFM Business Fleet Management Ltd
> Billag Ltd
> Cablex Ltd
> Datasport Ltd
> Swisscom Broadcast Ltd
> Swisscom Energy Solutions Ltd
> Swisscom Event & Media Solutions Ltd
> Hospitality Services5
> PubliGroupe Ltd6
> Mona Lisa Capital Ltd7
> Swisscom Ltd
> Swisscom Belgium N.V.
> Swisscom Italia S.r.l.
> Swisscom Re Ltd
> Worklink AG
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> Belgacom International Carrier SA
> Metroweb S.p.A.
> Medgate Holding Ltd
> Zanox Ltd
> Venturing Participations
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1 Swisscom Switzerland comprises the operating segments Residential Customers, Small and Medium-Sized Enterprises, Enterprise Customers,
Wholesale and IT, Network & Innovation.
2 Other operating Segments comprises the operating segments Participations, Health, Connected Living and Hospitality Services.
3 Swisscom (Switzerland) Ltd has operating subsidiaries in Austria, the Netherlands, Singapore, Switzerland and the USA.
4 CT Cinetrade Ltd has subsidiaries in Switzerland: kitag kino-theater Ltd, PlazaVista Entertainment AG and Teleclub AG.
5 Hospitality Services has subsidiaries in Austria, Belgium, Denmark, Finland, France, Germany, Italy, Luxembourg, the Netherlands,
in Norway, Portugal, Romania, Spain, the UK and the USA.
6 PubliGroupe Ltd has subsidiaries in France, Germany, the Netherlands, Sweden and Switzerland.
7 Mona Lisa Capital Ltd is a venturing participation.
Corporate strategy and objectives
Corporate strategy
Swisscom commands a leading position in the mobile, fixed, broadband and digital TV submarkets.
It is also one of the leading providers in the IT services market. Technological change coupled with
intensive local and global competition and changing customer requirements are steadily eroding
prices and volumes in the classical usage-based business. The resulting lower revenue and income
need to be offset in order to ensure that sufficient financial resources are available for major invest-
ments in new technologies.
Three key trends are changing the ICT sector and exerting a significant influence on Swisscom’s
strategy:
> Always online: A few years from now, Swisscom customers will be able to access all their private
and work-related applications and data in real time from any digital device. Technical innovations
are fundamentally changing the way in which customers interact and communicate with each
other and with devices. As a result of digitalisation, not only people but also smart applications
and devices are becoming increasingly interconnected. Networking and digitalisation are revolu-
tionising value chains, production processes and customer contacts in all sectors of the economy.
> Internet-based: In future, all products and services will be operated on the basis of Internet pro-
tocol. Storage space, processing power and software will increasingly be sourced from the Inter-
net. This trend is driving new business models and generating better customer experiences.
> Global competition: Digitalisation and the spread of Internet-based services are creating inter-
national markets. Worldwide competitors are benefiting from global economies of scale and are
transforming business models through enhanced use of customer data. In the telecommunica-
tions industry, too, the trend towards consolidation looks set to continue. Many telecommuni-
cations providers are expanding their business to include offerings in the IT, media and enter-
tainment fields.
Swisscom firmly believes that a competent and trustworthy partner is needed in this increasingly
interconnected and digitalised world. In this capacity Swisscom aims to inspire people and play a
key role in turning Switzerland into a leading ICT centre. It wants to play an active part in shaping
connectivity for the community at large, and to position itself successfully as an exemplary com-
pany in a digital world. This objective is reflected in Swisscom’s vision and corporate strategy.
The best in the networked world –
always and everywhere
fair + sustainable
Building the best
infrastructure
Creating the best
experiences
Realising the best
growth opportunities
The vision of Swisscom: The best in the networked world – always and everywhere
At Swisscom, people and their relationships are at the heart of all our activities. Customer focus,
sustainability, passion, curiosity and reliability are the values that guide our employees’ actions. As
the best partner in the networked world, Swisscom strives to ensure simplicity and is a trusted and
inspiring partner for its customers. Swisscom helps customers feel secure and at ease, and enables
them to find what they are looking for quickly and simply, and to experience and achieve extraordi-
nary things. Swisscom also helps business customers to create a flexible ICT infrastructure, adjust
their business processes to meet the new challenges of the digital world, and to optimise commu-
nication and collaboration among their employees. Due to the value that Swisscom creates and,
indirectly, its high level of investment from which other companies in Switzerland benefit,
Swisscom plays a major role in Switzerland’s competitiveness and contributes significantly to the
country’s GDP and employment.
To be the best partner, Swisscom must meet the highest expectations in terms of infrastructure,
customer experience and growth.
Building the best infrastructure
Infrastructure is the foundation that allows Swisscom to deliver its products and services and pro-
vide a consistently positive customer experience. Swisscom wants to offer its customers in Switzer-
land and Italy the leading IT and communications infrastructure: one that will generate the best
experiences, enable Swisscom to differentiate itself from the competition, and enhance efficiency.
Swisscom fulfils the ever-growing requirements of its customers with networks that are second to
none in terms of security, availability and performance. In the fixed network area, Swisscom’s focus
is on driving forward the continuous expansion of the ultra-fast broadband network – both in Swit-
zerland and in Italy – with Fibre to the Home (FTTH) and Fibre to the Street (FTTS). In the mobile
area, Swisscom aims to further expand the LTE fourth-generation mobile network and deploy addi-
tional technologies (for example, Voice over LTE) in order to meet the demand for higher capacity
and to further improve the mobile communication experience.
Swisscom intends to increase its efficiency through a scalable infrastructure, increasingly virtual-
ised infrastructure and services, and continual improvement processes. The new cloud infrastruc-
ture offers high-level quality and security and will also be used for Swisscom systems. In addition,
Swisscom wants to accelerate technological transformation and for this reason is switching from
proprietary to open, more powerful technology systems and infrastructures. In the first place,
Swisscom plans to build an open cloud, provide simple programming interfaces to functions and
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drive forward both the technological transformation from traditional offerings to IP-based solu-
tions and the related organisational transformation, so as to take full advantage of the available
technological resources.
Creating the best experiences
To differentiate itself clearly in its core business, Swisscom is committed to delivering professional
advice and first-class service to its customers, right along the entire experience chain. Swisscom
aims to provide highly personalised and flexible customer care and offer an outstanding service
experience to its customers.
By building full-service solutions and rolling out innovative digital services, Swisscom wants to
inspire its customers and drive forward digitalisation and networking both for the business world
and private individuals. Current examples include cloud products such as the successful, fur-
ther-developed TV service (Swisscom TV 2.0), the storage solution Docsafe, the digital wallet Tapit,
and the cross-platform communication application iO.
From the customer’s standpoint, the key to contact with Swisscom should be simplicity. This is why,
when creating new offerings, Swisscom focuses on customer needs right from the development
stage. A streamlined product structure and new self-service options simplify customer interaction
and enhance efficiency.
Realising the best growth opportunities
The telecoms markets in Switzerland and Italy are expected to see moderate growth over the next
few years, driven primarily by a slight increase in population and the number of households, the
growing number of networked devices per individual, and a rise in the use of ICT in many sectors of
the economy. Added to this, there is still pent-up demand in Italy due to the relatively low level of
broadband penetration.
Against this backdrop, Swisscom aims to ensure existing revenues in its core business through the
further development of its product portfolio. One key factor in this context is the development of
national and international offerings based on a modern, high-speed cloud infrastructure. Vertical
solutions offer growth opportunities for Swisscom in the banking, healthcare and energy sectors.
New related business fields also harbour promising revenue potential for Swisscom. Examples
include the development of new services and business fields in the area of Internet services (for
example Big Data) and the “Internet of Things” (for example Smart Home), and the further devel-
opment of Swisscom Energy Solutions. Swisscom intends to cater to the changed framework con-
ditions resulting from increasingly global competition by developing business models and by fur-
ther developing its Natel infinity pricing plans, in order to ensure a sustained source of revenue.
Fastweb in Italy is focusing on new customer acquisition by extending its coverage of the optical
fibre network, enlarging partnerships and offering new convergent products.
Forerunner in corporate responsibility
Swisscom’s corporate responsibility activities focus on issues which have high relevance for stake-
holder groups and at the same time are closely linked to the company’s core business and thus
entail market opportunities. Swisscom’s vision is of a modern, forward-looking Switzerland: a coun-
try of great opportunities, particularly in the field of sustainability. Specifically, Swisscom focuses
on the following six areas as strategic priorities. For each of these it has formulated a long-term
target for 2020:
> Climate protection: With the help of its customers, Swisscom wants to save twice as much CO2
as it emits throughout the entire Group and along the entire supply chain; for example, by avoid-
ing commuting thanks to Home Office solutions, or by promoting the use of TV set-top boxes
that consume less energy than older boxes.
> Work-life balance: Swisscom is aiming to support one million customers with its offerings in the
healthcare sector; for example with the Swisscom health platform with fitness sensors included,
electronic patient dossiers and products from its subsidiary Datasport.
> Media expertise: Swisscom aims to be the market leader in data security, helping one million
people to use media safely and responsibly; for example, with a router that allows customers to
set age-appropriate browsing times and protects minors against inappropriate use.
> Attractive employer: Swisscom wants to be one of the most attractive employers in Switzer-
land, offering employees the opportunity to develop their knowledge and skills and promoting
work-life balance. Fair terms and conditions of employment are as important to Swisscom as an
active social partnership and an above-average commitment to vocational training.
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> Fair supply chain: In the interests of a fair supply chain, Swisscom is committed to improving
employment conditions for more than two million people. To this end, Swisscom has forged
international partnerships that will ensure the implementation of relevant measures in close
collaboration with suppliers.
> Networked Switzerland: Swisscom will extend ultra-fast broadband coverage to 85% of all
homes and offices and bring mobile ultra-fast broadband to 99% of the population.
Swisscom’s targets
Based on the strategy, Swisscom has set itself various short- and long-term targets that take eco-
nomic, ecological and social factors into consideration.
Objectives
Effective 2014
Financial targets
Net revenue
Group revenue for 2014 of around CHF 11.5 billion.
Operating income before depreciation
and amortisation (EBITDA)
Capital expenditure in property,
plant and equipment and other intangible assets
EBITDA for 2014
of more than CHF 4,4 billion
Capital expenditure for 2014
of around CHF 2.4 billion
Other targets
Ultra–fast–broadband homes and offices Switzerland
Coverage of 85% by the end of 2020
Ultra–fast–broadband homes and offices Italy
Mobile ultra–fast–broadband Switzerland
Energy efficiency Switzerland
CO2–emissions Switzerland
Coverage of 30% or of around
7.5 million of homes and offices
by the end of 2016
Coverage of 99% with 4G/LTE
by the end of 2016
+25% by the end of 2015
to the efficiency of energy Switzerland
1 January 2010
–12% by the end of 2015
to 1 January 2010
CHF 11,703 million
CHF 4,413 million
CHF 2,436 million
41% or more than 1.4 million
of homes and offices
20% or 5.5 million
of homes and offices
97%
+26%
–17%
The following sections describe the targets and key performance indicators.
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Value-oriented business management
Key performance indicators for planning and managing the operating cash flows are operating
income before depreciation and amortisation (EBITDA) and capital expenditure on property, plant
and equipment and intangible assets. The enterprise value / EBITDA ratio is also used to compare
Swisscom with other companies in the sector.
The ratio is primarily driven by revenue and margins as well as the growth expectations of equity
investors. The remuneration system for Group Executive Board members contains a variable per-
formance-related component, of which 25% is paid out in Swisscom shares subject to a three-year
blocking period. Group Executive Board members may opt to receive up to 50% of the perfor-
mance-related component in the form of shares. The variable performance-related component is
based on factors including financial targets such as net revenue, EBITDA margin and operating free
cash flow. The financial targets that determine the variable performance-related salary component
and the Management Incentive Plan ensure that the interests of management are kept aligned
with those of the shareholders.
Enterprise value
In CHF million, except where indicated
31.12.2014
31.12.2013
Enterprise value
Market capitalisation
Net debt
Non-controlling interests in subsidiary companies
Enterprise value (EV)
Operating income before depreciation and amortisation (EBITDA)
Ratio enterprise value/EBITDA
27,067
8,120
3
35,190
4,413
8.0
24,394
7,812
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32,235
4,302
7.5
The sum of market capitalisation, net debt and non-controlling interests in subsidiaries is the enter-
prise value (EV) derived from the share price. Non-controlling interests are stated at carrying
amount. For the sake of simplicity, other non-operating assets and liabilities are not included.
Swisscom’s enterprise value increased year-on-year by CHF 3.0 billion or 9.2% to CHF 35.2 billion.
Market capitalisation grew by CHF 2.7 billion, while net debt was CHF 0.3 billion higher. The ratio of
enterprise value to EBITDA rose to 8.0 (prior year: 7.5). The increase is largely attributable to the
higher relative share price valuation and only to a lesser extent to the higher EBITDA. With a ratio
of 8.0, Swisscom is well above the average for comparable companies in Europe’s telecoms sector.
The higher ratio is supported by the solid market position Swisscom has achieved thanks to high-
level investment, an attractive dividend policy and the Confederation’s majority share of capital, as
well as the general business conditions in Switzerland such as lower interest rates and lower corpo-
rate income tax rates.
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General conditions
Macroeconomic environment
Swisscom’s financial position, results of operations and cash flows are primarily influenced by macro-
economic factors, notably economic trends, interest rates, exchange rates and the capital markets.
Economy
Switzerland enjoyed robust economic growth in 2014, thanks in large measure to strong domestic
demand. Gross domestic product (GDP) rose by 1.8%. In Europe, inflation rates are low and eco-
nomic development has plateaued. The risk of a phase of consistently low growth is still present.
Following the steep rise in the value of the Swiss franc in January 2015, the risk of a pronounced
economic downturn or even a recession has increased.
Gross domestic product Switzerland, rolling in CHF billion
650
625
600
575
550
647
636
587
592
574
2010
2011
2012
2013
2014
The bulk of Swisscom’s revenue stems from telephony, broadband services and digital TV – services
based on fixed monthly fees and subject to low cyclical fluctuations in demand. By contrast, project
business with business customers and international roaming are affected by cyclical factors.
Interest rates
For many years, the general level of interest rates in Switzerland has been lower than in most other
industrialised countries. In 2014, the main national banks adhered to their low-interest policy and,
after edging up slightly in 2013, interest rates dropped relatively strongly during the reporting year.
Consequently, the yield on ten-year Confederation bonds had fallen to only 0.36% by the end of
2014. In January 2015, the downward movement in interest rates resumed, and yields on ten-year
Confederation bonds turned negative.
Development of interest rates in Switzerland Yield on government bonds for 10 years in %
4.00
3.00
2.00
1.00
0.00
1.67
1.25
0.74
0.56
0.36
2010
2011
2012
2013
2014
In the year under review, Swisscom capitalised once more on the continuing low-interest phase by
entering into two financing transactions: Swisscom took out loans of EUR 500 million and
CHF 360 on, with terms between 7.5 and 15 years, at advantageous interest rate conditions. Aver-
age interest rate expense on all financial liabilities in 2014 was 2.5%. Market-based interest rates
influence the measurement of various items in the Swisscom consolidated financial statements,
such as the weighted average cost of capital (WACC) used to measure goodwill impairment for the
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Italian subsidiary Fastweb, the discount rates for defined benefit obligations, and non-current pro-
visions for dismantlement and restoration costs. In addition, Swisscom has concluded in the past
interest rate swaps with long terms to maturity which are not classified under hedge accounting.
Changes in market interest rates can result in high fluctuations in fair values charged to income.
Exchange rates
There was only a minimal change in the value of the Swiss franc against currencies of key relevance
for Swisscom’s operations in 2014. On 15 January 2015, the Swiss National Bank (SNB) announced
it would no longer defend the minimum CHF/EUR exchange rate of 1.20. As a consequence, the
Swiss franc appreciated substantially against all major currencies.
Development of exchange rate at the end of period CHF/EUR
1.75
1.50
1.25
1.00
0.75
1.25
1.22
1.21
1.23
1.20
2010
2011
2012
2013
2014
Swisscom’s business activities in Switzerland are not materially influenced by currency move-
ments. Only a small share of revenue is generated in foreign currencies. Handset and technical
equipment procurement as well as roaming charges incurred for the use of fixed and mobile net-
works abroad by Swisscom customers give rise to transaction risks in foreign currencies (notably
EUR and USD). These risks are partly hedged by forward foreign exchange transactions.
Swisscom finances itself primarily in Swiss francs. At the end of 2014, financial liabilities amounted
to CHF 8.6 billion, of which 80% was in CHF, 18% in EUR and 2% in USD. Currency translations in
respect of foreign Group companies, in particular Fastweb in Italy, affect the presentation of the
financial position and results of operations in the consolidated financial statements. Cumulative
currency translation adjustments in respect of foreign subsidiaries recognised in consolidated
equity amounted before deduction of tax effects to CHF 2.0 billion in 2014 (prior year: CHF 1.9 bil-
lion). In 2015, there is a risk that with the abandonment of the minimum EUR exchange rate, cumu-
lative currency translation adjustments not affecting income may increase and that the EBITDA
contribution of Fastweb will be reduced by the currency conversion.
Capital market
International equity markets performed positively in 2014. The SMI rose by 9.5%. Swisscom holds
surplus liquidity in the form of cash and cash equivalents and short-term money-market invest-
ments. There are only insignificant direct financial investments in equities or other non-current
financial assets. comPlan, Swisscom’s legally independent pension fund in Switzerland, has total
assets of around CHF 9.0 billion invested in equities, bonds and other investment categories. These
assets are exposed to capital market risks. This indirectly affects the financial position presented in
Swisscom’s consolidated financial statements. The prices of Swiss shares plummeted following the
SNB’s abandonment of the minimum EUR exchange rate in January 2015.
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See
www.swisscom.ch/
investor
Legal and regulatory environment
Swisscom’s legal framework
Swisscom is a public limited company with special status under Swiss law. It is organised in compli-
ance with the Telecommunications Enterprise Act (TEA), company law and the company’s Articles
of Incorporation. Its business operations are governed primarily by telecommunications and broad-
casting legislation. Swisscom is also subject to rules governing business as a whole, namely compe-
tition law. As a stock-exchange-listed company, Swisscom is also required to comply with capital
market legislation as well as with the Federal Ordinance against Excessive Compensation in Listed
Stock Companies.
Telecommunications Enterprise Act (TEA) and relationship with the Swiss Confederation
As of 1 January 1998, the former operations of Swiss Telecom PTT were legally transformed into
“Swiss Post” and “Swisscom Ltd” (hence the term “public limited company with special status”).
Under the terms of the TEA and the company’s Articles of Incorporation, Swisscom is responsible
for the provision of domestic and international telecommunications and broadcast services as well
as related products and services. The TEA requires the Swiss Confederation to hold a majority of the
capital and voting rights in Swisscom. For the Swiss Confederation to give up its majority share-
holding, the TEA would need to be amended. Swisscom is also obliged to draw up a collective
employment agreement in consultation with the employee associations. Every four years the Fed-
eral Council defines the goals which the Confederation as principal shareholder aims to achieve.
These include strategic, financial and personnel policy goals as well as goals relating to partner-
ships and investments. To guarantee transparency, the goals are made public to other investors.
The aims of the Confederation are incorporated in the strategic and operating targets set by the
Swisscom Board of Directors. For the year under review, the goals for the period 2014 to 2017 are
relevant. The Federal Council has set the following financial goals for Swisscom:
> Increase enterprise value over the long term. Deliver a total shareholder return (dividend payout
and share performance) on a par with that of comparable telecoms companies in Europe.
> Pursue a dividend policy that follows the principle of consistency and guarantees an attractive
dividend yield commensurate with other stock-exchange-listed companies in Switzerland. It
should reflect the requirements of a sustainable investment policy, a risk-appropriate, indus-
try-standard equity ratio and easy access to capital markets at all times.
> Aim for a maximum net debt of 2.1 times EBITDA (operating income before depreciation and
amortisation). This ratio may be temporarily exceeded.
The Federal Council also expects Swisscom to enter into partnerships (participations, alliances,
foundation of companies and other forms of cooperation) only if they promote a sustained increase
in enterprise value, can be managed according to good practices and take sufficient account of the
risk aspect. No interests may be held in foreign telecoms companies with a universal service obliga-
tion. Other interests in foreign companies may be acquired if they support the core business in
Switzerland or are otherwise a strategic fit.
See
www.admin.ch
Telecommunications Act (TCA)
The Telecommunications Act governs the conditions under which market-dominant providers of
telecoms services are required to make their network available to other providers. The Act covers a
comprehensive catalogue of access types and in the connection area is restricted to copper cables.
The access services cited in the Act must be offered at regulated conditions and above all at cost-
based prices. In addition to network access, the Act governs universal service provision, laying
down the framework for the reliable and affordable provision of basic telecommunications to all
sections of the population in all regions of the country. The scope of services as well as the related
quality and pricing requirements are determined periodically by the Federal Council. Among other
things, universal service provision covers guaranteed nationwide access to a broadband connec-
tion with a download speed of at least 1 Mbps (2 Mbps as of 1 January 2015). The universal service
provision licence granted to Swisscom in 2007 by the Federal Communications Commission (Com-
Com) runs until 2017. To date, Swisscom has fulfilled the requirements of the universal service
provision licence according to the quality criteria laid down by the TCA without complaints and
without financial compensation. The Telecommunications Act also governs conditions for use of
the radio frequency spectrum.
See
www.admin.ch
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Competition law/Federal Cartel Act
The Cartel Act prohibits anti-competitive agreements between companies, provides for sanctions
in the event of abuse by companies of their market-dominant position, and prohibits business com-
binations that result in the elimination of competition. Discrimination of trading partners with
respect to prices or other business conditions is considered to be an example of abuse.
See
www.admin.ch
Capital market law
The shares of Swisscom Ltd are listed on the SIX Swiss Exchange in Zurich. In addition, Swisscom has
issued debenture bonds which are traded on the SIX Swiss Exchange. Swisscom is therefore
required to comply with Swiss stock market legislation and regulations. Among other things, it is
subject to regulations governing accounting and financial reporting as well as rules relating to
ad-hoc publicity and the disclosure of transactions in Swisscom securities by members of the Board
of Directors and the Group Executive Board. Shareholdings in Swisscom must also be disclosed if
they exceed, fall below or meet a certain limit.
Ordinance Against Excessive Compensation in Listed Stock Companies (OaEC)
The OaEC entered into force on 1 January 2014. Members of the Board of Directors (including the
Chairman) as well as members of the Compensation Committee and the independent proxy must
be elected on an annual basis by the Annual General Meeting. For members of the Board of Direc-
tors and the Group Executive Board it is prohibited to award severance payments, advance com-
pensation and bonus payments for company acquisitions and disposals. The Board of Directors is
required to prepare a written compensation report as of the 2014 financial year. Shareholders must
vote on total compensation for the Board of Directors and the Group Executive Board starting from
the 2015 Annual General Meeting. The Articles of Incorporation and regulations must be revised in
line with the provisions of the Ordinance by no later than the 2015 Annual General Meeting.
Swisscom amended the relevant Articles of Incorporation and regulations in the course of 2014.
The OaEC stipulates certain types of abuse that constitute an offence punishable by law.
Regulatory developments in Switzerland in 2014
Ongoing proceedings relating to telecommunications and competition legislation
In recent years, a number of proceedings relating to telecommunications and competition law have
been initiated against Swisscom. Ongoing proceedings are described in Notes 28 and 29 to the
consolidated financial statements.
See report
pages 180–181
“Pro Service Public” initiative
The people’s initiative “Pro Service Public”, submitted in June 2013 by a Swiss consumer magazine,
calls for the Swiss Confederation to desist from seeking profit, cross-subsidising or pursuing fiscal
interests and to bring the wages of employees in government-associated companies in line with
those of federal employees. The Federal Council rejected the initiative in its message of May 2014,
without counterproposal. The Council of States followed suit in the autumn of 2014.
2014 Telecommunications Report – revision of the Telecommunications Act (TCA)
In November 2014, the Federal Council published its third Telecommunications Report, the conclu-
sions of which supported a revision of the Telecommunications Act. The Federal Council seeks to
approach the revision in two stages. The first stage will be confined to the most pressing problems.
The second stage will involve a system change in relation to the access regime and fundamental
amendments regarding universal service. The 2014 Telecommunications Report underscores the
good market conditions. Switzerland is regularly ranked among the leading countries in terms of
investment, broadband penetration and effective transmission speeds. The report describes infra-
structure competition (i. e. competition between the various networks) as the primary driver of
market development. The Federal Office of Communications (OFCOM) is aiming to formulate the
priority areas for the first stage of the revision and will prepare a draft bill by the end of 2015. The
subject of this bill will be the introduction of an official (ex officio) option to regulate. This would
constitute a deviation from the established primacy of negotiation, according to which regulation
is resorted to only if the parties are unable to agree on the aspects of regulated access (ex post). In
addition, roaming is to be billed by the second rather than by the minute. In terms of net neutrality,
the Federal Council is aiming to introduce certain regulations governing the transparency of the
bandwidth to which customers subscribe. With this in mind, at the beginning of November 2014,
the main telecoms providers Swisscom, Orange, Sunrise, upc cablecom and the Swisscable Associ-
ation signed a voluntary open Internet code of conduct under which all users are ensured the free-
dom to use the content, services, applications, hardware and software of their choice. No services
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or applications shall be blocked as a matter of principle. Moreover, the telecoms providers con-
firmed their support of unrestricted freedom of information and the free expression of opinion.
The code of conduct also states that providers may continue network management for the pur-
pose of quality assurance and provision of services tailored to end users’ needs, and that users can
ask their provider whether and to what extent the capacity available through their Internet con-
nection is shared with services other than Internet services.
Revision of the Ordinance on Telecommunications Services (OTS)
The revised Ordinance on Telecommunications Services (OTS) came into force on 1 July 2014. It
requires an amendment to the cost calculation models for regulated access services, resulting in a
price reduction of around 10% for these services. In addition, as of 1 January 2015, the download
speed for basic-service broadband provision was raised from a minimum of 1 Mbps to 2 Mbps.
Roaming
There are two pending motions in Parliament which aim to regulate roaming along the same lines
as in the EU. They call for the Federal Council to fix binding maximum tariffs to be adopted by all
telecoms providers for incoming and outgoing calls, SMS messages and data transfers via mobile
devices when used abroad. The Council of States suspended both motions, which are similarly
worded. After the 2014 Telecommunications Report was published, the debate on the two motions
was resumed.
Net neutrality
In June 2014, the National Council voted in favour of a motion calling for net neutrality. The Advi-
sory Commission of the Council of States suspended the motion in August 2014 in order to enable
the findings of the Federal Council’s Telecommunications Report to be included in the consultation.
The motion calls for the Federal Council to enshrine net neutrality in law, in order to ensure the
transparent and non-discriminatory transfer of data over the Internet.
Copyright protection – tariff proceedings
Joint tariff 12 for the recording of TV programmes and replay TV has been in force since mid-Sep-
tember 2014. The Federal Administrative Court rejected the objection to the tariff lodged by Pro7/
Sat1, as a result of which catchup TV may continue to be offered in Switzerland without agree-
ments with the channels, simply by paying a charge to the copyright collecting agencies.
Since 2009, the copyright collecting agencies had been negotiating with the user associations on
Joint tariff 4e concerning a tariff as compensation for copyright-protected works stored on mobile
phones. Despite the various proceedings pending before the Federal Administrative Court in this
context, the parties came to an agreement in 2014. The agreement retrospectively covers the tariff
for the period between July 2010 and the end of 2014 as well as the tariff valid from 1 January 2015.
The pending proceedings have been settled.
Revision of the Federal Law on the Monitoring of Postal and Telecommunications Traffic (BÜPF)
In February 2013, the Federal Council submitted to Parliament its message proposing a revision of
the BÜPF. The aim of the revision is to ensure that the required monitoring cannot be prevented
through the use of modern technologies. The current fee and payment model for telecommunica-
tions services would be retained. The bill is still under discussion in Parliament.
Regulatory differences between Switzerland and the European Union
In the European Union (EU), the regulatory authorities have extensive powers to analyse markets
and impose on market-dominant companies obligations relating to non-discrimination, transpar-
ency and forms of access (“ex-ante regulation”). The Swiss regulator has rejected this type of prac-
tice, opting instead for ex-post regulation (primacy of negotiation and appeal principle) on the
grounds that market conditions in Switzerland differ from those in most EU member states. The
Swiss market is characterised by virtually nationwide competition between Swisscom and the
cable network operators. Municipal and regional power utility companies have also now entered
the market. The market situation prevailing in Switzerland therefore necessitates a different set of
regulations from those in place in countries such as France and Italy, where no platform competi-
tion has evolved due largely to the existence of a single network provider.
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Legal and regulatory environment in Italy
Fastweb’s legal framework
As a member of the European Union, Italy is required to bring national legislation into line with the
European legislative framework. The Italian telecoms regulator Autorità per le Garanzie nelle
Comunicazioni (AGCOM) has the task, based on an analysis of the markets defined by the European
Commission, of imposing regulatory requirements on companies. Drafts of such requirements and
corresponding regulations must be submitted to the European Commission and the regulatory
authorities of the other member states, who have the right to comment on or veto the draft. The
business operations of Swisscom’s Italian subsidiary Fastweb are therefore heavily influenced by
Italian and European telecommunications legislation and its application.
Regulatory developments in Italy in 2014
In 2014, AGCOM continued its work on the market analysis for wholesale markets, which will deter-
mine the regulatory guidelines for the next three years. A new consultation document is to be
adopted in early 2015. The final decision will be taken in mid-2015.
AGCOM confirmed that the glide path would be applied for fixed network termination prices for
2013 to 2015. This glide path is based on the assumption of a migration to efficient, IP-based archi-
tectures. Since July 2013, the applicable price for all fixed network operators has been EUR/
cent 0.104 per minute. From 1 July 2015, this will gradually decrease to EUR/cent 0.043 per minute.
In 2014, the Italian Federal Administrative Court (Consiglio di Stato) partially annulled AGCOM’s
decision on applicable prices between May 2009 and December 2012. In response, AGCOM started
consultations on a revision of wholesale prices. The Consiglio di Stato also questioned AGCOM’s
decision to impose no cost basis on WLR and bitstream services and found that some cost ele-
ments used for pricing unbundled subscriber connections (LLU) had been overestimated. A final
decision is expected in 2015.
AGCOM also launched a new market analysis of mobile termination prices, which is scheduled for
completion in 2015.
Swisscom stakeholder groups
Swisscom fosters dialogue with its most important stakeholder groups through various channels:
via electronic media, over the phone, through surveys, information events, business meetings, road
shows and conferences, as well as in customers’ homes and in the Swisscom Shops.
Customers
Swisscom systematically consults residential customers in order to identify their needs and deter-
mine their satisfaction. Customer relationship managers, for example, gather information on cus-
tomer needs in the course of direct contact with customers. Representative customer satisfaction
surveys are also regularly conducted, among other things to determine the extent to which cus-
tomers perceive Swisscom as an environmentally responsible, socially aware company. Quarterly
surveys are conducted among business customers that include questions about sustainability.
Swisscom also maintains regular contact with consumer organisations in all language regions of
Switzerland and runs blogs as well as online discussion platforms. The overall findings show that
Swisscom customers expect attractive pricing, good service, market transparency, responsible
marketing, comprehensive network coverage, network stability, low-radiation communication
technologies and sustainable products and services.
Shareholders and external investors
Swisscom pursues an open and ongoing information policy vis-à-vis the general public and the
capital markets. It publishes comprehensive financial information on a quarterly basis. Swisscom
also meets investors regularly throughout the year, presents its financial results at analysts’ meet-
ings and road shows, attends expert conferences for financial analysts and investors, and keeps its
shareholders regularly informed about its business through press releases. Swisscom also fosters
contacts with numerous external investors and rating agencies. Shareholders and external inves-
tors expect above all profitability and innovation from Swisscom.
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See
www.swisscom.ch/
crblog
Authorities
Swisscom maintains regular, close contact with various public authorities. A key issue in its dealings
with this stakeholder group concerns mobile network expansion. Mobile communications and
mobile applications are growing in popularity, but acceptance of the expansion of the infrastruc-
ture that is required to provide them is sometimes lacking. Because of the different interests at
stake, network expansion can give rise to tensions. For many years, Swisscom has therefore engaged
in dialogue with residents and municipalities on network planning, which in the case of construc-
tion projects gives the parties affected an opportunity to suggest suitable alternative locations.
Swisscom also liaises regularly with public authorities in other areas and on other occasions: for
example, it invites ICT heads of the cantonal education authorities to an annual two-day seminar
on the subject of “Internet for Schools”. As a stakeholder group, public authorities expect Swisscom
to act decisively in the way it honours its responsibility towards the public at large and towards
young people in particular.
Legislators
Swisscom is required to deal with political and regulatory issues, advocating the company’s inter-
ests vis-à-vis political parties, public authorities and associations. Legislators expect compliance,
comprehensive network coverage and technology leadership from Swisscom.
Suppliers
Swisscom’s procurement organisations regularly deal with suppliers and supplier relationships,
analysing the results of evaluations, formulating target agreements and reviewing performance.
Once a year, they invite their main suppliers to a Key Supplier Day. The focus of the event is on risk
mitigation and responsibility in the supply chain. In the interests of maintaining dialogue with
global suppliers, Swisscom also relies on international cooperation within the relevant sectors.
Media
Swisscom maintains close contact with the media, seven days a week. Its relationship with the
media is informed by professional journalistic principles. In addition to the Media Office, represent-
atives of management maintain a regular dialogue with journalists and make themselves available
for interviews and more in-depth background discussions.
Employees and employee representation
In order to meet its mandate and live up to its customer promise, Swisscom relies on fully commit-
ted, responsibly-minded employees who think and act proactively. It is our employees who trans-
form Swisscom into a tangible experience for customers. Swisscom gains valuable information from
dialogue between employees and customers. The information gathered at the customer interfaces
flows back to the company and allows Swisscom to continually improve its products and services.
Using a wide range of communications platforms and activities, Swisscom promotes a corporate
culture that encourages dialogue and cross-collaboration within the company. Every two years,
Swisscom conducts an employee survey, the results of which provide ideas for new projects and
measures. Helping to shape Swisscom’s future is one of the most important tasks of the Employee
Representation Committee. Twice a year, Swisscom organises a round-table meeting with the
employee representatives. Employee concerns mainly relate to social partnership, training and
development, diversity, and health and safety at work. Swisscom engages in dialogue with teams
from all organisational units on sustainability issues, under the motto “Hello Future”. Through this
dialogue, Swisscom keeps its employees up to date on its commitments in the area of sustainability
and motivates them to implement sustainability measures in their daily work and life.
Partners and NGOs
Swisscom believes in the importance of sharing insights and information with partners and NGOs
within the framework of projects; for example, with WWF Climate Savers, myclimate, the Swiss
Child Protection Foundation and organisations that address the specific needs of affected groups.
Active partnerships and Swisscom’s social and ecological commitment are especially relevant for
this stakeholder group.
See
www.swisscom.ch/
cr-partnerships
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Market trends in telecoms and IT services
Swiss telecoms market
Switzerland has three mobile networks and several transport and access networks in the fixed
network area. TV signals in Switzerland are transmitted terrestrially via antenna as well as satellite.
The Swiss telecoms market is highly developed by international standards. It is characterised by
innovation, a wide range of voice and data services and television signal broadcasting. Total reve-
nue generated by the telecoms market in Switzerland is estimated at around CHF 13 billion. The
market is in a state of transition, driven by the growing convergence of telecommunications, infor-
mation technology, media and entertainment. More and more new global competitors are enter-
ing the Swiss telecoms market, offering free and paying Internet-based services including tele-
phony, SMS messaging and TV. Cloud solutions are also playing an ever more important role, with
storage capacity, processing power, software and services all relocating to an increasing degree to
the Internet. Customers’ needs also continue to change as more and more switch to flat-rate
monthly subscriptions. Increasingly, they are accessing data and applications from just about any-
where and at any time using a whole range of different Internet-enabled devices. The result is a
rapid growth in demand for high bandwidths that enable fast, high-quality access. To address this
trend, Swisscom is building the network infrastructure of the future. Swisscom is tackling the
relentless growth in data traffic by continuously expanding fixed broadband access and further
expanding new technologies in the mobile network such as 4G/LTE (Long Term Evolution). In addi-
tion, Swisscom’s bundled offerings combine different technologies such as fixed-line access with
telephony, Internet and TV, plus the option of a mobile line. The Swiss telecoms market can thus be
broken down into the following submarkets of relevance to Swisscom: mobile, fixed-line, broad-
band and TV.
Swisscom Switzerland access lines in thousand
6,540
505
6,035
8,000
6,000
4,000
2,000
0
Fixed-line
2,778
938
1,840
2,152
262
1,209
681
1,165
947
218
Mobile
subscribers
Telephone
Broadband
Wholesale
Bundle subscriptions
Single subscriptions
180
Swisscom TV
subscribers
Unbundled
access
lines
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Mobile communications market
Three companies operate their own wide-area mobile networks in Switzerland: Swisscom, Orange
Switzerland and Sunrise. In December 2014, Apax Partners announced that it would consent to the
sale of Orange Switzerland to NJJ Capital, the private holding company of Xavier Niel, subject to
the approval of the responsible authorities. In early 2015, Sunrise announced that it plans to list the
company on the Swiss stock exchange (SIX Swiss Exchange). Another major market player, upc cable-
com, has been offering its own mobile services (MVNO, mobile virtual network operator) via
Orange Switzerland’s networks since the spring of 2014. However, these offerings are currently
limited to existing and new upc cablecom customers with at least one additional digital product.
While GSM network coverage is close to 100% of the population, the demands on mobile networks
continue to grow. To continue offering customers optimum data connectivity, Swisscom is invest-
ing in new mobile technologies such as 4G/LTE. At the end of 2014, 97% of the Swiss population
had access to the latest-generation mobile network. At 0.8%, growth in mobile lines (SIM cards) in
Switzerland was once again slow in 2014 due to the already high market penetration. Together, the
three network operators have a combined total of more than 11 million mobile lines; penetration
in Switzerland is around 136%. The technical possibilities offered by mobile communications are
increasing due to the rapid spread of smartphones. Swisscom’s infinity tariffs reflect customers’
changing needs. These subscriptions allow Swisscom customers to make unlimited phone calls and
send unlimited SMS messages to all Swiss networks, as well as unlimited Internet surfing at flat
rates. The individual subscriptions mainly differ in terms of mobile data speeds. At the end of 2014,
2.1 million customers were using the new infinity offerings. For occasional mobile network users,
Swisscom provides prepaid offerings with no monthly subscription fee, so that they are charged
only as and when they access the network. Swisscom makes its mobile network available to third-
party providers (MVNO, mobile virtual network operators) so that they can offer their customers
proprietary products and services via the Swisscom network.
Market shares mobile subscribers in Switzerland* in %
Swisscom mobile access lines in thousand
19%
Orange
22%
Sunrise
8,000
6,000
6,217
2,199
6,407
2,176
6,540
2,163
59%
Swisscom
4,000
4,018
4,231
4,377
* Estimate Swisscom
2012
2013
2014
2,000
0
Prepaid
Postpaid
In 2014, Swisscom’s market share remained relatively stable at 59% (postpaid 64%, prepaid 50%).
The 60% market share reported by Swisscom for 2013 is not comparable with the 2014 figure due
to the application of different measurement methods. The percentage of postpaid customers in
Switzerland is around 61%. As in previous years, prices for mobile services continued to be squeezed
by competition.
Fixed-line market
Fixed-line telephony is mainly based on lines running over the telephone network and cable net-
works. The number of Swisscom fixed lines is steadily declining. This trend continued in 2014, with
the number of fixed lines falling by around 4% to 2.8 million mainly due to the substitution of fixed
lines by mobile communications and the slight reduction in market share. At the end of 2014, the
number of unbundled fixed lines totalled 180,000. As a result of rapid technological developments
and the changeover to IP telephony, fixed-line telephony will in future more often be offered on the
basis of a broadband access line.
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Broadband market
The most widespread access technologies for fixed broadband in Switzerland are telephone-
network-based infrastructures and cable networks. Like in the mobile communications market, the
broadband market’s demands on networks are also increasing. To meet these expectations,
Swisscom is upgrading its network infrastructure with state-of-the-art fibre-optic technology. At
the regional level, this important technological change is attracting new market players such as
municipal utilities. At the end of 2014, the number of retail broadband lines in Switzerland totalled
3.5 million or around 73% of all Swiss homes and offices. Switzerland therefore leads the way inter-
nationally in terms of broadband access market penetration. Swisscom’s offerings reach more than
98% of the Swiss population.
Market shares broadband access lines in Switzerland* in %
Swisscom Broadband access lines in thousand
13%
Other
33%
Cable
operators
54%
Swisscom
3,000
2,250
1,500
750
0
1,913
186
788
939
2,026
215
1,001
2,152
262
1,209
810
681
Wholesale
Bundle subscriptions
Single subscriptions
* Estimate Swisscom
2012
2013
2014
The number of broadband lines increased by around 4% in 2014 (prior year: around 4%). As in the
previous year, growth in broadband access lines provided by cable network operators outpaced
that of the telephone-based broadband access lines of telecoms providers. Telecoms providers
accounted for more than a quarter of new broadband access lines in 2014, corresponding to a mar-
ket share of all broadband lines of around 67%. Of these, 54% (prior year: 54%) were for Swisscom
end customers and 13% (prior year: 15%) for Swisscom wholesale offerings and fully unbundled
lines. Broadband is increasingly becoming the basic Internet access for households, through which
customers can access additional services or bundled offerings.
Digital TV market
In Switzerland, TV signals are transmitted via cable, broadband, satellite, antenna (terrestrial) and
mobile. The importance of digital television continues to grow, as does its market penetration. At
the same time, other national and international operators are penetrating the Swiss TV market,
offering TV as well as Video on Demand services which can be accessed over an existing broadband
connection regardless of the Internet provider.
Market shares digital TV in Switzerland* in %
Swisscom TV subscribers in thousand
13%
Satellite
24%
Other cable
3%
Antenna
* Estimate Swisscom
26%
Swisscom
2%
Sunrise
32%
upc Cablecom
2,000
1,500
1,000
500
0
791
521
270
1,165
947
1,000
724
276
218
Bundle subscriptions
Single subscriptions
2012
2013
2014
More than 80% of all digital TV connections are provided over the cable or broadband network,
with cable TV and Swisscom TV commanding the largest market shares. Swisscom has been stead-
ily growing its market share over the last few years thanks to its own digital TV offering, Swisscom
TV, which at the end of 2014 had a market share of 26% (prior year: 23%). In 2014, the number of
Swisscom TV subscribers rose by 165,000 to 1.2 million. Of this number, around 306,000 have
signed up to the Swisscom TV 2.0 service launched in the spring of 2014, which offers extended
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functionality compared to the previous version. The cloud-based recording function allows users to
record an unlimited number of programmes simultaneously and play them back on different
devices. Swisscom also extended the Replay TV function from 30 hours to seven days, and inte-
grated around 50 of the most popular apps such as YouTube and Facebook in Swisscom TV 2.0. The
new Teleclub Play video flat rate service launched in December 2014 offers Swisscom TV 2.0 cus-
tomers unlimited access to a broad range of TV series, classic films, children’s programmes, docu-
mentaries and sports content. Swisscom TV remains available in a range of packages to meet all
customer needs.
IT services market in Switzerland
In 2014, the IT services market generated a revenue volume of CHF 8.6 billion. Swisscom expects
the market volume in 2017 to total CHF 9.4 billion. Cloud services, business process outsourcing
(BPO) and application-based services are expected to show the most significant growth. Custom-
ers often demand services customised to their individual sector and processes. Even the classical
infrastructure services business has the potential for moderate growth over the next few years.
Market shares IT services in Switzerland* in %
Swisscom net revenue IT services in CHF million
62%
Others
8%
Swisscom
11%
IBM
7%
HP
5%
Accenture
4%
Infosys
3%
T-Systems
1,000
750
500
521
612
650
250
0
* Estimate Swisscom
2012
2013
2014
Thanks to a market share of around 8%, Swisscom remains one of the leading providers of IT services
on the Swiss market. In 2014, Swisscom reported growth in all areas. In the vertical business for the
banking sector, for example, it continued to substantially increase its share of the BPO market and
rolled out innovative solutions such as a crowdfunding platform. Crowdfunding is a new way of con-
necting companies with each other and with their end customers. By bringing Swisscom IT Services
and the Corporate Business division of Swisscom Switzerland under one roof at the beginning of
2014, Swisscom laid the foundations for further growth in the Swiss enterprise customers market.
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Italian broadband market
Italy’s fixed broadband market is Europe’s fourth largest, with a revenue volume of around EUR 13 bil-
lion. In contrast to most other European countries, in Italy there are no cable network operators who
offer broadband services. Half of the homes and offices in Italy have access to the broadband net-
work; the penetration of broadband is thus well below the European average. The total number of
broadband lines in Italy grew to around 14 million in 2014. Fastweb increased the number of broad-
band lines by 6.7% or 130,000 to more than 2 million, repeating its positive 2013 results.
The Italian market continues to be dominated by double-play bundles that combine voice and
broadband services, and is subject to significant pressure on prices due to the highly competitive
environment. In 2014, the number of fixed broadband customers in Italy reached a penetration
rate for fixed lines of around 70%, with ultra-fast broadband services gaining acceptance. The mar-
ket leaders for fibre-optic/VDSL offerings are Telecom Italia and Fastweb.
Market shares broadband access lines in Italy* in %
Fastweb broadband access lines in thousand
6%
Others
13%
Vodafone
16%
Wind
15%
Fastweb
50%
Telecom Italia
3,000
2,250
1,500
750
0
1,942
2,072
1,767
* Estimate Swisscom
2012
2013
2014
With a share of 50% (prior year: 51%), Telecom Italia commands a leading position on the Italian
broadband market. Fastweb increased its market share year-on-year from 14% to 15%.
For service providers, a permanent countrywide presence is becoming increasingly important in
view of the growing complexity of products and services. With this in mind, Fastweb is further
expanding the ultra-fast broadband network and by the end of 2016 aims to cover around 7.5 mil-
lion homes and offices, or 30% of the population. Fastweb has also decided to expand its own sales
network, improve the efficiency of its dealer structure and step up investment in its own sales
outlets in major Italian cities.
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Business model and customer
relations
Swisscom is Switzerland’s leading telecom provider and its subsidiary
Fastweb has built up a strong position in the Italian market. Swisscom
is an aggressive player, operating in a dynamic marketplace and
competing against an ever-increasing number of global service
providers. It is totally committed to meeting customer needs and
delivering service and quality, and is also investing heavily in the
networks of the future.
Business activities
Company profile
Swisscom is the Swiss market leader in the field of telecommunications. Since acquiring Fastweb in
2007, Swisscom’s international activities have been concentrated mainly in Italy. Fastweb is one of
Italy’s largest broadband telecoms companies. Swisscom’s corporate strategy is focused on
strengthening the company’s core business, which relies on a high-performance, secure and
always-available infrastructure. Swisscom is also looking to grow by offering differentiated prod-
ucts and services and increasing the deployment of ICT. Major investments in network infrastruc-
ture ensure that Swisscom will continue to satisfy all its customers’ needs well into the future.
Sustainable management and long-term responsibility are firmly enshrined in the company’s cor-
porate culture. Swisscom owes its business success to the dedication and commitment of a
20,000-strong workforce which continually strives to develop new solutions for customers and the
information society. Swisscom consistently invests in staff training and development, and is train-
ing more than 900 apprentices in Switzerland.
Swisscom generates over 80% of its net revenue and operating income before depreciation and
amortisation (EBITDA) from business operations in Switzerland. The company offers a full portfolio
of products and services for fixed-line telephony, broadband, mobile communications and digital
TV throughout Switzerland, and is mandated by the federal government to provide basic telecoms
services to all sections of the population throughout Switzerland. Swisscom offers corporate cus-
tomers a comprehensive range of communications solutions as well as individually tailored solu-
tions. Swisscom is also a leading provider specialising in the integration and operation of IT systems
in the fields of outsourcing, workplaces, SAP and finance services. Customers can purchase their
products and services via a range of sales channels. They can check out products and services first
hand and receive comprehensive advice in Swisscom’s own shops as well as in numerous partner
outlets. They can also obtain product information and order products and services at any time
online via the Swisscom website.
In the digital customer centre, which is also accessible via the Internet, customers can manage their
personal details, subscriptions and bills on their own. Swisscom fosters close ties with all stake-
holder groups: shareholders, investors, employees, suppliers, the general public, public authorities
and, above all, its customers. It has long been committed to its Swiss roots and endeavours to
ensure that all citizens benefit from leading-edge technologies. This is reflected in Swisscom’s solu-
tion-oriented approach, which is geared to serving the common good as well as the interests of the
company.
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See
www.swisscom.ch
Swisscom brand
The Swisscom brand is a strategic intangible asset for Swisscom in general, and for reputation
management in particular. One of the main purposes of the brand is to optimally support
Swisscom’s wide variety of business activities. The brand must consistently accompany the core
business while at the same time remaining sufficiently elastic for new business opportunities.
The Swisscom Group offers core-business products and services under the Swisscom brand. Out-
side Switzerland, notably in Italy, Swisscom operates under the Fastweb brand. Swisscom also
operates under a range of other brands in related business fields. The strategic management of the
entire brand portfolio comes under the remit of Corporate Communications.
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By merging Swisscom IT Services and the Corporate Business division of Swisscom Switzerland to
create Enterprise Customers, Swisscom is consistently pursuing its strategy of positioning its brand
in the core business of telecommunications and ICT. Thanks to the success of Swisscom TV, the
Swisscom brand has confirmed and enhanced its credibility in the field of digital entertainment.
Other key brands belonging to Swisscom are the Teleclub, Kitag and Cinetrade brands in the enter-
tainment sector. A number of other state-of-the-art products such as iO and Docsafe help to
strengthen the Swisscom brand and promote the “Best in the networked world – always and every-
where” vision, and to position Swisscom as a straightforward, inspiring and trustworthy companion
in a rapidly-changing digital world.
In 2014 Swisscom was once more selected by consumers as the Most Trusted Brand in three catego-
ries in the Reader’s Digest annual survey, reflecting the brand’s awareness level in Switzerland. The
brand thus remains well ahead of the competition in terms of “top-of-mind awareness” and is firmly
anchored among consumers as a trustworthy, reliable and high-quality brand. Trust and service are
among the most important factors that motivate potential customers to switch to Swisscom.
The Swisscom brand also symbolises Swisscom’s close ties with and commitment to Switzerland.
Swisscom is part of the modern Switzerland. It takes seriously its responsibility of fostering the com-
mon denominators that characterise Switzerland. Swisscom’s consistent and manifold commit-
ment to sustainability rounds off the brand’s positive image and enriches customer relations in a
variety of ways. This is one reason why the reputation values achieved by the brand are exception-
ally high for the telecommunications industry.
This is confirmed by the Interbrand “Best Swiss Brands 2014” Study, in which the Swisscom brand
was once again ranked as Switzerland’s sixth most valuable brand with a monetary brand value of
CHF 5 billion.
Swisscom’s network and IT infrastructure
Network infrastructure in Switzerland
Demand for broadband in the Swiss fixed network is doubling every 16 months, and every
12 months in the case of mobile customers, who want to use applications such as HD television,
video conferencing and cloud services at any time, anywhere and on different devices. The key
enabling element of the network of the future is Internet protocol (IP) technology. Swisscom
decided to switch over all of its products and services to this forward-looking technology by the
end of 2017. All IP will make processes and operations faster and more flexible, which will make not
only Swisscom more competitive but also its business customers, and increase Switzerland’s
attractiveness as a business hub. This will also fulfil the needs of Swisscom’s residential customers
to have constant access to their data from anywhere and any device.
Switzerland already has one of the best IT and telecoms infrastructures in the world. According to
OECD findings, Switzerland leads the world in terms of broadband penetration (44.9%), ahead of
the Netherlands and Denmark (source: OECD Broadband Portal, December 2013). This result is fur-
ther supported by the “State of the Internet report” issued by technology service provider Akamai,
which ranked Switzerland in first place in Europe for ultra-broadband availability, and in third place
worldwide. In mobile communications, broadband LTE coverage now extends to 97% of the popu-
lation, making Swisscom the largest network operator in Switzerland by far, both in the fixed and
mobile network.
The fixed network comprises two levels: an access network and a transport network. The access
network consists of over 1,500 local exchanges and around 3.4 million subscriber access lines to
end customers. Swisscom started to upgrade the fixed network a number of years ago. To drive
forward ultra broadband provision in Switzerland, Swisscom has opted for a broad, innovative mix
of technologies. In addition to Fibre to the Home (FTTH), Swisscom operates Fibre to the Street
(FTTS) and Fibre to the Building (FTTB) since 2013, laying fibre-optic cables to within a short dis-
tance of individual homes and offices or in basements so as to achieve a significant further increase
in bandwidth.
Copper cables are also evolving, doubling their capacity thanks to vectoring. Moreover, thanks to
G.fast, the successor to VDSL, copper cables will soon be able to provide bandwidths of up to
500 Mbps. Through this mix of technologies, Swisscom had already installed over 1.4 million
ultra-broadband connections by the end of 2014.
Swisscom wants to have installed 2.3 million ultra-fast broadband connections in homes and
offices by the end of 2015, and by the year 2020 have equipped 85% of all homes and offices with
ultra-fast broadband. In 2014 Swisscom invested CHF 1.75 billion in the IT and network infrastruc-
ture with this objective in mind. Swisscom honours its universal service provision mandate in
remote-lying regions of Switzerland. It is also seeking new solutions to deliver higher bandwidth to
remote regions. For example, Swisscom is looking at DSL-LTE bonding, a technology, which, thanks
to high bandwidths, can supplement or in some cases replace the fixed network in areas which are
less well connected.
Swisscom completed the modernisation of the mobile network in mid-2014, creating the basis for
a rapid rollout of 4G/LTE technology across all mobile sites alongside second- and third-generation
mobile technology. Thanks to the new frequency bands acquired by auction in 2012, Swisscom will
be able to deploy all mobile technologies over the long term and in a needs-appropriate manner. To
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networkcoverage
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use the acquired frequency spectrum, Swisscom needs to switch frequencies. The first part of this
switchover was carried out in 2014 as part of a coordinated project covering all Swiss mobile oper-
ators, and the second part is scheduled to take place in 2015.
In 2012 Swisscom was the first mobile provider in Switzerland to launch 4G/LTE commercially.
Today Swisscom is already providing extended 4G/LTE coverage to 97% of the Swiss population, In
regions with particularly high mobile traffic, along the streets and in busy public places 4G/LTE
microcells ensure the required network capacity. Swisscom is increasingly installing dedicated
antenna systems in large business premises and public interiors. 4G+ (LTE Advanced) installed in
urban areas already provides for bandwidth speeds of up to 300 Mbps in the mobile Internet, and
bandwidth speeds are set to increase to 450 Mbps by the end of 2015. Swisscom’s offerings are
therefore leading the way, both in Switzerland and by international standards. Mobile telephony is
also keeping up with the times. Today the LTE network is a dedicated data network, while voice
telephony is implemented on its forerunners 3G and 2G. By introducing Voice over LTE (VoLTE) and
WLAN Interworking, Swisscom is consistently driving forward IP transformation in the mobile net-
work. Mobile voice telephony takes place via the digital Internet Protocol (IP), offering advantages
in terms of voice quality and call setup.
Swisscom is continually expanding its broadband network, extending the product range and
increasing the number of antenna sites. Swisscom is committed to deploying modern, needs-
appropriate technologies in order to ensure efficiency and compliance with contemporary zoning
requirements while also minimising emissions. It coordinates site expansions with other mobile
providers wherever feasible and already shares around 22% of its nearly 6,800 antenna sites with
other providers. And with over 2,000 hotspots in Switzerland, Swisscom is also the country’s lead-
ing provider of public wireless local area networks.
In a bid to improve efficiency, Swisscom is not only investing in latest-generation networks but also
systematically decommissioning the earlier-generation networks.
Network infrastructure in Italy
Fastweb’s network infrastructure consists of a fibre-optic network spanning a total distance of
over 37,500 kilometres. Fastweb thus reaches more than half of the Italian population, with 5.5 mil-
lion homes and offices equipped with ultra-broadband at speeds of up to 100 Mbps, based on Fibre
to the Home (FTTH) and Fibre to the Street (FTTS).
Fastweb is continuing its expansion of the ultra-broadband network and by the end of 2016 aims
to have covered around 7.5 million homes and offices, or around 30% of the population. In addition,
thanks to wholesale services provided by well-established Italian operators, Fastweb reaches cus-
tomers who are not directly connected to its own network.
While Fastweb does not have a mobile network of its own, it offers proprietary mobile services
based on an agreement with another mobile operator (MVNO).
Swiss IT infrastructure
Swisscom operates 24 data centres around Switzerland, which currently store around 20 petabytes
of data online. This volume more than doubles when taking into consideration the necessary data
backups. In the Storage Area Network (SAN), more than 25,000 ports or active operating systems
are provided for around 15,000 servers. Through its on-demand contracts with innovative partner
companies, Swisscom is also able to ensure sufficient capacity and the deployment of efficient
technologies at all times.
Mobile data traffic is increasing every year.
Compared with the previous year,
data volume grew by
96 %
Investments in performance enhancement
and security in the Swiss infrastructure
and in ultra-broadband expansion
totalled
1.75 billion CHF
In the interest of sustainable resource management, Swisscom maximises energy-efficient opera-
tion of its data centres. The average annual power usage effectiveness (PUE) of Swisscom’s data
centre in Zollikofen (Berne) is 1.3. This value, representing the ratio of total power consumed by the
data centre to the power consumed by the IT systems, means that power consumption in Zollikofen
is around 33% lower than that of conventionally built data centres. With a PUE of 1.2, the data centre
in Wankdorf (Berne), which was inaugurated in September 2014, is even more energy-efficient.
Cloud technology further increases the efficiency of the data centres by enabling the distributed
use of the underlying infrastructure platforms for customers. Customers can choose to store or
process their data and applications in the private cloud, in dedicated zones within the public cloud,
or in shared clouds.
Swisscom is planning to move up to 70% of its own work and production processes to the cloud in
the coming years. In this way it will further enhance the knowledge advantage it needs to fulfil its
role as a trustworthy partner for business customers in the digital world.
Fastweb’s IT infrastructure
Fastweb operates four main data centres in Italy with a total surface area of 8,000 square meters.
The IT infrastructure consists of around 5,000 servers (virtual and physical servers in equal parts),
700 databases and 2.9 petabytes of storage capacity.
One of the data centres is managed by Ericsson on the basis of a multi-year contract which covers
the setup and design of the data centre as well as the operational aspects of Fastweb’s IT infra-
structure. Two other data centres are used by Fastweb mainly for corporate customer services, i.e.
for housing, hosting or other cloud-based services.
Fastweb is currently investing EUR 25 million in the construction of two new data centres in Milan
and Rome respectively, which will be used to host ICT and cloud services for corporate customers.
Construction of the new data centre in Milan has been completed. It is the first data centre in Italy
to attain Tier IV certification, which is synonymous with the highest levels of reliability, security
and performance.
Data protection
Data are one of the most valuable production factors in the information society. Swisscom is there-
fore committed to storing and transmitting information as securely and reliably as possible. Around
150 specialists work to ensure information security, data privacy and reliable network and Internet
operations.
Swisscom also makes every effort to protect its customers’ data during telephone calls. All calls
made over the mobile network are transmitted in encrypted form. Banks, insurance companies,
hospitals and public services such as the police and fire services also need their communication
infrastructure to operate as reliably and securely as possible. Many companies, institutions and ser-
vices working in these sensitive areas rely on Swisscom services. Swisscom also provides secure
cloud-based solutions to small and medium-sized enterprises.
Customer data are subject to the Data Protection Act and the Telecommunications Act and may
only be processed by individuals for whom such data are essential for the purposes of performing
their tasks. Moreover, the purpose for which a customer’s data is viewed or processed must be
apparent to the customer at all times. In accordance with the Data Protection Act, customer data
also have to be protected against unauthorised use through appropriate technical and organisa-
tional measures. Swisscom therefore ensures that only a limited number of individuals are permit-
ted to access customer data. As a rule, customer data is hosted in Switzerland. If a service is pro-
vided by Swisscom with the involvement of third parties, Swisscom may pass on data to third
parties insofar as it is necessary for the provision of the services in question. Swisscom ensures that
such third parties are bound by the same data protection provisions and that they may only process
such data to the same extent as Swisscom itself is entitled. In addition, only such data as are
required for the provision of services, the handling and maintenance of the customer relationship,
and for the security of the company and its infrastructure, may be collected from Swisscom cus-
tomers, processed and stored. Swisscom also processes the data for marketing purposes aimed at
the customer-driven design and development of its services and offerings tailored to end users.
Customers are able to keep their data from being used in this way by opting out. The Data Protec-
tion Act also requires customer data to be protected against unauthorised use through appropriate
technical and organisational measures.
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Products, services, sales channels
Swisscom in Switzerland
Swisscom is committed to service and quality, and to interacting with its customers in a personal-
ised and value-adding manner. Six million customer visits to Swisscom Shops, 3,500 customer advi-
sors, twelve million calls and more than four million e-mails and letters per year are the basis for
staying in touch with customers and providing personal service. For years now, excellence in service
has been a top priority for Swisscom.
Residential Customers: In only six years Swisscom has become the most successful provider of
digital TV. More than a million customers now watch Swisscom TV. Swisscom TV 2.0, launched in
April 2014, offers additional functions. The cloud-based recording function allows users to record
an unlimited number of programmes simultaneously and play them back on different devices. And
thanks to the replay function, customers can catch up with programmes broadcast over the past
seven days. Swisscom also gives customers access to other applications such as the iO communica-
tion app and Tapit. iO allows users to make calls, chat and share pictures with other iO users over
the Internet free of charge, Tapit makes it possible for users to pay for purchases securely using their
smartphone and in future collect loyalty points. Tapit will in future also offer a building access
function. The Natel infinity and Vivo packages demonstrate Swisscom’s consistent commitment to
addressing changing customer needs. Natel infinity enables unlimited surfing, telephoning and
SMS/MMS messaging across Switzerland and to all networks. The bundled offerings, ranging from
Vivo light to XL, combine TV, Internet and fixed-line access and offer the right subscription for indi-
vidual needs. Subscribers who combine Vivo and Natel infinity also benefit from a price reduction.
Swisscom customers are becoming increasingly accustomed to using modern communication
technology. Consequently, product presentation and expert customer advice are becoming more
and more important. Swisscom’s new Campus Shop concept was created with this in mind. Now
the Shops provide more individual advice and allow customers to try out products on site. Between
2012 and 2014 the new concept and design was implemented in all Swisscom Shops.
Small and Medium-Sized Enterprises: Swisscom’s SME, Office and Natel business infinity packages
offer products tailored to the needs of small and medium-sized enterprises. Business Connect and
Full Service Solution are innovative communication solutions that can be customised to meet the
individual needs of SME customers.
Enterprise Customers: The digital transformation is substantially changing business processes, the
working world and the way companies operate on the market. As an ICT provider with comprehen-
sive experience in digitalisation, Swisscom drives this digital transformation forward and helps
companies to find their way in the new networked world. Swisscom’s range of offerings comprises
comprehensive services such as cloud computing, outsourcing, workplace solutions, mobility solu-
tions such as Natel go, networking solutions, business process optimisation, SAP solutions and a
full range of services tailored to the financial industry. Every year the service desk fields 1.2 million
calls and responds to 300,000 call-outs.
Healthcare market: Swisscom now delivers a full range of solutions for linking service providers
and for managing the health of private individuals. These offerings range from the Evita online
health dossier to networking solutions for service providers, billing services and mobile health files
for hospitals, making Swisscom a leading provider of networked healthcare solutions in the Swiss
market. Today more than 1,600 doctors and 100 hospitals, insurances and other service providers
are already using the healthcare solutions of Swisscom to exchange over two million documents.
Net revenue
Switzerland accounts for
Operating income before depreciation
and amortisation (EBITDA)
Switzerland accounts for
82 % of net revenue
86 % of EBITDA
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Networked home: SmartLife is a range of products designed to make the home safer and more
secure. The SmartLife app allows movement detectors, HD cameras, fire and water alarms and
other home security technology to be controlled via smartphones, computers and tablets. Like-
wise, tiko, the smart electricity storage network from Swisscom Energy Solutions, allows users to
optimally manage the energy consumption of their heat pumps, electrical heating systems or boil-
ers remotely over the Internet.
Sustainability: Green ICT technologies support companies in their efforts to save energy in intelli-
gent ways so as to boost their long-term efficiency while also reducing CO2 emissions. This includes
teleworking and virtual meetings, which save on travel costs and time, and telehousing or hosting
solutions, which reduce the amount of energy consumed by data centres. Green ICT will therefore
grow further in importance in the future not only for efficiency reasons but also as an image factor.
Fastweb in Italy
Fastweb offers residential and business customers voice and broadband services provided through
its own broadband and ultra-fast broadband network as well as via unbundled access lines and
wholesale products of Telecom Italia. A successful partnership exists with pay-TV provider Sky Ita-
lia, offering bundled products that combine voice and broadband services as well as satellite TV.
Based on an agreement with a mobile operator, Fastweb offers mobile services primarily to resi-
dential customers. Furthermore, it offers a comprehensive range of ICT, cloud and security services
for business customers.
Customer satisfaction
Swisscom Switzerland conducts segment-specific surveys and studies in order to measure general
customer satisfaction. It measures customer satisfaction twice a year, in the second and fourth
quarters of the year. The Wholesale segment measures customer satisfaction once a year. For all
segments, the most important metrics are the extent to which customers are willing to recom-
mend Swisscom to others and the related Net Promoter Score (NPS), which depicts the emotional
aspects of customer loyalty as well as revealing customers’ attitudes towards Swisscom. The NPA
is calculated from the difference between promoters (customers who would strongly recommend
Swisscom) and critics (customers who would only recommend Swisscom with reservations or
would not recommend the company). Swisscom also conducts the following segment-specific sur-
veys and studies:
> The Residential Customers segment conducts representative surveys to determine customer
satisfaction and the extent to which customers are willing to recommend Swisscom to others.
Callers to the Swisscom hotline and visitors to the Swisscom Shops are questioned regularly
about waiting times and staff friendliness. Product studies also regularly survey buyers and
users to determine product satisfaction, service and quality.
> The Small and Medium-Sized Enterprises segment conducts random interviews to gauge cus-
tomers’ satisfaction with Swisscom as well as dealers’ satisfaction with Swisscom products and
support.
> The Enterprise Customers segment conducts surveys among customers to measure satisfac-
tion along the customer experience chain. Feedback instruments are also used at key customer
touch points in order to determine customer satisfaction. After each interaction with the ser-
vice desk or after placing orders, IT users can submit feedback to the service desk or enter their
comments in the order system; customers can assess the quality and success of their projects
on completion.
> The Wholesale segment measures customer satisfaction along the entire customer experience
chain.
The results of these studies and surveys help Swisscom to improve its services and products and
they influence the variable performance-related component of employees’ pay.
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Employees
Overall headcount at Swisscom increased by 1,017 FTEs year-on-year.
In Switzerland Swisscom has 18,272 employees and is training
922 apprentices.
Headcount
At the end of 2014 Swisscom had 21,125 full-time equivalent employees, of which 18,272 or 86.5%
of the total workforce were employed in Switzerland (prior year: 86.3%). Swisscom is also training
922 apprentices in Switzerland. The following chart shows a breakdown of full-time equivalent
positions by segment:
Full-time equivalent employees at end of year
Residential Customers
Small and Medium-Sized Enterprises
Corporate Business
Wholesale
Network & IT
Swisscom Switzerland
Fastweb
Swisscom IT Services
Other
Other operating segments
Group Headquarters
Total Group
Thereof employees in Switzerland
31.12.2012
31.12.2013
31.12.2014
4,316
681
2,360
116
4,389
4,754
757
2,441
107
4,404
5,313
775
2,487
111
4,599
11,862
12,463
13,285
2,893
2,684
1,735
4,419
340
19,514
16,269
2,363
3,162
1,802
4,964
318
20,108
17,362
2,391
3,164
1,968
5,132
317
21,125
18,272
Headcount increased year-on-year by 1,017 full-time equivalents or 5.1% to 21,125. The higher
headcount resulted from corporate acquisitions, the hiring of external staff and the strengthening
of customer service operations. Excluding acquisitions, the increase was 282 FTEs, or 1.4%, and
375 FTEs in Switzerland, or 2.2%.
In the year under review, employees in Switzerland on open-ended contracts accounted for 99.6%
of the workforce (prior year: 99.6%). Part-time employees made up 14.2% (prior year: 13.5%)- Termi-
nations of employment by employees in Switzerland amounted to 5.8% of the workforce (prior
year: 6.4%).
Development of headcount in full-time equivalent
28,000
21,000
14,000
7,000
0
19,547
350
3,133
16,064
20,061
340
3,093
16,628
19,514
339
2,906
16,269
20,108
371
2,375
17,362
21,125
441
2,412
18,272
2010
2011
2012
2013
2014
Other countries
Italy
Switzerland
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Employment law in Switzerland
Introduction
Swisscom is one of the largest employers in Switzerland, with 18,272 full-time equivalent positions.
The legal terms and conditions of employment in Switzerland are based on the Swiss Code of Obli-
gations. The collective employment agreement (CEA) sets out the key terms and conditions of
employment between Swisscom and its employees. It also contains provisions governing relations
between Swisscom and its social partners. Prior to their merger, Swisscom IT Services Ltd and
Swisscom (Switzerland) Ltd had their own collective employment agreements (CEA) commensu-
rate with the respective market environments. The terms and conditions in these agreements had
to be adjusted accordingly, and the new CEA negotiated between Swisscom and the social partners
enters into force on 1 April 2015. The CEA of cablex AG entered into force on 1 January 2013. At the
end of December 2014, 14,596 FTEs or 84.1% of the workforce were covered by the collective
employment agreement.
General terms and conditions of employment which exceed the minimum standard defined by the
Code of Obligations govern the employment law provisions applicable to Swisscom management
staff in Switzerland.
Employee representation and union relations
Swisscom is committed to fostering constructive dialogue with its social partners (the syndicom
union and the transfair staff association) as well as the employee associations (employee repre-
sentatives). The collective employment agreement (CEA) and the social plan constitute fair and
consensual solutions. In the event of significant operational changes, Swisscom involves the social
partners and employee associations at an early stage. The CEA grants the social partners and the
employee associations rights of co-determination in various areas. In general and free elections in
autumn 2013, Swisscom employees elected the new members of the employee associations
charged with exercising these rights. Two employee representatives from the unions also sit on the
Board of Directors of Swisscom Ltd.
Collective employment agreement (CEA)
The harmonised CEA which enters into force on 1 April 2015 retains the very good employment
conditions under the old CEAs and standardises the regulations governing working hours and
annual leave as well as the pay system. The working week for employees covered by the CEA is
40 hours. Among the most progressive fringe benefits defined by the CEA are five weeks’ annual
leave, or 27 days from age 45 (applicable from 1 January 2015) and six weeks’ annual leave from
age 60, 17 weeks’ maternity leave and ten days’ paternity leave. Employees also enjoy an additional
week of paid leave after five years of service. Swisscom pays a child and education allowance which
in most cases is above the statutory cantonal allowance, and grants leave on special family-related
grounds such as adoption leave. In the event of incapacity to work due to illness or accident,
Swisscom continues to pay the employee’s full salary for up to 730 days. The CEA places special
emphasis on staff development while also improving the rights of part-time employees.
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Working-hour models
Swisscom promotes work-life balance by offering working conditions that enable both full- and
part-time employees to balance their professional and private lives: flexible working hours (the
standard model used by a majority of employees) and variable working-hour models such as annual
working hours, a long-term working-time account and part-time working from the age of 58. The
“Holiday Purchasing” model also allows employees to purchase additional leave. Employees may
also work from home with the consent of their line manager. This option is used by many employees
and is becoming increasingly easier thanks to tools such as Unified Communications & Collabora-
tion (UCC). Swisscom is a “home office friendly” employer.
Combining work with the care of relatives at home presents a major challenge to those affected.
Swisscom provides special support for employees who care for a relative or closely-related individ-
ual in addition to their work duties. As part of a “Work & Care” pilot project, two new flexible work-
ing-hour models have been added to the existing models to promote the work-life balance.
Social plan
Swisscom’s social plan sets out the benefits provided to employees covered by the CEA who are
affected by redundancy, and offers resources aimed at improving employability. It also provides for
retraining measures in the event of long-term job cuts. Responsibility for implementing the social
plan lies with Worklink AG, a wholly owned subsidiary of Swisscom. Worklink AG opens up new
prospects for Swisscom employees affected by job cuts, providing them with advice and support in
their search for new employment outside the company or arranging temporary internal or external
placements. The success rate is high, with 69% of those affected finding a new job in 2014 prior to
the end of the social plan programme. Worklink is also committed to promoting and enhancing the
employability of Swisscom employees by reviewing employees’ current status and providing career
advice and coaching.
Swisscom also operates special employment schemes (phased partial retirement, temporary place-
ments in similar areas of expertise) in line with its commitment to providing fair solutions for older
employees affected by changes in skill set requirements or redundancy.
Employee remuneration
Salary system
Competitive pay packages help to attract and retain highly-skilled and motivated specialists and
managerial staff. Swisscom’s salary system comprises a basic salary, a variable performance-related
component and bonuses. The basic salary is determined by function, individual performance and
the job market, while the variable component is contingent on business performance as well as
individual performance in the case of executive functions. Business performance is measured
based on achievement of the Swisscom Group’s overarching targets and the targets of the respec-
tive business segment or division. The targets primarily relate to key financial indicators and cus-
tomer loyalty. Individual performance is measured according to the achievement of results- and
conduct-related goals. Details on remuneration paid to members of the Group Executive Board are
provided in the Remuneration Report.
See report
page 115
Minimum wage
There is no legally defined minimum wage in Switzerland. Instead, this is negotiated by the social
partners in the context of collective employment agreements. The new CEA which entered into
force on 1 January 2013 included an increase in minimum salary to CHF 52,000, or CHF 50,000 in
the case of cablex. Swisscom’s operations are spread throughout Switzerland, and when it comes
to determining salaries there is very little difference between regions. A study of starting salaries
for the youngest employees (up to age 21) at the widely-applied starting-function level found that
the average basic annual salary in this category is CHF 57,400 or CHF 55,770 at cablex: in other
words, 10% above the minimum salary defined by the relevant CEA.
Pay round
In January 2014 Swisscom and its social partners signed a two-year pay round agreement for 2014
and 2015. In the year under review Swisscom increased its total salary payout in Switzerland by
1.2%. This increase was used to make adjustments in salaries based on individual performance and
the ratio of the salary to the benchmark. For 2015 Swisscom has earmarked 1.8% of the total salary
payout for salary adjustments.
Equal pay
Swisscom takes great care to ensure equal pay for men and women. The company’s salary system
is structured in such a way as to award equal pay for equivalent duties, responsibilities and perfor-
mance. To this end, individual functions are assigned to functional levels according to their require-
ments and a salary band is defined for each function level, stipulating the remuneration range for
equivalent duties and responsibility. Pay is determined within this range based on the individual
employee’s performance. As part of its salary review, Swisscom grants employees who have per-
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formed better and are lower within the respective salary band an above-average pay rise. In this
way, any wage disparities are evened out on an ongoing basis. When conducting the salary review,
Swisscom also checks whether there are any pay inequalities between men and women within
individual organisational units and corrects them in a targeted manner.
Swisscom also uses the federal government’s equal pay tool (Logib) to conduct periodic reviews of its
salary structures to ascertain whether disparities exist between men’s and women’s pay. Previous
reviews have revealed only minor pay discrepancies, well under the tolerance threshold of 5%.
In 2011, Swisscom joined the Equal Pay Dialogue, an initiative set up by the employer and employee
umbrella organisations in association with the federal government to review the status of equal
pay and which ran until February 2014. The positive outcome of the Equal Pay Dialogue confirms
that Swisscom salaries conform to the principle of equal pay.
Staff development
Swisscom’s market environment is constantly changing. the company invests in targeted profes-
sional training for employees and managers in order to retain and improve their employability and
the company’s competitiveness in the long term. Employees are supported in their development by
a wide range of on-, near- and off-the-job training options as well as internal programmes and
courses. In 2014 the various training options were brought together under the Group-wide Learn-
ing Centre and made available to all employees via their own dedicated learning space. Nearly half
of all internal learning and training courses take the form of e-learning programmes which can be
carried out any time and from anywhere. The courses cover technical, management and project
management topics. As part of talent management, around 10% of the top performers from the
target groups have completed a corresponding internal programme. On-the-job training options,
including job moves and stages, are becoming increasingly important. Even now Swisscom fills
almost 43% of advertised vacancies internally. It also welcomes opportunities for employees to
attend external further training courses, providing financial support and granting time off for such
studies. In the year under review, every Swisscom employee spent 3.8 days on training and devel-
opment in Switzerland.
Swisscom management sees staff development as a crucial element of its management responsi-
bility. Regular dialogue between employees and management is used as an orientation tool to
heighten the general commitment to training and development in the digital world It also makes it
easier to agree on and realise medium-term development measures. To assess and promote
employee performance and development, Swisscom will continue to develop its Performance
Management System in line with requirements. Performance appraisals are carried out according
to fair principles and cover a wide range of criteria based on binding agreements on objectives. The
ongoing dialogue between employee and management about the agreed objectives ensures they
are met over the course of a year. Broad-based support for the performance and development eval-
uations is provided within the framework of twice-yearly calibration rounds among groups of man-
agers, at which performance is systematically assessed and further development steps are defined.
These rounds are also used to draw up succession plans for key functions and to place talents in
specially-designed talent programmes and offer promising employees challenging positions
beyond their individual departments so as to promote their development.
In 2014 Swisscom launched the Leadership Academy, which offers members of management the
opportunity to get to grips with individual and collective management issues in a changing envi-
ronment and enhance their expertise in dialogue with other managers.
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Staff recruitment
As a Swiss company, Swisscom is committed to the Swiss labour market. In order to meet customer
needs and remain competitive, Swisscom is prepared to work together with both domestic and
international partners, on condition that they satisfy Swisscom’s requirements as regards labour
legislation and sustainability.
Swisscom seeks individuals who are motivated and passionate about helping customers and who
want to help shape the future of the networked world. At all company locations in Switzerland,
Swisscom endeavours to give priority to people from the surrounding regions. This is the reason
behind the high percentage of local employees in all areas and at all hierarchical levels.
In order to attract talented and highly motivated graduates, Swisscom cultivates close contact
with universities and schools of applied sciences. Attending recruitment fairs and engaging in
more advanced forms of cooperation such as guest lectures and workshops is very important to
Swisscom. Many students gain initial professional experience at Swisscom during their studies
either by working as interns or during the practical part of their Bachelor’s or Master’s course.
In August 2014, 256 young people started their apprenticeship at Swisscom. Swisscom is thus Swit-
zerland’s largest trainer of ICT professionals. In 2014, Swisscom trained a total of 922 apprentices in
technical and commercial apprenticeships. The Swisscom training model is designed to promote
independence and personal accountability so as to support the apprentice’s personal development.
Apprentices take an active role in devising their training so that it fits their individual priorities, and
they apply within the company for different practical placements and learn from experienced
employees during such placements.
Employee satisfaction
In 2014, 83% of Swisscom employees in Switzerland took part in the job satisfaction survey. The
results again revealed an above-average level of job satisfaction and a high level of employee com-
mitment at Swisscom. The employees gave all of the areas under review a significantly better aver-
age score than in the 2012 survey, and some of the scores were above average compared to other
companies in the sector. The results are all the more notable given the fact that Swisscom has
undergone a major change process since the last survey, with the merger of Swisscom IT Services Ltd
and Swisscom (Switzerland) Ltd as well as other organisational changes and process adjustments.
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Employment law in Italy
Employment agreement for the telecoms sector in Italy
Statutory terms and conditions of employment in Italy are based on the Contratto collettivo
nazionale di lavoro (CCNL), a state collective employment agreement. The CCNL defines the terms
and conditions of employment between Swisscom’s Italian subsidiary Fastweb and its employees.
It also contains provisions governing relations between Fastweb and the unions.
In February 2013 the telecoms companies and unions negotiated a new CCNL, setting out better
terms and conditions compared with the previous agreement.
Employee representation and relations with the unions
Fastweb engages in dialogue with the unions and the employee representatives and, in the event
of major operational changes, involves them at an early stage.
Industry-wide collective agreement for employees
The working week for employees covered by the CCNL is 40 hours. Benefits include five weeks’
annual leave, 20 weeks’ maternity leave and one day of paternity leave.
In the event of incapacity for work due to illness or accident, Fastweb guarantees full payment of
the employee’s salary for 180 days and half the salary for a further 185 days.
Working time model
Fastweb supports work-life balance. The company’s terms and conditions of employment enable
employees to achieve a healthy balance between their working and private lives. These include in
particular the following measures agreed with the unions in the Conciliazione famiglia e lavoro in
2001: flexible office working hours, choice of shifts for mothers, and temporary part-time work for
mothers.
Employee remuneration
Fastweb offers competitive salary packages aimed at attracting and retaining highly qualified spe-
cialists and managers. The company’s salary system comprises a basic salary, a collective variable
profit-sharing bonus for non-managerial staff, and a variable performance-related component for
managerial staff which is contingent on meeting individual goals and company targets. The basic
salary is determined according to function, individual performance and the situation in the labour
market. The variable profit-sharing bonus is based on the Premio di risultato agreed separately with
the unions. Fastweb respects the legal minimum salary defined by the CCNL.
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Innovation and development
In a dynamic environment in which the market situation and general
conditions are constantly changing, a company must be innovative
to ensure long-term success. With this in mind, Swisscom consistently
addresses changing customer needs, and identifies growth areas in
which it can sustainably defend and strengthen its position.
Innovation is an important driver in the bid to enter new markets and develop up-and-coming
technologies. Due to the rapidly changing nature of Swisscom’s business environment, research
and development are becoming increasingly important. Swisscom wants to anticipate the strate-
gic challenges, new growth areas and future customer needs early on, so as to help actively shape
the future of telecommunications and the Internet. At Swisscom, innovation takes place in all areas
of the company as well as beyond.
Open innovation: a success factor
Swisscom recognises the importance of maintaining a dialogue with customers, employees, sup-
pliers and other partners, as it enables a permanent, open process of innovation with the focus on
customers and their needs. When developing new products and services, Swisscom consistently
adopts human-centred design methods to create simple, inspiring experiences which optimally
help customers find their way in the networked world.
Within the company, Swisscom practices and promotes decentralised product development. As a
result, new ideas are generated throughout the company. Various events and platforms provide
employees with the opportunity to exchange innovative ideas and familiarise themselves with
best practice examples. One example is the Innovation Week held twice a year, during which teams
of employees from different divisions realise a new idea that addresses a specific customer need, is
of business relevance and has potential on the market.
To identify customer needs in good time, it is essential to involve future users in the development
process at the earliest stage possible. Swisscom operates its own open innovation platform called
Swisscom Labs, where registered users are able to contribute their own ideas, give their own opin-
ions on trials and take part in beta tests.
Outside the company, Swisscom promotes innovation throughout the industry. In particular,
Swisscom is committed to supporting young companies that offer forward-looking new solutions
in the field of IT, communications and entertainment. Swisscom participates in start-ups as a pro-
ject partner and investor, and supports them by providing tailored products and services. Since
2013 Swisscom has held the StartUp Challenge competition, where winners are sent on a one-
week mentoring programme in Silicon Valley.
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innovation
Specific areas of innovation
End-to-end connectivity
A high-quality, reliable network infrastructure is one of the key success factors for Swisscom. Over
the past few years, the standard of quality that customers expect the network to deliver has risen
dramatically. Swisscom is therefore working on the next-generation network and developing solu-
tions to give users in Switzerland even faster, more reliable networks. The main challenge here is
the growing volume of data in the mobile area. Swisscom is seeking and developing innovative
network solutions that allow high volumes of data to be handled efficiently and guarantee seam-
less mobile network provision at busy locations. One promising solution is the installation of low-
power microcells that provide high capacity locally. Swisscom is working on the development of
new types of antenna that will allow such microcells to be operated efficiently and integrated
seamlessly in the existing architecture.
Mobile services and apps
The trend towards greater mobility is proceeding apace. Mobile devices such as smartphones and
tablets are commonplace, and it is hard to imagine life nowadays without mobile Internet.
Swisscom’s vision is therefore to use smartphones as a bridge between the real and the digital
worlds. One important step in this direction was the launch of Swisscom Tapit, the Swiss wallet of
the future. Tapit is an open, non-exclusive platform for all service providers in various industries
who are seeking to mobilise their business processes. For end customers, Tapit is a safe place in
which to manage their bank and credit cards. Tapit is based on Near Field Communication (NFC)
technology, which is already incorporated in the majority of smartphones. Swisscom also contin-
ues to operate and continually develop the iO app, which allows users to send SMS messages and
make calls to Switzerland and abroad free of charge. With iO@home they can also be reached on
their fixed-line number wherever they are in the world.
Security and intelligence
As data volumes continue to grow, so too do the requirements placed on products that process this
data in a secure and anonymised way and analyse it according to the latest methodology. “Big data
technologies” have already made inroads in various sectors and are used, for example, to measure
and control traffic flows. At the same time, the number of customers who use their smartphone for
mobile Internet browsing and leave behind customer data is also growing. Hackers and other par-
ties are therefore becoming increasingly interested in customer data. Given this situation, Swisscom
aims to offer its customers various applications that ensure greater transparency and control.
CheckAp, for example, checks the security of programmes installed on a smartphone. In 2014,
Swisscom launched DocSafe, a cloud-based solution that enables users to easily and securely store
important documents, and that users can access at any time and from anywhere.
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Current innovation projects
Swisscom invests in progressive solutions in a number of areas in order to continuously tap into
new growth opportunities and offer its customers the best services and products:
> Identity Access Management: In a world full of virtual products and services, a digital identity
can be a useful tool. It makes life simpler by replacing a large number of passwords with a single,
simple user ID. Swisscom is currently drawing up the foundations for such a digital identity and
for concrete applications.
> Voice over LTE (VoLTE)/WLAN interworking: The 4G/LTE network is currently a dedicated data
network, with customers being transferred to the 3G network for calls. With VoLTE, Swisscom is
aiming to enable the use of voice telephony via 4G, with a technical adjustment to the mobile
infrastructure also allowing voice telephony via WLAN. Customers will be able to enjoy faster
connection times and improved voice quality.
> Clean Pipe: Under the working title “Clean Pipe” Swisscom is trialling new ways of making digital
life simpler for customers and protecting them against dangers and bad experiences, such as
phishing. In the year under review, Swisscom launched the first product, Safe Connect: an app
based on VPN technology that blocks access to websites considered to be dangerous, and to
malware.
> Cloud: Swisscom is developing a 360-degree Cloud with a unified architecture that offers com-
panies and private individuals a wide range of services. Thanks to state-of-the-art technologies,
open source, the latest security concepts and data storage in Switzerland, Swisscom is leading
the way in cloud computing.
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Financial review
Swisscom grows revenue (+2.4%) and operating income before depre-
ciation and amortisation EBITDA (+2.6%). 2.1 million mobile customers
benefit from unlimited usage (Natel infinity). 1.2 million customers
(+16.5%) use Swisscom TV. Fastweb increases revenue and EBITDA
and grows the number of broadband customers to 2.1 million.
Key financial figures
In CHF million, except where indicated
Net revenue
Operating income before depreciation and amortisation (EBITDA)
EBITDA as % of net revenue
Operating income (EBIT)
Net income
Share of net income attributable to equity holders of Swisscom Ltd
Earnings per share (in CHF)
Operating free cash flow
Capital expenditure in property, plant and equipment and other intangible assets
Net debt at end of period
2014
11,703
4,413
37.7
2,322
1,706
1,694
32.70
1,860
2,436
8,120
2013
11,434
4,302
37.6
2,258
1,695
1,685
32.53
1,978
2,396
7,812
Full-time equivalent employees at end of year
21,125
20,108
Change
2.4%
2.6%
2.8%
0.6%
0.5%
0.5%
–6.0%
1.7%
3.9%
5.1%
Development of net revenue in CHF million
Development of EBITDA in CHF million
11,434
1,032
2,013
8,389
11,703
1,089
2,043
8,571
16,000
12,000
11,384
937
2,040
8,000
8,407
4,000
0
6,000
4,500
3,000
1,500
0
Others
Fastweb
Swisscom
Switzerland
4,477
318
602
3,557
4,302
135
620
3,547
4,413
212
625
3,576
2012
2013
2014
2012
2013
2014
Others
Fastweb
Swisscom
Switzerland
Development of capital expenditure in CHF million
Development of net income in CHF million
2,529 *
146
531
1,852
2,396
185
695
1,516
2,436
183
682
1,571
3,000
2,250
1,500
750
0
2,000
1,500
1,000
500
0
Others
Fastweb
Swisscom
Switzerland
1,815
1,695
1,706
2012
2013
2014
2012
2013
2014
* Including expenses of CHF 360 million for mobile
frequency.
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Introduction
As in the prior year, the 2014 consolidated financial statements report the segments “Residential
Customers”, “Small and Medium-Sized Enterprises”, “Corporate Business”, “Wholesale” and “Net-
work & IT”, which are grouped together as “Swisscom Switzerland”. Swisscom IT Services is
accounted for under “Other Operating Segments”. Segment reporting will be adjusted in line with
the management structure from 2015. Swisscom Switzerland covers the segments Residential
Customers, Small and Medium-Sized Enterprises, Enterprise Customers, Wholesale and IT, Network
& Innovation. Group Headquarters, which primarily includes the Group divisions as well as the
employment company Worklink AG, will continue to be reported separately.
Summary
Swisscom’s net revenue rose by CHF 269 million or 2.4% to CHF 11,703 million, while operating
income before depreciation and amortisation (EBITDA) was CHF 111 million or 2.6% higher at
CHF 4,413 million. Net income increased by CHF 11 million or 0.6% to CHF 1,706 million.
At constant exchange rates, excluding company acquisitions and Fastweb’s wholesale revenue
from interconnection (hubbing), net revenue rose by 1.9% or CHF 218 million, of which Swiss busi-
ness accounted for CHF 128 million. Price erosion of CHF 360 million in Swiss core business
(CHF 170 million of which resulted from reduced roaming fees) was more than offset by customer
and volume growth of CHF 488 million. Excluding hubbing, Fastweb’s net revenue was EUR 63 mil-
lion or 3.9% higher at EUR 1,660 million.
On a like-for-like basis, Swisscom’s EBITDA increased by 0.9% or CHF 39 million, of which Swiss busi-
ness accounted for CHF 22 million. Fastweb’s EBITDA rose year-on-year by EUR 10 million or 2.0% to
EUR 515 million. Net income increased year-on-year by CHF 11 million or 0.6% to CHF 1,706 million.
The increase in EBITDA was offset in part by higher depreciation and amortisation and higher
income tax expense.
Capital expenditure increased by CHF 40 million or 1.7% to CHF 2,436 million, and in Switzerland by
CHF 65 million or 3.9% to CHF 1,751 million. The higher figures are primarily due to the expansion
and upgrading of mobile and fixed network infrastructure with the latest technologies. At the end
of 2014, Swisscom had connected more than 1.4 million homes and offices to ultra-fast broadband.
Despite ending the year EUR 3 million or 0.5% lower at EUR 562 million, capital expenditure at Fast-
web remains high due to progressive expansion and upgrading of the broadband network in Italy.
Operating free cash flow declined by CHF 118 million or 6.0% to CHF 1,860 million. Net debt increased
by CHF 308 million or 3.9% over the end of 2013 to CHF 8,120 million, chiefly due to the acquisition
of PubliGroupe. The ratio of net debt to EBITDA remained unchanged year-on-year at 1.8.
Headcount increased year-on-year by 1,017 FTEs or 5.1% to 21,125 FTEs. The higher headcount
resulted from corporate acquisitions, the hiring of external staff and the strengthening of cus-
tomer service operations. In Switzerland the number of employees increased by 910 FTEs or 5.2%
to 18,272. Excluding corporate acquisitions, the number of FTEs rose by 282 or 1.4%, in Switzerland
by 375 FTEs or 2.2%.
Swisscom expects to close 2015 with net revenue in excess of CHF 11.4 billion and EBITDA of
around CHF 4.2 billion. This outlook is based on an assumed euro exchange rate of CHF 1.00. It does
not take account of the possible negative implications of the currency situation for the economy.
The negative effects of the lower euro exchange rate will amount to almost CHF 400 million on net
revenue and around CHF 100 million on EBITDA. In the case of EBITDA, the All IP transformation,
higher pension costs and lower gains from the sale of real estate, will result in a reduction of more
than CHF 100 million. At CHF 2.3 billion, capital expenditure is expected to be some CHF 100 million
lower than in 2014, due to the lower euro exchange rate and a slight reduction in investment in
Fastweb. Capital expenditure in Switzerland will remain unchanged at CHF 1.75 billion. Subject to
achieving its targets, Swisscom will again propose a dividend of CHF 22 per share for the 2015
financial year at the 2016 Annual General Meeting.
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Results of operations
Income statement
In CHF million, except where indicated
Swisscom Switzerland
Fastweb
Other operating segments
Group Headquarters
Revenue from external customers
Swisscom Switzerland
Fastweb
Other operating segments
Group Headquarters
Reconciliation pension cost 1
Intersegment elimination
2014
8,571
2,043
1,088
1
11,703
3,576
625
361
(121)
–
(28)
2013
8,389
2,013
1,032
–
11,434
3,547
620
303
(127)
(17)
(24)
Operating income before depreciation and amortisation (EBITDA)
4,413
4,302
Net revenue
Goods and services purchased
Personnel expense
Other operating expense
Capitalised self-constructed assets and other income
Operating expenses
Operating income before depreciation and amortisation (EBITDA)
Depreciation, amortisation and impairment losses
Operating income (EBIT)
Net interest expense
Other financial result
Share of results of associates
Income before income taxes
Income tax expense
Net income
Share of net income attributable to equity holders of Swisscom Ltd
Share of net income attributable to non-controlling interests
Average number of shares outstanding (in millions of shares)
Earnings per share (in CHF)
11,703
11,434
(2,369)
(2,751)
(2,540)
370
(7,290)
4,413
(2,091)
2,322
(218)
(42)
26
2,088
(382)
1,706
1,694
12
51.801
32.70
(2,338)
(2,706)
(2,476)
388
(7,132)
4,302
(2,044)
2,258
(251)
(8)
30
2,029
(334)
1,695
1,685
10
51.801
32.53
Change
2.2%
1.5%
5.4%
–
2.4%
0.8%
0.8%
19.1%
–4.7%
–
16.7%
2.6%
2.4%
1.3%
1.7%
2.6%
–4.6%
2.2%
2.6%
2.3%
2.8%
–13.1%
425.0%
–13.3%
2.9%
14.4%
0.6%
0.5%
20.0%
–
0.5%
1 The operating income of segments consists of pension cost especially employer contributions.
The difference to the pension cost by IAS 19 will therefore be recognised as a reconciliation item.
Share of operating segments in net revenue in %
Share of operating segments in EBITDA in %
9%
Others
18%
Fastweb
5%
Others
14%
Fastweb
73%
Swisscom
Switzerland
81%
Swisscom
Switzerland
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Net revenue
Swisscom’s net revenue rose by CHF 269 million or 2.4% to CHF 11,703 million. On a like-for-like
basis, net revenue increased by 1.9%. At Swisscom Switzerland, revenue from external customers
was CHF 182 million or 2.2% higher at CHF 8,571 million, resulting in a like-for-like growth in net
revenue of 1.4%. Price erosion and reductions in roaming fees totalling CHF 360 million (of which
roaming fee reductions accounted for CHF 170 million) were outweighed by customer and volume
growth. Fastweb’s net revenue increased by EUR 46 million or 2.8% to EUR 1,688 million, or by 1.5%
in Swiss francs. Excluding wholesale revenue from interconnection services (hubbing business), net
revenue at Fastweb was EUR 63 million or 3.9% higher at EUR 1,660 million. Fastweb’s broadband
customer base grew year-on-year by 130,000 or 6.7% to 2.07 million. Primarily as a result of corpo-
rate acquisitions, revenue from external customers generated by other operating segments
increased by CHF 56 million or 5.4% to CHF 1,088 million.
Goods and services purchased
Goods and services purchased rose year-on-year by CHF 31 million or 1.3% to CHF 2,369 million. The
lower expenditure at Fastweb is attributable to the shrinking hubbing business and lower termina-
tion rates. Expenditure at Swisscom Switzerland rose due to higher costs for subscriber acquisition
and retention.
Personnel expense
Personnel expense increased by CHF 45 million or 1.7% year-on-year to CHF 2,751 million, largely as
a result of corporate acquisitions. Headcount rose year-on-year by 1,017 FTEs or 5.1% to 21,125 FTEs.
Adjusted for corporate acquisitions, the increase amounts to 1.4%, which is largely attributable to
measures to strengthen customer service operations and the insourcing of external staff.
Other operating expense
Other operating expense increased by CHF 64 million or 2.6% year-on-year to CHF 2,540 million.
The increase is mainly attributable to corporate acquisitions, the purchase of services for call centre
operations and higher spending on advertising.
Capitalised costs of self-constructed assets and other income
Capitalised self-constructed assets and other income fell by CHF 18 million or 4.6% year-on-year to
CHF 370 million, and includes gains on the sale of real estate of CHF 59 million (prior year: CHF 9 mil-
lion). Capitalised self-constructed assets were CHF 11 million or 4.3% higher year-on-year at
CHF 267 million.
Operating income before depreciation and amortisation (EBITDA)
Operating income before depreciation and amortisation (EBITDA) rose by CHF 111 million or 2.6%
to CHF 4,413 million. The figure was positively influenced by higher gains on the sale of real estate,
lower pension costs and corporate acquisitions. Adjusted EBITDA rose by 0.9% due to the higher
revenue and as a result of cost management.
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Depreciation and amortisation
Depreciation and amortisation rose by CHF 47 million or 2.3% year-on-year to CHF 2,091 million,
due to higher depreciation and amortisation related to the increase in capital expenditure. Intangi-
ble assets resulting from business combinations were capitalised for purchase price allocation pur-
poses. Depreciation and amortisation includes scheduled amortisation related to intangible assets
from business combinations (for example, brands and customer relationships) totalling CHF 140 mil-
lion (prior year: CHF 156 million).
Net interest expense and other financial result
Net financial expense in 2014 amounted to CHF 260 million (prior year: CHF 259 million). Net inter-
est expense declined by CHF 33 million to CHF 218 million as a result of lower average interest
costs. The other financial result declined by CHF 34 million year-on-year, chiefly as a result of nega-
tive effects of CHF 76 million arising from the fair value adjustment of interest rate derivatives.
Associates
The share of results of associates fell year-on-year by CHF 4 million to CHF 26 million, primarily due
to the acquisition of majority stakes in LTV Yellow Pages and Cinetrade in the prior year. Dividends
received, amounting to CHF 30 million (prior year: CHF 43 million), largely concern dividends paid by
LTV Yellow Pages, Belgacom International Carrier Services and Cinetrade.
Income tax expense
Income tax expense amounted to CHF 382 million (prior year: CHF 334 million), corresponding to an
effective income tax rate of 18.3% (prior year: 16.5%). The higher income tax expense is largely a
result of using and recognising tax loss carry-forwards in the prior year that had previously not
been capitalised. Excluding non-recurring items, Swisscom anticipates an income tax rate of
around 21% in the long term. Income taxes paid were CHF 108 million higher than a year earlier at
CHF 386 million.
Net income and earnings per share
Net income rose by 0.6% or CHF 11 million to CHF 1,706 million. The increase in EBITDA was offset in
part by higher depreciation and amortisation and higher income tax expense. Earnings per share
increased by 0.5% from CHF 32.53 to CHF 32.70.
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Excluding non-recurring items,
revenue increased by 1.9% year-on-year.
Revenue in 2014 totalled
Excluding non-recurring items,
EBITDA increased by 0.9% year-on-year.
EBITDA in 2014 totalled
11.7 billion CHF
4.4 billion CHF
Segment revenue and results
Reporting is broken down into the segments Swisscom Switzerland, Fastweb and Other operating
segments. Group Headquarters is disclosed separately.
Development of revenue from external customers
Swisscom Switzerland in CHF million
Development of revenue generating units (RGU)
Swisscom Switzerland in thousand
8,407
8,389
8,571
10,000
7,500
5,000
2,500
0
11,748
12,097
12,373
14,000
10,500
7,000
3,500
0
Revenue mobile
single subscriptions
Revenue fixed-line
single subscriptions
Revenue bundle
subscriptions
Revenue others
Total
2012
2013
2014
2,932
2,782
2,776
2,470
2,215
1,967
1,172
1,833
8,407
1,553
1,839
8,389
1,921
1,907
8,571
Fixed access lines
2012
3,013
Broadband access lines retail 1,727
Swisscom TV access lines
791
Mobile access lines
6,217
2013
2014
2,879
1,811
1,000
6,407
2,778
1,890
1,165
6,540
Total revenue generating
units (RGU)
11,748
12,097
12,373
Development of revenue from external customers
Fastweb in EUR million
Development of broadband access lines
Fastweb in thousand
1,694
1,638
1,685
2,000
1,500
1,000
500
0
3,000
2,250
1,500
750
0
1,942
2,072
1,767
2012
2013
2014
2012
2013
2014
Residential Customers
Small and Medium-Sized
Enterprises
Wholesale hubbing
Wholesale others
724
791
87
92
744
771
45
78
753
789
28
115
External revenue
1,694
1,638
1,685
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Swisscom Switzerland
In CHF million, except where indicated
Net revenue and results
Residential Customers
Small and Medium-Sized Enterprises
Corporate Business
Wholesale
Elimination
Net revenue
Residential Customers
Small and Medium-Sized Enterprises
Corporate Business
Wholesale
Network & IT
Segment result before depreciation and amortisation (EBITDA)
Margin as % of net revenue
Depreciation, amortisation and impairment losses
Segment result
Capital expenditure and headcount
2014
2013
Change
5,326
1,159
1,788
929
(571)
8,631
2,951
856
900
381
(1,512)
3,576
41.4
(1,173)
2,403
5,145
1,151
1,787
966
(600)
8,449
2,898
864
907
384
(1,506)
3,547
42.0
(1,104)
2,443
3.5%
0.7%
0.1%
–3.8%
–4.8%
2.2%
1.8%
–0.9%
–0.8%
–0.8%
0.4%
0.8%
6.3%
–1.6%
3.6%
6.6%
Capital expenditure in property, plant and equipment and other intangible assets
Full-time equivalent employees at end of year
1,571
13,285
1,516
12,463
Swisscom Switzerland’s net revenue grew year-on-year by CHF 182 million or 2.2% to CHF 8,631 mil-
lion, while operating income before depreciation and amortisation (EBITDA) was CHF 29 million or
0.8% higher at CHF 3,576 million. Adjusted for corporate acquisitions and non-recurring costs for
restructuring, revenue increased by 1.4% and EBITDA by 0.3%. Price erosion of some CHF 360 mil-
lion (of which CHF 170 million resulted from reductions in roaming fees) was more than offset by
customer and volume growth. At CHF 1,571 million, capital expenditure was CHF 55 million or 3.6%
higher than in the previous year due to higher spending on network infrastructure. Headcount
increased by 822 FTEs or 6.6% year-on-year to 13,285 FTEs. Adjusted for company acquisitions, the
increase amounted to 336 FTEs, mainly as a consequence of measures to strengthen customer
service operations and the insourcing of external staff.
The trend towards bundled offerings and new pricing models such as flat-rate tariffs continues
unabated. Natel infinity mobile subscriptions, which offer customers unlimited calls and SMS mes-
sages to all Swiss networks as well as unlimited web browsing, remain very popular. The customer
base grew year-on-year by 0.4 million to around 2.1 million. By the end of 2014, 1.2 million customers
were subscribing to packages such as the Vivo range of offerings which combine fixed-line access
with telephony, Internet and TV or also include a mobile line. This corresponds to an increase of
208,000 customers or 20.8% versus the prior year. Revenue from contracts for bundled offerings
rose by CHF 368 million or 23.7% to CHF 1,921 million.
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Swisscom Switzerland/net revenue
In CHF million, except where indicated
2014
2013
Change
Revenue by services
Revenue mobile single subscriptions
Revenue fixed-line single subscriptions
Revenue bundles
Revenue wholesale
Other net revenue
Revenue from external customers
Operational data at end of period in thousand
Fixed access lines
Broadband access lines retail
Swisscom TV access lines
Mobile access lines
Bundles
Unbundled fixed access lines
Broadband access lines wholesale
Revenue generating units (RGU)
2,776
1,967
1,921
570
1,337
8,571
2,778
1,890
1,165
6,540
1,209
180
262
2,782
2,215
1,553
588
1,251
8,389
2,879
1,811
1,000
6,407
1,001
256
215
12,373
12,097
–0.2%
–11.2%
23.7%
–3.1%
6.9%
2.2%
–3.5%
4.4%
16.5%
2.1%
20.8%
–29.7%
21.9%
2.3%
Revenue from external customers increased year-on-year by CHF 182 million or 2.2% to
CHF 8,571 million. The decrease of CHF 190 million due to price erosion and the price reductions for
roaming amounting to CHF 170 million were more than offset by customer and volume growth.
Swisscom Switzerland’s revenue also increased thanks to the acquisition of LTV Yellow Pages Ltd in
September 2014, and to the majority stake in Cinetrade acquired in the prior year. The number of
revenue generating units (RGU) with end customers grew by 276,000 or 2.3% to 12.4 million. Natel
infinity mobile subscriptions, which offer customers unlimited phone calls and SMS messages to all
Swiss networks as well as surfing, continue to grow in popularity. At the end of 2014, 2.1 million
customers, or 63% of the customer base (excluding corporate customers), were using the Natel
infinity offerings. Figures from recent quarters show that customers switching to Natel infinity
continue to generate higher revenues (ARPU). The number of postpaid mobile customers grew by
146,000, while the number of prepaid customers dropped by 13,000. In 2014, Swisscom sold a total
of 1.5 million mobile handsets (–3.6%). The number of smartphone users has further increased,
with the share of postpaid subscribers rising from 69% to 74% within the space of a year.
Demand remains high for bundled offerings such as the Vivo range, which combines fixed-line
access with telephony, Internet and TV or also includes a mobile line. The number of customers
using bundled offerings rose year-on year by 208,000 or 20.8% to 1.21 million. Revenue from con-
tracts for bundled offerings rose by CHF 368 million or 23.7% to CHF 1,921 million. The number of
Swisscom TV connections increased by 165,000 or 16.5% to 1.17 million, of which 1.06 million sub-
scribed to the basic packages. Swisscom TV 2.0, which offers additional functions, was launched at
the beginning of April 2014 and by the end of 2014 had already attracted 306,000 customers, most
of whom had upgraded from a previous Swisscom offering to a higher-quality bundled offering.
2014 saw a decline of the number of fixed lines for voice telephony by 101,000 or 3.5% to 2.78 mil-
lion, due primarily to the number of customers migrating to cable network providers or switching
from fixed to other forms of connectivity such as mobile. Retail broadband access lines grew year-
on-year by 79,000 or 4.4% to 1.89 million, while the number of unbundled subscriber access lines
fell by 76,000 or 29.7% to 180,000. The number of wholesale broadband access lines rose by 47,000
or 21.9% year-on-year to 262,000.
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Swisscom Switzerland/operating expenses and segment result
In CHF million, except where indicated
2014
2013
Change
Segment expenses by nature of cost
Traffic fees
Subscriber acquisition and retention costs
Other direct costs
Direct costs
Personnel expense
Other indirect costs
Capitalised self-constructed assets and other income
Indirect costs
Segment expenses
Segment result
Segment result before depreciation and amortisation (EBITDA)
Margin as % of net revenue
Depreciation, amortisation and impairment losses
Segment result
Capital expenditure and headcount
(424)
(520)
(925)
(1,869)
(1,765)
(1,590)
169
(3,186)
(5,055)
3,576
41.4
(1,173)
2,403
(449)
(463)
(892)
(1,804)
(1,691)
(1,581)
174
(3,098)
(4,902)
3,547
42.0
(1,104)
2,443
Capital expenditure in property, plant and equipment and other intangible assets
Full-time equivalent employees at end of year
1,571
13,285
1,516
12,463
–5.6%
12.3%
3.7%
3.6%
4.4%
0.6%
–2.9%
2.8%
3.1%
0.8%
6.3%
–1.6%
3.6%
6.6%
Segment expense rose by CHF 153 million or 3.1% to CHF 5,055 million. At CHF 1,869 million, direct
costs were CHF 65 million or 3.6% higher year-on-year. The higher subscriber acquisition and reten-
tion costs as well as additional costs related to corporate acquisitions were partly offset by the
reduction in mobile termination rates and outbound roaming fees. Indirect costs increased by
CHF 88 million or 2.8% to CHF 3,186 million. Adjusted for company acquisitions and restructuring
costs, indirect costs rose by 1.2%. The higher personnel expense as a result of the increase in head-
count was partly offset by savings on other operating costs. Personnel expense increased by
CHF 74 million or 4.4% to CHF 1,765 million, adjusted personnel expense was 2.4% higher. Head-
count rose by 822 FTEs or 6.6% to 13,285 FTEs as a result of acquisitions, the insourcing of external
personnel and an increase in customer service staff. Adjusted for corporate acquisitions, headcount
was 2.7% higher year-on-year. The segment result before depreciation and amortisation was
CHF 29 million or 0.8% higher at CHF 3,576 million, resulting in like-for-like growth in EBITDA of
0.3%. The profit margin was down 0.6 percentage points at 41.4%. Depreciation and amortisation
increased year-on-year by CHF 69 million or 6.3% to CHF 1,173 million, largely due to the high level
of capital expenditure. The segment result ended the year CHF 40 million or 1.6% lower at
CHF 2,403 million. Capital expenditure rose year-on-year by CHF 55 million or 3.6% to CHF 1,571 mil-
lion due to increased investment in the expansion and upgrading of mobile and fixed network infra-
structure with the latest technologies.
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Number of infinity subscribers
at the end of 2014 was
Revenue from bundle contracts
increased year-on-year by
2.1 million
23.7 %
Fastweb
In EUR million, except where indicated
Residential Customers
Corporate Business
Wholesale hubbing
Wholesale other
Revenue from external customers
Intersegment revenue
Net revenue
Segment expenses
Segment result before depreciation and amortisation
Margin as % of net revenue
Capital expenditure in property, plant and equipment and other intangible assets
Full-time equivalent employees at end of year
Broadband access lines at end of year in thousand
2014
753
789
28
115
1,685
3
1,688
(1,173)
515
30.5
562
2,391
2,072
2013
744
771
45
78
1,638
4
1,642
(1,137)
505
30.8
565
2,363
1,942
Change
1.2%
2.3%
–37.8%
47.4%
2.9%
–25.0%
2.8%
3.2%
2.0%
–0.5%
1.2%
6.7%
Development of revenue
from external customers in EUR million
Development of EBITDA in EUR million
1,694
1,638
1,685
2,000
1,500
1,000
500
0
1,000
750
500
250
0
500
505
515
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2012
2013
2014
2012
2013
2014
Fastweb’s net revenue grew by EUR 46 million or 2.8% to EUR 1,688 million compared to the previous
year. Wholesale revenue from low-margin interconnection services (hubbing) dropped as expected.
Excluding hubbing, Fastweb’s revenue was EUR 63 million or 3.9% higher at EUR 1,660 million. Despite
difficult market conditions, Fastweb’s broadband customer base grew year-on-year by 130,000 or
6.7% to 2.07 million. In the residential customer segment, fierce competition drove down average
revenue per broadband customer by around 6% versus the previous year. This decline was offset by
customer growth, with revenue from residential customers rising by EUR 9 million or 1.2% to
EUR 753 million. Revenue from business customers increased by EUR 18 million or 2.3% to EUR 789 mil-
lion, while other wholesale business revenue was EUR 37 million or 47.4% higher at EUR 115 million.
The segment result before depreciation and amortisation totalled EUR 515 million. This corre-
sponds to a year-on-year rise of EUR 10 million or 2.0%, mainly as a result of higher revenues. The
profit margin fell year-on-year by 0.3 percentage points to 30.5%.
Headcount at the end of 2014 totalled 2,391 FTEs, representing an increase of 28 FTEs or 1.2% com-
pared to a year earlier. Capital expenditure dropped by EUR 3 million or 0.5% to EUR 562 million due
to lower spending on the network infrastructure. The ratio of capital expenditure to net revenue
was 33.3% (prior year: 34.4%).
Other operating segments
In CHF million, except where indicated
Revenue from external customers
Intersegment revenue
Net revenue
Segment expenses
Segment result before depreciation and amortisation
Margin as % of net revenue
Capital expenditure in property, plant and equipment and other intangible assets
Full-time equivalent employees at end of year
2014
1,088
801
1,889
(1,528)
361
19.1
211
5,132
2013
1,032
787
1,819
(1,516)
303
16.7
195
4,964
Change
5.4%
1.8%
3.8%
0.8%
19.1%
8.2%
3.4%
Development of revenue
from external customers in CHF million
Development of EBITDA in CHF million
2,000
1,500
1,000
500
0
936
1,032
1,088
1,000
750
500
250
274
303
361
2012
2013
2014
2012
2013
2014
0
At CHF 1,088 million, revenue from external customers was CHF 56 million or 5.4% higher year-on-
year, largely due to acquisitions. Swisscom’s takeover of the PubliGroupe was completed in Septem-
ber 2014, following which LTV Yellow Pages Ltd was assigned to the Swisscom Switzerland seg-
ment, while other interests were assigned to Other operating segments. In 2013 Swisscom IT
Services took over the business platform of Entris Banking and Entris Operations, which is used
primarily for processing payment transactions and securities trading for banks. Revenue from
external customers generated by Swisscom IT Services grew by CHF 38 million or 6.2% to
CHF 650 million, largely as a result of acquisitions. Intersegment revenue grew year-on-year by
CHF 14 million or 1.8% to CHF 801 million, chiefly due to the higher volume of construction services
performed for Swisscom Switzerland.
Segment expense rose by CHF 12 million or 0.8% to CHF 1,528 million. The increase is a result of
higher costs related to acquisitions and revenue growth and was partially offset by higher gains on
the sale of real estate, which in 2014 rose by CHF 50 million year-on-year. The segment result before
depreciation and amortisation rose accordingly by CHF 58 million or 19.1% to CHF 361 million. At
5,132 FTEs, headcount at the end of 2014 was 168 FTEs or 3.4% higher than the previous year, due
primarily to acquisitions. Capital expenditure rose by CHF 16 million or 8.2% to CHF 211 million as a
result of the higher volume of investment by Swisscom IT Services in IT infrastructure.
Group Headquarters and reconciliation of pension cost
The segment result before depreciation and amortisation improved by CHF 6 million or 4.7% to
CHF –121 million, largely on account of the lower cost of restructuring measures compared to the
prior year. At 317 FTEs, headcount was on a par with the prior year.
No expenses are disclosed as a pension cost reconciliation item (prior year: CHF 17 million).
69
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Quarterly review 2013 and 2014
In CHF million, except where indicated
Income statement
Net revenue
1.
4.
quarter quarter quarter quarter
2.
3.
4.
2013 quarter quarter quarter quarter
1.
2.
3.
2014
2,734 2,862 2,867 2,971 11,434 2,821 2,879 2,929 3,074 11,703
Goods and services purchased
Personnel expense
Other operating expenses
Capitalised costs and other income
(552)
(671)
(557)
77
(604)
(691)
(599)
103
(561)
(638)
(596)
(621)
(2,338)
(706)
(2,706)
(724)
(2,476)
74
134
388
(552)
(692)
(597)
81
(558)
(684)
(599)
83
(583)
(655)
(620)
119
(676)
(2,369)
(720)
(2,751)
(724)
(2,540)
87
370
Operating income (EBITDA)
1,031 1,071 1,146 1,054 4,302 1,061 1,121 1,190 1,041 4,413
Depreciation and amortisation
Operating income (EBIT)
Net interest expense
Other financial result
Result of associates
Income before income taxes
Income tax expense
Net income
Share attributable to equity holders
of Swisscom Ltd
Share attributable to
non-controlling interests
(491)
540
(63)
(2)
6
481
(91)
390
(501)
(509)
(543)
(2,044)
570
(63)
5
6
518
(89)
429
637
511 2,258
(59)
(14)
6
570
(116)
454
(66)
(251)
3
12
(8)
30
460 2,029
(38)
(334)
422 1,695
(510)
551
(61)
(23)
3
470
(97)
373
(512)
609
(53)
(11)
10
555
(122)
433
(511)
679
(51)
25
8
661
(118)
543
(558)
(2,091)
483 2,322
(53)
(33)
5
(218)
(42)
26
402 2,088
(45)
(382)
357 1,706
388
427
450
420 1,685
369
430
540
355 1,694
2
2
4
2
10
4
3
3
2
12
Earnings per share (in CHF)
7.49
8.24
8.69
8.11 32.53
7.12
8.30 10.43
6.85 32.70
Net revenue
Swisscom Switzerland
2,041 2,109 2,122 2,177 8,449 2,089 2,114 2,167 2,261 8,631
Fastweb
Other operating segments
Group Headquarters
487
412
–
509
454
1
494
460
–
528 2,018
493 1,819
–
1
483
450
–
499
476
1
513
474
–
552 2,047
489 1,889
1
2
Intersegment elimination
(206)
(211)
(209)
(227)
(853)
(201)
(211)
(225)
(229)
(866)
Total net revenue
2,734 2,862 2,867 2,971 11,434 2,821 2,879 2,929 3,074 11,703
Segment result before depreciation and amortisation
Swisscom Switzerland
Fastweb
Other operating segments
Group Headquarters
Reconciliation pension cost
Intersegment elimination
877
119
73
(29)
(5)
(4)
888
139
86
(30)
(7)
(5)
948
155
78
(27)
(4)
(4)
834 3,547
207
66
(41)
(1)
(11)
620
303
(127)
(17)
(24)
894
132
68
(25)
(2)
(6)
902
155
98
(31)
2
(5)
941
163
126
(27)
(4)
(9)
839 3,576
175
69
(38)
4
(8)
625
361
(121)
–
(28)
Total segment result (EBITDA)
1,031 1,071 1,146 1,054 4,302 1,061 1,121 1,190 1,041 4,413
Capital expenditure in property, plant and equipment and other intangible assets
Swisscom Switzerland
Fastweb
Other operating segments
Intersegment elimination
Total capital expenditure
284
155
38
(3)
354
160
38
(5)
361
168
56
(6)
517 1,516
212
63
4
695
195
(10)
299
173
52
(5)
378
173
54
(7)
422
148
49
(9)
472 1,571
188
56
(7)
682
211
(28)
474
547
579
796 2,396
519
598
610
709 2,436
Full-time equivalent employees at end of year
Swisscom Switzerland
12,018 12,344 12,513 12,463 12,463 12,522 12,622 13,215 13,285 13,285
Fastweb
2,389 2,379 2,370 2,363 2,363 2,362 2,373 2,378 2,391 2,391
Other operating segments
4,505 4,802 4,991 4,964 4,964 4,883 4,917 5,164 5,132 5,132
Group Headquarters
Total headcount
335
334
320
318
318
314
316
318
317
317
19,247 19,859 20,194 20,108 20,108 20,081 20,228 21,075 21,125 21,125
Operating free cash flow
245
615
528
590 1,978
334
496
640
390 1,860
Net debt
7,931 8,622 8,263 7,812 7,812
7,676 8,502 8,398 8,120 8,120
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In CHF million, except where indicated
Swisscom Switzerland
Net revenue and results
Residential Customers
Small and Medium-Sized Enterprises
Corporate Business
Revenue mobile single subscriptions
Residential Customers
Small and Medium-Sized Enterprises
Corporate Business
Revenue fixed-line single subscriptions
Residential Customers
Small and Medium-Sized Enterprises
Revenue bundles
Total revenue single subscriptions
and bundles
Solution business
Hardware sales
Wholesale
Revenue other
1.
4.
quarter quarter quarter quarter
2.
3.
4.
2013 quarter quarter quarter quarter
1.
2.
3.
2014
428
104
141
673
304
124
146
574
309
40
349
442
109
145
696
289
121
146
556
330
46
376
469
109
142
720
284
119
143
546
352
52
404
444 1,783
107
142
429
570
693 2,782
280 1,157
117
142
481
577
539 2,215
369 1,360
55
193
424 1,553
435
103
135
673
257
115
143
515
381
58
439
448
107
141
696
245
111
141
497
408
62
470
465
104
142
711
233
109
139
481
430
66
496
447 1,795
105
144
419
562
696 2,776
226
107
141
961
442
564
474 1,967
449 1,668
67
253
516 1,921
1,596 1,628 1,670 1,656 6,550 1,627 1,663 1,688 1,686 6,664
84
128
149
68
87
143
146
90
90
143
148
56
99
181
145
82
360
595
588
296
85
153
145
65
92
153
139
53
88
172
144
59
103
208
142
106
368
686
570
283
Total revenue from external customers 2,025 2,094 2,107 2,163 8,389 2,075 2,100 2,151 2,245 8,571
Residential Customers
1,190 1,247 1,254 1,294 4,985 1,234 1,258 1,299 1,377 5,168
Small and Medium-Sized Enterprises
Corporate Business
Wholesale
274
412
149
282
419
146
286
419
148
286 1,128
438 1,688
145
588
282
414
145
286
417
139
284
424
144
287 1,139
439 1,694
142
570
Revenue from external customers
2,025 2,094 2,107 2,163 8,389 2,075 2,100 2,151 2,245 8,571
Segment result before depreciation and amortisation
Residential Customers
Small and Medium-Sized Enterprises
Corporate Business
Wholesale
Network & IT
Intersegment elimination
Total segment result (EBITDA)
Margin as % of net revenue
710
213
220
96
731
216
226
96
759
222
231
97
698 2,898
213
230
95
864
907
384
730
215
217
95
742
220
223
92
762
215
227
98
717 2,951
206
233
96
856
900
381
(362)
(380)
(363)
(401)
(1,506)
(364)
(374)
(361)
(413)
(1,512)
–
877
43.0
(1)
888
42.1
2
948
44.7
(1)
–
834 3,547
38.3
42.0
1
894
42.8
(1)
902
42.7
–
941
43.4
–
–
839 3,576
37.1
41.4
Fastweb, in EUR million
Residential Customers
Corporate Business
Wholesale hubbing
Wholesale other
Revenue from external customers
Segment result (EBITDA)
Margin as % of net revenue
186
178
14
19
397
97
24.4
186
193
11
21
411
113
27.4
186
188
9
19
402
126
31.3
186
212
11
19
744
771
45
78
428 1,638
169
39.4
505
30.8
188
177
7
23
395
108
27.3
188
188
7
26
409
128
187
202
7
28
424
134
31.3
31.6
190
222
7
38
753
789
28
115
457 1,685
145
31.7
515
30.5
Capital expenditure
126
130
137
172
565
142
142
122
156
562
Broadband access lines in thousand
1,861 1,887 1,911 1,942 1,942 1,984 1,994 2,016 2,072 2,072
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In thousand, except where indicated
Swisscom Switzerland
Operational data
Access lines
Single subscriptions
Bundles
Fixed access lines
Single subscriptions
Bundles
1.
4.
quarter quarter quarter quarter
2.
3.
4.
2013 quarter quarter quarter quarter
1.
2.
3.
2014
2,272 2,207 2,142 2,073 2,073 2,007 1,948 1,902 1,840 1,840
698
729
763
806
806
849
882
909
938
938
2,970 2,936 2,905 2,879 2,879 2,856 2,830 2,811 2,778 2,778
909
842
878
889
843
810
810
773
745
718
681
681
938 1,001 1,001 1,060 1,110 1,154 1,209 1,209
Broadband access lines retail
1,751 1,767 1,781 1,811 1,811 1,833 1,855 1,872 1,890 1,890
Single subscriptions
Bundles
Swisscom TV access lines
291
569
860
289
613
902
281
662
276
724
276
724
271
781
259
832
246
879
218
947
218
947
943 1,000 1,000 1,052 1,091 1,125 1,165 1,165
Prepaid single subscriptions
2,196 2,180 2,173 2,176 2,176 2,173 2,165 2,165 2,163 2,163
Postpaid single subscriptions
3,741 3,763 3,783 3,812 3,812 3,812 3,828 3,850 3,872 3,872
Mobile access lines single subscriptions 5,937 5,943 5,956 5,988 5,988 5,985 5,993 6,015 6,035 6,035
Bundles
Mobile access lines
333
364
390
419
419
444
467
484
505
505
6,270 6,307 6,346 6,407 6,407 6,429 6,460 6,499 6,540 6,540
Revenue generating units (RGU)
11,851 11,912 11,975 12,097 12,097 12,170 12,236 12,307 12,373 12,373
Broadband access lines wholesale
Unbundled fixed access lines
196
290
201
280
208
268
215
256
215
256
221
241
224
228
241
204
262
180
262
180
Bundles
2play bundles
3play bundles
4play bundles
nplay bundles
Total bundles
Data traffic in million
257
428
157
–
264
451
174
–
270
479
189
–
279
517
205
–
279
517
205
–
287
555
218
–
294
584
231
1
302
609
242
1
304
646
255
4
304
646
255
4
842
889
938 1,001 1,001 1,060 1,110 1,154 1,209 1,209
Fixed-line traffic in minutes
1,918 1,889 1,728 1,830
7,365 1,716 1,482 1,498 1,535 6,231
Mobile traffic in minutes
1,728 1,817 1,770 1,831 7,146 1,894 2,026 2,065 2,133 8,118
Data SMS mobile
628
607
598
552 2,385
509
510
517
483 2,019
Swisscom Group
Information by geographical regions
Net revenue in Switzerland
2,235 2,337 2,358 2,428 9,358 2,323 2,361 2,401 2,501 9,586
Net revenue in other countries
499
525
509
543 2,076
498
518
528
573 2,117
Total net revenue
2,734 2,862 2,867 2,971 11,434 2,821 2,879 2,929 3,074 11,703
EBITDA Switzerland
EBITDA in other countries
Total EBITDA
910
121
933
138
993
153
849 3,685
205
617
924
137
966 1,028
870 3,788
155
162
171
625
1,031 1,071 1,146 1,054 4,302 1,061 1,121 1,190 1,041 4,413
Capital expenditure in Switzerland
Capital expenditure in other countries
Total capital expenditure
319
155
474
387
160
547
409
170
579
571 1,686
225
710
796 2,396
345
174
519
424
174
598
463
147
610
519 1,751
190
685
709 2,436
Full-time equivalent employees
in Switzerland
Full-time equivalent employees
in other countries
16,483 17,099 17,449 17,362 17,362 17,395 17,545 18,220 18,272 18,272
2,764 2,760
2,745 2,746 2,746 2,686 2,683 2,855 2,853 2,853
Total headcount
19,247 19,859 20,194 20,108 20,108 20,081 20,228 21,075 21,125 21,125
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Cash flows
In CHF million
Operating income before depreciation and amortisation (EBITDA)
Capital expenditure in property, plant and equipment and other intangible assets
Change in net working capital and other cash flows from operating activities
Operating free cash flow
Net interest paid
Income taxes paid
Free cash flow
Net cash outflow from acquisition of PubliGroupe 1
Other cash flows from investing activities, net
Issuance and repayment of financial liabilities, net
Dividends paid to equity holders of Swisscom Ltd
Other cash flows
(Net decrease) Net increase in cash and cash equivalents
2014
4,413
(2,436)
(117)
1,860
(235)
(386)
1,239
(385)
147
(265)
(1,140)
(19)
(423)
2013
4,302
(2,396)
72
1,978
(243)
(278)
1,457
–
(152)
37
(1,140)
(18)
184
Change
111
(40)
(189)
(118)
8
(108)
(218)
(385)
299
(302)
–
(1)
(607)
1 Acquisition cost of CHF 474 million less remaining minority interests of CHF 8 million, acquired cash and cash equivalents of CHF 16 million
and proceeds of CHF 65 million from sale of securities and media participations.
Free cash flow in CHF million
4,413
–2,436
88
–22
–167
–16
1,860
–235
–386
1,239
EBITDA
Capital
expenditure
Proceeds
from sale
of assets
Change in
defined
benefit
obligations
Change in
net working
capital
Dividends
to non-
controlling
interests
Operating
free cash
flow
Net interest
paid
Taxes
paid
Free
cash flow
Free cash flow dropped by CHF 218 million or 15.0% to CHF 1,239 million as a result of the lower
operating free cash flow and higher income tax payments, which increased by CHF 108 million
year-on-year to CHF 386 million.
The reduction of CHF 118 million or 6.0% in operating free cash flow to CHF 1,860 million is chiefly
a result of the increase in net working capital, which could not be offset by the improvement in
EBITDA and higher income from the sale of property, plant and equipment. After deducting pay-
ments already received, proceeds from the sale of real estate in 2014 amounted to CHF 85 million
(prior year: 25 million). Net working capital grew by CHF 167 million compared to the end of 2013
(prior year: reduction of CHF 78 million), chiefly due to lower trade payables. Capital expenditure
was CHF 40 million or 1.7% higher at CHF 2,436 million, mainly as a result of the expansion of net-
work infrastructure in Switzerland.
In September 2014, Swisscom acquired PubliGroupe Ltd for a purchase price of CHF 474 million.
Less the acquired cash and cash equivalents, the deferred payment of the purchase price for out-
standing shares and the sale of securities and media interests, the net outflow for this transaction
amounted to CHF 385 million. Total dividends paid by Swisscom to its shareholders in 2014
remained unchanged from the prior year at CHF 1,140 million.
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Net asset position
Balance sheet
In CHF million
Assets
Cash and cash equivalents and current financial assets
Trade and other receivables
Property, plant and equipment
Goodwill
Other intangible assets
Associates and non-current financial assets
Income tax assets
Other current and non-current assets
Total assets
Liabilities and equity
Financial liabilities
Trade and other payables
Defined benefit obligations
Provisions
Income tax liabilities
Other current and non-current liabilities
Total liabilities
Share of equity attributable to equity holders of Swisscom Ltd
Share of equity attributable to non-controlling interests
Total equity
Total liabilities and equity
Equity ratio at end of year
31.12.2014
31.12.2013
Change
342
2,586
9,720
4,987
1,921
404
434
538
883
2,516
9,156
4,809
2,053
346
301
432
20,932
20,496
8,604
1,876
2,441
932
529
1,093
15,475
5,454
3
5,457
20,932
26.1%
8,823
1,870
1,293
799
640
1,069
14,494
5,973
29
6,002
20,496
29.3%
–61.3%
2.8%
6.2%
3.7%
–6.4%
16.8%
44.2%
24.5%
2.1%
–2.5%
0.3%
88.8%
16.6%
–17.3%
2.2%
6.8%
–8.7%
–89.7%
–9.1%
2.1%
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Total assets rose by CHF 0.4 billion or 2.1% to CHF 20.9 billion, mainly due to the higher investment
activity and acquisitions of subsidiaries.
In CHF million
Property, plant and equipment
Goodwill
Other intangible assets
Receivables
Liabilities
Other net operating assets
Cash and cash equivalents and financial assets
Financial liabilities
Defined benefit obligations
Income tax assets and liabilities, net
Investments in associates
Other assets, net
Equity
31.12.2012
31.12.2013
31.12.2014
Change
8,549
4,662
2,121
3,081
(3,763)
14,650
712
(8,783)
(2,108)
(85)
268
63
4,717
9,156
4,809
2,053
2,948
(3,738)
15,228
883
(8,823)
(1,293)
(339)
153
193
6,002
9,720
4,987
1,921
3,124
(3,901)
15,851
342
(8,604)
(2,441)
(95)
171
233
5,457
564
178
(132)
176
(163)
623
(541)
219
(1,148)
244
18
40
(545)
Fastweb
As at 31 December 2014, the book value of Fastweb in Swisscom’s consolidated financial state-
ments amounted to EUR 2.8 billion (CHF 3.4 billion; CHF/EUR end-of-period exchange rate of 1.202).
This includes goodwill with a net carrying amount of EUR 0.5 billion. In 2013 and 2014 Swisscom
raised financing totalling EUR 1.3 billion, which was intended as an instrument for hedging Fast-
web’s net assets. Fastweb’s cumulative currency translation losses of CHF 1.6 billion (after tax) as
at 31 December 2014 are recognised in equity in Swisscom’s consolidated financial statements.
Goodwill
The net carrying amount of goodwill is CHF 4,987 million, the bulk of which relates to Swisscom
Switzerland (CHF 4,223 million). This goodwill arose primarily in 2007 in connection with the repur-
chase of the 25% stake in Swisscom Mobile Ltd sold to Vodafone in 2001. Following the repurchase,
the mobile, fixed-network and solutions businesses were organisationally combined and merged
to create the new company Swisscom (Switzerland) Ltd. The valuation risk of this goodwill item is
extremely low. The net carrying amount of Fastweb’s goodwill is EUR 492 million (CHF 592 million).
Goodwill in respect of Other operating segments amounts to CHF 172 million.
Post-employment benefits
Defined benefit obligations presented in the consolidated financial statements are measured in
accordance with International Financial Reporting Standards (IFRS). Net obligations recognised in
the balance sheet amounted to CHF 2,441 million, corresponding to an increase of CHF 1,148 mil-
lion compared to the prior year. This is largely due to a lower discount rate, which was only partly
offset by plan asset performance. In accordance with Swiss accounting standards (Swiss GAAP
ARR), the surplus amounts to CHF 1.0 billion corresponding to a coverage ratio of 111%. The main
reasons for the differences in accordance with IFRS of CHF 3.4 billion are the application of differing
actuarial assumptions with regard to the discount rate (CHF 2.7 billion) and life expectancy
(CHF 0.4 billion), and a different actuarial measurement method (CHF 0.3 billion). IFRS measure-
ment takes into account future salary, contribution and pension increases and early retirements. By
contrast, the equal distribution of risk prescribed by law and in the regulations in the event of a
funding deficit is not taken into account.
Equity
Equity declined by CHF 545 million or 9.1% to CHF 5,457 million, bringing the ratio of consolidated
equity to total assets down from 29.3% to 26.1%. The dividend payments of CHF 1,140 million to
the equity holders of Swisscom Ltd and net losses of CHF 938 million recognised directly in equity
were not offset by the CHF 1,706 million in net income. Net losses recognised directly in equity
include non-cash actuarial losses from pension plans totalling CHF 1,161 million as well as unreal-
ised losses of CHF 46 million resulting from currency translation of foreign Group companies. The
CHF/EUR exchange rate fell from 1.228 at the end of 2013 to 1.202 at the end of 2014. At 31 Decem-
ber 2014, cumulative currency translation losses recognised in equity amounted to CHF 1,590 mil-
lion (after tax).
Distributable reserves are calculated on the basis of equity reported in the separate financial state-
ments of Swisscom Ltd in accordance with statutory accounting provisions, rather than on the
basis of equity as disclosed in the consolidated balance sheet prepared in accordance with Interna-
tional Financial Reporting Standards (IFRS). At 31 December 2014, the equity of Swisscom Ltd
amounted to CHF 5,575 million. The difference between this amount and equity disclosed in the
consolidated balance sheet is essentially due to earnings retained by subsidiaries as well as differ-
ent accounting and valuation methods. Under Swiss company law, share capital and that part of
the general reserves representing 20% of the share capital may not be distributed. At 31 December
2014, Swisscom Ltd had distributable reserves of CHF 5,513 million.
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Net debt
Net debt comprises financial liabilities less cash and cash equivalents, current financial assets and
non-current, fixed-interest-bearing deposits. Swisscom’s goal is to achieve a maximum net debt/
EBITDA ratio of 2.1. This value may be exceeded temporarily. Financial leeway exists if the target is
not reached.
In CHF million, except where indicated
Net debt
Ratio total liabilities/total assets
Ratio net debt/equity
Ratio net debt/EBITDA
Development of net debt in CHF million
31.12.2012
31.12.2013
31.12.2014
8,071
76.2%
1.7
1.8
7,812
70.7%
1.3
1.8
8,120
73.9%
1.5
1.8
7,812
–1,860
1,140
218
386
424
8,120
Net debt
31.12.2013
Operating
free cash flow
Dividends
Net interest
expense
Taxes paid
Other
effects
Net debt
31.12.2014
The ratio of net debt to EBITDA remained unchanged year-on-year at 1.8. In recent years, Swisscom
has taken advantage of favourable capital market conditions with a view to optimising the interest
and maturity structure of the Group’s financial obligations. The share of the Group’s variable-rate
financial liabilities amounts to 29%.
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Maturity profile of financial liabilities
Swisscom aims for a broadly diversified debt portfolio. This involves paying particular attention to
balancing maturities and a diversification of financing instruments and markets. The following
table shows the maturity profile of interest-bearing financial liabilities at nominal value as at
31 December 2014:
In CHF million
Bank loans
Debenture bonds
Private placements
Finance lease liabilities
Other financial liabilities
Total
Due within Due within Due within Due within
1 year 1 to 2 years 3 to 5 years 6 to 10 years
Due after
10 years
998
500
–
14
2
300
130
361
–
2,025
2,202
350
14
–
600
24
1
–
30
2
96
360
–
479
–
Total
1,885
5,087
950
561
5
1,514
664
2,780
2,595
935
8,488
Capital expenditure
See report
pages 45–47
Swisscom remains committed to maintaining the high quality and availability of its network infra-
structures. In Switzerland this involves making targeted investments in ultra-fast broadband net-
work expansion, migrating to an all-IP-based infrastructure, and ensuring a state-of-the-art mobile
network.
In Italy, Fastweb operates a network comprising a proprietary fibre-optic network and a cop-
per-based broadband access infrastructure. Fastweb is also systematically expanding this network
infrastructure.
In CHF million, except where indicated
Fixed access & Infrastructure
Mobile access
Expansion of the fibre-optic network
Customer driven
Projects and others 1
Mobile frequencies
Swisscom Switzerland
Fastweb
Other operating segments
Group Headquarters and elimination
Total capital expenditure
Thereof Switzerland
Thereof foreign country
Total capital expenditure as % of net revenue
2012
425
226
317
162
362
360
2013
410
271
292
159
384
–
2014
406
235
440
186
304
–
1,852
1,516
1,571
531
167
(21)
2,529
1,994
535
22.2
695
195
(10)
2,396 2
1,686
710
21.0
682
211
(28)
2,436 2
1,751
685
20.8
Change
–1.0%
–13.3%
50.7%
17.0%
–20.8%
–
3.6%
–1.9%
8.2%
180.0%
1.7%
3.9%
–3.5%
1 Including All IP migration.
2 Excluding capital expenditure of CHF 24 million (2013: CHF 49 million; 2012: CHF 32 million) in real estate projects, for which
sales contracts were concluded and the purchasers made payments in the same amount.
Capital expenditure incurred by Swisscom rose year-on-year by CHF 40 million or 1.7% to
CHF 2,436 million, corresponding to 20.8% of net revenue (prior year: 21.0%). Swisscom Switzerland
accounted for 64% of 2014 capital expenditure, while Fastweb accounted for 28% and other oper-
ating segments 8%.
Capital expenditure incurred by Swisscom Switzerland rose year-on-year by CHF 55 million or 3.6%
to CHF 1,571 million, corresponding to 18.2% of net revenue (prior year: 17.9%). The increase is due
to the expansion and upgrading of mobile and fixed network infrastructure with the latest tech-
nologies. By the end of 2014, Swisscom had connected more than 1.4 million homes and offices
with ultra-fast broadband – from fibre-to-the-home (FTTH) to the latest fibre-optic technology
such as fibre-to-the-street (FTTS), fibre-to-the-building (FTTB) and vectoring technology – and
extended 4G/LTE coverage to 97% of the Swiss population.
By contrast, Fastweb reduced its capital expenditure year-on-year by CHF 13 million or 1.9% to
CHF 682 million. This corresponds to a reduction of EUR 3 million or 0.5% to EUR 562 million in local
currency terms and is mainly due to lower investment in the network infrastructure resulting in a
ratio of capital expenditure to revenue of 33.3% (prior year: 34.4%). Around 33% of total capital
expenditure is directly related to customer growth.
At CHF 211 million, capital expenditure incurred by other operating segments was CHF 16 million
or 8.2% higher year-on-year, largely as a result of higher investment in the IT infrastructure of
Swisscom IT Services.
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Statement of added value
Operating added value is equivalent to net revenue less goods and services purchased, other operating
expenses, and depreciation and amortisation. Personnel expense is treated as use of added value
rather than as an intermediate input. Swisscom generates the bulk of its added value in Switzerland,
with activities abroad accounting for 4% of the Group’s added value from operations in the year under
review (prior year: 5%).
In CHF million
Added value
Net revenue
Capitalised self-constructed assets and other income
Goods and services purchased
Other operating expenses 1
Depreciation 2
Intermediate inputs
Operating added value
Other non-operating result 3
Total added value
Allocation of added value
Employees 4
Public sector 5
Shareholders (dividends)
External investors (net interest expense)
Company (retained earnings) 6
Total added value
Switzerland
Abroad
Total Switzerland
Abroad
2014
2013
Total
9,586
(290)
1,789
1,783
1,322
4,604
4,982
2,520
390
2,117
11,703
9,358
2,076
11,434
(80)
580
738
646
1,884
233
(229)
1,712
1,736
1,281
4,500
4,858
(370)
2,369
2,521
1,968
6,488
5,215
(139)
5,076
253
2,773
2,460
322
8
398
1,156
218
531
5,076
(159)
626
723
607
1,797
279
266
(3)
(388)
2,338
2,459
1,888
6,297
5,137
(83)
5,054
2,726
319
1,154
251
604
5,054
1 Other operating expense: excluding taxes on capital and other taxes not based on income.
2 Depreciation and amortisation: excluding depreciation and amortisation of acquisition-related assets such as brands or customer relations.
3 Other non-operating result: financial result excluding net interest expense, share of profits of investments in associates, and depreciation and
amortisation of acquisition-related intangible assets.
4 Employees: employer contributions are reported as pension cost, rather than as expenses according to IFRS.
5 Public sector: current income taxes, taxes on capital and other taxes not based on income.
6 Company: including changes in deferred income taxes and defined benefit obligations.
Operating added value amounted to CHF 5,076 million in 2014, an increase of 0.4% compared with
the previous year. As in the prior year, some 95% of operating added value was generated in Swit-
zerland. Added value from international operations declined by CHF 46 million to CHF 233 million
on account of higher depreciation and amortisation costs.
Although operating added value in Switzerland was virtually unchanged year-on-year at
CHF 4,982 million, added value from operations per FTE was 1.4% lower at CHF 283,000 (prior year:
CHF 287,000).
Swisscom development of added
value per employee in Switzerland in CHF thousand
Allocation of added value in %
400
300
200
100
0
296
287
283
2012
2013
2014
10%
Company
8%
Public sector
23%
Shareholders
4%
External investors
55%
Employees
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Energy efficiency and CO2 emissions
In % except where indicated
Energy consumption (in GWh)
Increase of the efficiency of energy to 1 January 2010
Direct CO2-emissions (in tons)
Reduction of direct CO2-emissions to 1 January 2010
2014
497
26.4
21,380
17.0
2013
498
21.1
23,835
3.9
Change
–0.2%
–10.3%
Swisscom is striving to boost energy efficiency and rely more on renewable energies in order to
minimise the environmental impact of its business activities. In Switzerland Swisscom is aiming, by
the end of 2015, to increase its energy efficiency by 25% from the levels of 1 January 2010 and then
by a further 35% between 1 January 2016 and 2020. The increase will be achieved primarily by
measures in the network infrastructure area. Swisscom is also aiming for a 12% reduction in direct
CO2 emissions in Switzerland by the end of 2015. This reduction is to be achieved primarily through
measures related to employee mobility and the infrastructure.
In 2014 total energy consumption in Switzerland fell by 1 GWh or 0.2% to 497 GWh, while energy
efficiency increased versus 1 January 2010 to 26.4% (prior year: 21.1%). This improvement was
achieved by efficiency enhancements in computer centres and the Mistral energy saving project
(the use of fresh air to cool telephone exchanges). In 2014, direct CO2 emissions in Switzerland fell
by 2,455 tonnes or 10.3% to 21,380 tonnes, chiefly due to reduced consumption of heating oil. This
results in a reduction of 17% in direct CO2 emissions versus 1 January 2010.
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Outlook for net revenue
Expectation for 2015 of more than
Outlook for EBITDA
Expectation for 2015 of around
11.4 billion CHF
4.2 billion CHF
Financial outlook
2014
reported
CHF/EUR 1.212
in CHF mio.
Effect
revaluation CHF
in CHF bn.
2014
pro-forma
CHF/EUR 1.00
in CHF mio.
Net revenue
11,703
(0.4)
11,331
2015
Change
Swisscom
without
Fastweb
in CHF bn.
0.1
2015
Change
Fastweb
in CHF bn.
2015
outlook
(CHF/EUR 1.00)
in CHF bn.
0
> 11.4
Operating income before
depreciation and amortisation
(EBITDA)
Capital expenditure
4,413
2,436
(0.1)
(0.1)
4,315
2,313
(0.1)
0
> 0
< 0
~ 4.2
2.3
The financial outlook for 2015 is influenced to a substantial degree by the CHF/EUR exchange rate.
The Swiss National Bank’s decision to abandon the euro currency peg in January 2015 has increased
the volatility of the exchange rate. The forecast of the future currency development and the effects
on the economy is subject to uncertainty. The following outlook is predicated on a parity CHF/EUR
exchange rate of 1.00 for 2015, corresponding to an exchange rate reduction in the euro of 17%
versus 2014 (average 2014 EUR exchange rate: CHF 1.21). It does not take account of the possible
negative implications of the currency situation for the economy.
On the basis of the assumed parity with the euro, Swisscom expects for 2015 net revenue of more
than CHF 11.4 billion, EBITDA of around CHF 4.2 billion and capital expenditure of CHF 2.3 billion.
Calculated at the same exchange rate as 2014, net revenue is expected to end 2015 CHF 100 million
higher as compared to 2014. Excluding Fastweb, Swisscom expects net revenue to grow by CHF 100
million. In local currency terms (euro), Fastweb’s net revenue for 2015 is expected to be on a par
with the prior year, which corresponds, however, to a decline of almost CHF 400 million in the
reporting currency.
EBITDA is expected to end 2015 at around CHF 4.2 billion, or some CHF 200 million below the 2014
figure. CHF 100 million of this decline is attributable to the appreciation of the Swiss franc, and the
other CHF 100 million is due to the following effects: The change in network infrastructure and
services to Internet protocol (All IP) will result in higher costs in 2015. In addition, gains from the
sale of real estate will be lower and, due to lower interest rates, pension costs in accordance with
IFRS will be higher. These effects cannot be offset by additional contributions to results from recent
acquisitions and the related synergies.
In local currency terms, Fastweb’s EBITDA is expected to be higher, primarily as a result of lower
usage fees for regulated services from other network operators. Regulated prices are expected to
drop further and the volume of services purchased will decline due to customers migrating to their
own ultra-fast broadband network.
Swisscom expects capital expenditure for 2015 to be CHF 2.3 billion. In Switzerland capital expend-
iture will remain the same as last year at CHF 1.75 billion due to further expansion of the ultra-fast
broadband network and investments in the IT platform for banking. At Fastweb the volume of
capital expenditure reached its peak in 2014, and in local currency terms will decline slightly in
2015, corresponding to a currency-related reduction of CHF 100 million.
If all targets are met, Swisscom will again propose to the Annual General Meeting of Shareholders
an unchanged ordinary dividend of CHF 22 per share for the 2015 financial year.
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Capital market
Swisscom’s shares are listed on the SIX Swiss Exchange. The credit-
worthiness of Swisscom is regularly assessed by international rating
agencies.
Swisscom share
Swisscom’s market capitalisation as at 31 December 2014 amounted to CHF 27.1 billion (previous
year: 24.4 billion). The number of shares outstanding remained the same at 51.8 million. Par value
per registered share is CHF 1. Each share entitles the holder to one vote. Voting rights can only be
exercised if the shareholder is entered in the share register of Swisscom Ltd with voting rights. The
Board of Directors may refuse to enter a shareholder with voting rights if such voting rights exceed
5% of the company’s share capital.
Ownership structure
Confederation
Natural person
Institution
Total
Number of
Shareholders
Number of
Shares
1
26,394,000
62,359
4,260,624
2,699
21,147,319
31.12.2014
Share
in %
51.0%
8.2%
40.8%
Number of
Shareholders
Number of
Shares
1
26,535,500
63,531
4,453,496
2,614
20,812,947
31.12.2013
Share
in %
51.2%
8.6%
40.2%
65,059
51,801,943
100.0%
66,146
51,801,943
100.0%
The majority shareholder as at 31 December 2014 was the Swiss Confederation, with 51.0% of the
voting rights and capital. The Confederation is obligated by current law to hold the majority of the
capital and voting rights. As at 31 December 2014, around 95% of the registered shareholders were
from Switzerland.
Stock exchanges
Swisscom shares are listed on the SIX Swiss Exchange under the symbol SCMN (Securities
No. 874251). In the United States they are traded in the form of American Depositary Receipts
(ADR) at a ratio of 1:10 (Over The Counter, Level 1) under the symbol SCMWY (Pink Sheet No. 69769).
81
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Share performance
Share performance 2014 in CHF
600
475
350
225
100
.
3
1
2
1
1
3
.
.
4
1
1
0
1
3
.
.
4
1
2
0
8
2
.
.
4
1
3
0
1
3
.
.
4
1
4
0
0
3
.
.
4
1
5
0
1
3
.
.
4
1
6
0
0
3
.
.
4
1
7
0
1
3
.
.
4
1
8
0
1
3
.
.
4
1
9
0
0
3
.
.
4
1
0
1
1
3
.
.
4
1
1
1
0
3
.
.
4
1
2
1
1
3
.
Swisscom
SMI (indexed)
Stoxx Europe 600 Telcos (in CHF, indexed)
See
www.swisscom.ch/
shareprice
The Swiss Market Index (SMI) gained 9.5% compared with the previous year. The Swisscom share
price increased by 11.0% to CHF 522.50, performing better than the European Stoxx Europe 600
Telecommunications Index (5.6% in CHF; 7.5% in EUR). Average daily trading volume fell by 5.8% to
97,881 units. Total trading volume of Swisscom shares in 2014 amounted to CHF 12.9 billion.
Shareholder return
On 14 April 2014 Swisscom paid out an ordinary dividend of CHF 22 per share. Based on the closing
price at the end of 2013, this equates to a return of 4.7%. Taking into account the rise in share price,
Swisscom achieved a total shareholder return (TSR) of 15.7% in 2014. The TSR for the SMI was 12.0%
and for the Stoxx Europe 600 Telecommunications Index 10.6% in CHF and 12.7% in EUR.
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Swisscom share performance indicators
Par value per share at end of year
2010
1.00
2011
1.00
2012
1.00
2013
1.00
2014
1.00
CHF
Number of issued shares at end of period
in thousand
51,802
51,802
51,802
51,802
51,802
Market capitalisation at end of year
in CHF million
21,296
18,436
20,400
24,394
27,067
Closing price at end of period
Closing price highest
Closing price lowest
Earnings per share
Ordinary dividend per share
Ratio payout/earnings per share
Equity per share at end of year
CHF
CHF
CHF
CHF
CHF
%
411.10
355.90
393.80
470.90
522.50
420.80
433.50
400.00
474.00
358.00
323.10
334.40
390.20
35.00
21.00
13.19
22.00
60.00
166.79
34.90
22.00
63.04
32.53
22.00
67.63
587.50
467.50
32.70
22.00 1
67.27
CHF
102.89
82.47
79.77
115.30
105.29
1 In accordance with the proposal of the Board of Directors to the Annual General Meeting.
Analysts’ recommendations
Investment specialists analyse Swisscom’s business performance, results and market situation on
an ongoing basis. Their findings and recommendations offer valuable indicators for investors.
29 analysts regularly publish studies on Swisscom. At the end of 2014, 31% of the analysts recom-
mended a buy rating for the Swisscom share, 48% a hold rating and 21% a sell rating. The average
price target at 31 December 2014, according to the analysts’ estimates, was CHF 559 per share.
Payout policy
Swisscom seeks to achieve a steady dividend payout per share. Subject to meeting its financial
targets, Swisscom plans to pay a dividend per share at least on a par with the previous year.
At the forthcoming Annual General Meeting on 8 April 2015, the Board of Directors will propose an
ordinary dividend of CHF 22 per share (prior year: CHF 22 per share). This is equivalent to a total
dividend payout of CHF 1,140 million.
Since going public in 1998 Swisscom has distributed a total of CHF 27.3 billion to its shareholders:
CHF 15.3 billion in dividend payments, CHF 1.6 billion in capital reductions and CHF 10.4 billion in
share buybacks. Swisscom has paid out a total of CHF 301 per share since the initial public offering.
Together with the overall increase in share price of CHF 182.50 per share, this amounts to an aver-
age annual total return of 5.6%.
Indebtedness
Level of indebtedness
Swisscom pursues a finance policy which limits the net debt / EBITDA ratio to a maximum of
around 2.1. Net debt comprises financial liabilities less cash and cash equivalents, current financial
assets and non-current, fixed-interest-bearing deposits.
As at 31 December 2014, net debt amounted to CHF 8.1 billion (prior year: CHF 7.8 billion), corre-
sponding versus the prior year to an unchanged net debt / EBITDA ratio of 1.8.
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Dividend per share
in the 2014 financial year
Total shareholder return
in the 2014 financial year
22 CHF
15.7 %
Credit ratings and financing
With an A (stable) and A2 (stable) respectively, Swisscom enjoys good ratings with the Standard &
Poor’s and Moody’s rating agencies. To avoid structural downgrading, Swisscom endeavours to
raise financing at the level of Swisscom Ltd. Swisscom aims to have a broadly diversified debt port-
folio. This involves paying particular attention to balancing maturities and a diversification of
financing instruments, markets and currencies. Swisscom’s solid financial standing enabled unre-
stricted access to money and capital markets also in 2014.
As at 31 December 2014, Swisscom’s financial liabilities amounted to CHF 8.6 billion. Around 80%
of financial liabilities have a term to maturity of more than one year. As at 31 December 2014, finan-
cial liabilities with a term of one year or less amounted to CHF 1.6 billion. 2014 average interest
expense on all financial liabilities were 2.5%, and average term to maturity four years. A large share
of the financial liabilities will fall due for repayment if a shareholder other than the Swiss Confeder-
ation can exercise control over Swisscom.
Listed debenture bonds
Swisscom has issued debenture bonds which are listed on the SIX Swiss Exchange (SIX) or the Irish
stock exchange (ISE).
Bonds listed on the Six Swiss Exchange
In CHF million
Par value
600
500
1,425
500
500
200
160
In EUR million
Par value
500
500
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Coupon
Payment
Expiring
Security number
3.75%
4.00%
3.25%
2.63%
1.75%
1.50%
1.50%
19.07.2007
22.10.2007 1
19.07.2007
17.09.2008
17.09.2015
3,225,473
4,515,633
14.09.2009
14.09.2018
10,469,162
31.08.2010
31.08.2022
11,469,537
10.07.2012
10.07.2024
188,335,365
14.07.2014
14.07.2026
24,777,613
30.09.2014
28.09.2029
2,514,750
Coupon
Payment
Expiring
ISIN–no. 1
2.00%
1.88%
30.09.2013 1
30.09.2020 XS0972165848
08.04.2014
08.09.2021 XS1051076922
1 Reopening.
Bonds listed on the Irish Stock Exchange (ISE)
1 The bonds have been issued through Lunar Funding V, an independent Irish repackaging-vehicle,
and are secured by loan notes granted from Lunar V to Swisscom.
Risks
Swisscom’s risk management is aimed at safeguarding the company’s
enterprise value.
Risk management system
Swisscom’s enterprise risk management (ERM) applies Group-wide and takes both internal and
external events into account. Swisscom complies with the established COSO II and ISO 31000 risk
management standards and thus has a risk management system in place that meets the require-
ments of its own corporate governance policy as well as those of Swiss law.
Objectives
Swisscom’s risk management is aimed at safeguarding the company’s enterprise value. This is
assured by having in place a recognised and appropriate Group-wide risk management system as
well as comprehensive, meaningful, level-appropriate reporting, suitable documentation and a
risk-aware corporate culture. Risks are events or situations which, should they occur, could poten-
tially jeopardise the company’s ability to achieve its objectives.
Organisation
The Board of Directors delegates responsibility for implementing the risk management system to
the CEO Swisscom Ltd. A central Risk Management unit reports to the CFO Swisscom Ltd, coordi-
nates all organisational units charged with risk management and oversees these insofar as this is
required for reporting purposes. This ensures comprehensive, Group-wide coordinated risk man-
agement and reporting. As part of their remit, employees entrusted with risk management tasks
have an unrestricted right to information and are authorised to access and view all relevant docu-
ments and records.
Swisscom employs special instruments in individual risk areas. In financial risk management, for
example, quantitative tools (sensitivity analyses) are used to assess interest rate and currency risks.
Specialised central organisational units monitor the legal compliance risks and financial reporting
risks (internal control system, ICS).
Process
The main risks to which Swisscom is exposed are identified in a comprehensive risk analysis. Each
risk is assigned a risk owner. To enable the early identification, assessment and management of
risks and their inclusion in strategic planning, the central Risk Management unit works closely with
the Controlling and Strategy departments and other relevant departments. Risk management cov-
ers risks in the areas of strategy (including market risks), operations (including finance risks), com-
pliance and financial reporting. The risks are assessed according to their probability of occurrence
and their qualitative and quantitative effects in the event of occurrence, and are managed on the
basis of a risk strategy. The risks are evaluated in terms of their impact on key performance indica-
tors reported by Swisscom. The risk profile is reviewed and updated on a quarterly basis. The Board
of Directors’ Audit Committee and the Swisscom Group Executive Board are informed about signif-
icant risks, their potential effects and the status of measures on a quarterly basis, and the Board of
Directors on an annual basis. The effectiveness of the risk strategies and measures taken is assessed
quarterly. Information on the internal control system, compliance management and internal audit-
ing is provided in the Corporate Governance Report, Section 3.8, Controlling instruments of the
Board of Directors vis-à-vis the Group Executive Board.
See report
page 105
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General statement on the risk situation
Risks are driven by changes in technology, the regulatory environment, markets, competition and
customer behaviour. The importance of established telecoms services is continuing to decline, and
the associated loss of revenue from traditional core business has to be compensated by promoting
customer and volume growth and offering new services. Over the long term the trend in the ICT
market will necessitate fundamental changes in the approach to risks related to human capital,
technology and the business model. Pending regulatory decisions pose a latent risk which could
impact Swisscom’s financial development, as illustrated by the following selected key risk factors.
The main risk factors in the supply chain are reported separately in the Sustainability Report.
Risk factors
Telecommunications market
Changes within the telecoms market, structural adjustments and competition from service provid-
ers who do not maintain their own telecoms infrastructure (e.g. OTTs) are exerting transformation
pressure on the business. It remains to be seen which technologies and services will emerge the
winners. There is a risk that revenue from classical telecoms business will not be secured sustaina-
bly during the transformation process. Current trends are increasingly necessitating the integration
of a growing number of technologies and devices in order to win new customers and deliver multi-
media services. The integration and operation of new infrastructures entails risks in terms of inter-
faces to existing infrastructure. The occurrence of such risks could delay implementation of the
strategy or have a detrimental effect on customer satisfaction. Swisscom has initiated measures in
various areas to manage these risks.
Politics and regulation
Telecommunications and antitrust legislation entail risks which could have a negative impact on
the company’s financial position and results of operations. The main risks concern the possibility of
stricter price regulations on mobile communications (mobile termination) which would further
reduce Swisscom’s income and restrict the company’s room for manoeuvre; or sanctions by the
Competition Commission, which could reduce Swisscom’s operating results and damage the com-
pany’s good reputation. The forthcoming revision of the Telecommunications Act also heightens
regulatory risk. Finally, excessively high demands imposed on universal service provision by political
groups, for instance supporters of the “Public Service” initiative, threaten to fundamentally under-
mine the current competitive system.
Increased bandwidth in the access network
Customer demand for broadband access is growing rapidly, as is the popularity of mobile devices and
IP-based services (smartphones, IP TV, OTTs, etc.). Swisscom faces tough competition from cable compa-
nies and other network operators as it strives to meet current and future customer needs and defend its
own market shares. The necessary network expansion calls for major investments. To mitigate financial
risks and ensure optimum network coverage, expansion is determined by population density and cus-
tomer demand. Substantial risks would arise if Swisscom were forced to spend more on network expan-
sion than planned, or if projected long-term earnings were to fall. Swisscom aims to minimise such risks
by adapting broadband expansion of the access network to changing framework conditions.
Human capital
Constant changes in framework conditions and markets necessitate a change in corporate culture.
The key challenges in this context lie in maintaining employee motivation and high staff loyalty
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despite cost pressure, while managing growth and efficiency, increasing employees’ ability to adapt
their skills and ensuring that Swisscom remains an attractive employer.
Economic climate, market consolidation in Italy, regulation and recoverability
of Fastweb’s assets
A potential consolidation of the Italian market could have significant ramifications for Swisscom’s
subsidiary Fastweb. In addition, Italy’s economic development and competitive dynamics carry
risks which could have a detrimental impact on Fastweb’s strategy and jeopardise projected reve-
nue growth. The impairment test performed in 2014 confirmed the recoverable value of Fastweb’s
assets. The recoverability of Fastweb’s net assets recognised in the consolidated financial state-
ments is contingent above all on achieving the financial targets set out in the business plan (reve-
nue growth, improvement in EBITDA margin and reduction in capital expenditure ratio). If future
growth is lower than projected, there is a risk that this will result in a further impairment loss.
Major uncertainty also surrounds the future interest rate trend and the country risk premium. An
increase in interest rates or the country risk premium could lead to an impairment loss. Fastweb’s
business operations are also influenced by the European and Italian telecommunications legisla-
tion. Regulatory risks can jeopardise the achievement of targets and reduce the enterprise value.
Business interruption
Usage of Swisscom’s services is heavily dependent on technical infrastructure such as communica-
tions networks and IT platforms. Any major disruption to business operations poses a high financial
risk as well as a substantial reputation risk. Force majeure, human error, hardware or software fail-
ure, criminal acts by third parties (for example, computer viruses or hacking) and the ever-growing
complexity and interdependence of modern technologies can cause damage or interruption to
operations. Built-in redundancy, contingency plans, deputising arrangements, alternative locations,
careful selection of suppliers and other measures are designed to ensure that Swisscom can deliver
the level of service that customers expect at all times.
Information technologies
Swisscom is in the midst of a transformation from line-switched TDM technology to IP technology.
This transformation should enable Swisscom to roll out new products more flexibly and efficiently
than before. The experience acquired with IP technology to date has been positive. Swisscom’s
complex IT architecture entails risks during both the implementation and operating phases. These
risks have the potential to delay the rollout of new services, increase costs and impact competitive-
ness. The transformation is being monitored by the Group Executive Board.
Environment and health
Electromagnetic radiation (for example from mobile antennas or mobile handsets) has repeatedly
been claimed to be potentially harmful to the environment and to health. Under the terms of the
Ordinance on Non-Ionising Radiation (ONIR), Switzerland has adopted a so-called precautionary
principle and introduced limits for base stations that are ten times higher than those imposed by
the EU. The public’s wary attitude to mobile antenna sites in particular is impeding Swisscom’s
network expansion. There is a future risk that regulations governing electromagnetic emissions
and legal requirements for the construction of mobile base stations may be further tightened. This
would result in additional costs for network expansion and operation. Even without stricter legis-
lation, public concerns about the effects of electromagnetic radiation on the environment and
health could further hamper the construction of wireless networks in the future and drive up costs.
Climate change poses risks for Swisscom in the form of increased levels of precipitation as well as
higher average or extreme temperatures. These trends could impact the operability of Swisscom’s
telecoms infrastructure, particularly in view of the potential risk to base stations and local
exchanges. The analysis of the risks posed by climate change is based on the official report of the
Federal Office for the Environment (FOEN) on climate change, published in October 2011.
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See
www.cdproject.net/en-us
“We have set up an independent
mobile network in the laboratory,
which we use for development,
testing and making optimisations
with the aim of providing our
customers with the best network
well into the future.”
Christian Rüger
ICT system engineer
IT, Network & Innovation
Corporate Governance and
Remuneration Report
Taking advantage
of new
opportunities
to generate
sustainable growth.
+15.7 %
total shareholder return on
Swisscom shares in 2014.
Return up 5.1 percentage points
on the telecom index (+10.6%).
Topics
Corporate Governance
Remuneration Report
92 Principles
93 1 Group structure and shareholders
95 2 Capital structure
97 3 Board of Directors
107 4 Group Executive Board
111 5 Remuneration, shareholdings and loans
111 6 Shareholders’ participation rights
113 7 Change of control and defensive measures
113 8 Auditor
114 9 Information policy
115 1 Principles
116 2 Decision-making powers
118 3 Remuneration paid to the Board of Directors
121 4 Remuneration paid to the Group Executive Board
126 5 Other remuneration
127 Report of the Statutory Auditor
+15.7 %
Corporate Governance
Corporate governance is a fundamental component of Swisscom’s
corporate policy. Swisscom is committed to practising effective
and transparent corporate governance as part of its aim to
deliver long-term value. In particular, Swisscom complies with the
recommendations of the Swiss Code of Best Practice for Corporate
Governance 2014 issued by economiesuisse and meets the
requirements of the Ordinance Against Excessive Compensation in
Listed Stock Companies.
Principles
In performing their activities, the Board of Directors and Group Executive Board of Swisscom are
guided by the objective of long-term and sustainable corporate governance. They incorporate in
their decisions the legitimate interests of Swisscom shareholders, customers, employees and other
interest groups. To this end, the Board of Directors practices effective and transparent corporate
governance, which is characterised by clearly assigned responsibilities and based on recognised
standards. In particular, Swisscom complies with
> the recommendations of the Swiss Code of Best Practice for Corporate Governance 2014 issued
by economiesuisse, the umbrella organisation representing Swiss business.
> the Corporate Governance Directive issued by the SIX Swiss Exchange of 1 September 2014,
which also forms the basis of this report.
> the requirements of the Ordinance Against Excessive Compensation in Listed Stock Companies
(OaEC) of 20 November 2013, which entered into force on 1 January 2014.
> legal requirements pursuant to the Swiss Code of Obligations.
The exchange of insights and information with investors, proxy advisors and other stakeholder
groups by the respective specialist divisions allows the Board of Directors to identify new standards
at an early stage and to adjust its corporate governance activities to new requirements. Swisscom’s
principles and rules on corporate governance are set out primarily in the company’s Articles of Incor-
poration, Organisational Rules and the Rules of Procedure of the Board of Directors’ committees. Of
particular importance is the Code of Conduct approved by the Board of Directors. It contains a dec-
laration by Swisscom of its commitment to absolute integrity as well as compliance with the law
and all other external and internal rules and regulations. Swisscom expects its employees to take
responsibility for their actions, show consideration for people, society and the environment, com-
ply with applicable rules, demonstrate integrity and report any violations of the Code of Conduct.
The latest version of these documents as well as revised or superseded versions can be viewed
online on the Swisscom website under “Basic principles”.
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See
www.swisscom.ch/
basicprinciples
1 Group structure and shareholders
1.1 Group structure
1.1.1 Group operating structure
Swisscom Ltd is the holding company responsible for overall management of the Swisscom Group.
It comprises the five Group divisions Group Business Steering, Group Strategy & Board Services,
Group Communications & Responsibility, Group Human Resources and Group Security. Day-to-day
business management is delegated by the Board of Directors to the CEO of Swisscom Ltd, who
together with the heads of the Group divisions Group Business Steering (CFO) and Group Human
Resources (CPO) as well as the heads of all business divisions (Residential Customers, Small and
Medium-Sized Enterprises, Enterprise Customers and IT, Network & Innovation) forms the Group
Executive Board. Strategic and financial management of the Group companies is assured through
the assignment of powers and responsibilities by the Board of Directors of Swisscom Ltd. The Group
companies are divided into three categories: strategic, important and other. Swisscom (Switzer-
land) Ltd and the Italian subsidiary Fastweb S.p.A. are classified as strategic Group companies. The
operations of Swisscom (Switzerland) Ltd are managed by the Group Executive Board. The Board
of Directors of Swisscom (Switzerland) Ltd comprises the CEO of Swisscom Ltd as Chairman, the
CFO of Swisscom Ltd and a further member of the Group Executive Board. Seats on the Board of
Directors of the “strategic” company Fastweb S.p.A. are held by the CEO of Swisscom Ltd as Chair-
man together with the CFO of Swisscom Ltd and other representatives of Swisscom. The Board
of Directors of Fastweb S.p.A. is supplemented by an external member. In the “important” Group
companies, the responsibilities of the Chairman of the Board of Directors are fulfilled by the CEO
of Swisscom Ltd, the CEO of a “strategic” Group company, the head of a Group or business division
or another person appointed by the CEO. Other representatives of Swisscom are also members of
the Board of Directors.
The Group structure is shown in the Management Commentary in the section on Group structure
and organisation. A list of Group companies, including company name, registered office, percent-
age of shares held and share capital, is given in Note 41 to the consolidated financial statements.
As of 1 January 2014, the activities of Swisscom IT Services Ltd were integrated into the operations
of Swisscom (Switzerland) Ltd. The reporting, which is based on the management structure, was not
adjusted, however. It is, as in 2013, divided into the segments “Residential Customers”, “Small and
Medium-Sized Enterprises”, “Corporate Business”, “Wholesale” and “Network & IT”, which are grouped
together as “Swisscom Switzerland”, as well as “Fastweb”, “Other Operating Segments” and “Group
Headquarters”. “Other Operating Segments” mainly comprises Swisscom IT Services and Group
Related Businesses, while “Group Headquarters” primarily covers the Group divisions and the employ-
ment company Worklink AG.
Changes as of 2015
The absorption merger of Swisscom IT Services Ltd with Swisscom (Switzerland) Ltd will take place
at the beginning of 2015 and mark the legal completion of the integration. From 2015, segment
reporting will be adjusted to the management structure and Swisscom IT Services – as well as
Swisscom Real Estate Ltd – will then be reported in the “Swisscom Switzerland” segment.
See report
page 24
See report
pages 200–201
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1.1.2 Listed companies
The Swisscom Group comprises the following listed companies:
Swisscom Ltd
Swisscom Ltd, a company governed by Swiss law and headquartered in Ittigen (canton of Berne, Swit-
zerland), is listed in the Main Standard of the SIX Swiss Exchange (Securities No. 874251; ISIN Code:
CH0008742519; Ticker Symbol: SCMN). Trading in the United States is conducted over-the-counter
(OTC) as a level 1programme (Symbol: SCMWY; ISIN No.: CH008742519; CUSIP for ADR: 871013108).
At 31 December 2014, Swisscom Ltd had a stock market capitalisation of CHF 27,067 million.
PubliGroupe Ltd
Swisscom Ltd acquired PubliGroupe Ltd in 2014 within the framework of a public takeover. The
takeover price was CHF 474 million. PubliGroupe Ltd, a company governed by Swiss law and head-
quartered in Lausanne (Switzerland), is listed in the Main Standard of the SIX Swiss Exchange
(Securities No.: 462630; ISIN Code: CH0004626302; Ticker Symbol: PUBN). At 31 December 2014,
PubliGroupe Ltd had a stock market capitalisation of CHF 493 million. Swisscom Ltd currently holds
98% of the shares in PubliGroupe Ltd. On 18 September 2014, PubliGroupe Ltd requested the
cancellation of the untendered shares (squeeze-out). On 1 October 2014, it submitted an applica-
tion for the delisting of the registered shares to the SIX Exchange Regulation. SIX Swiss Exchange
approved the application on 22 October 2014. The delisting is scheduled to take place in the first
quarter of 2015.
1.2 Disclosure notifications of significant shareholders
Pursuant to Article 20 of the Federal Act on Stock Exchanges and Securities Trading, there is a duty to
disclose shareholdings where a person or group subject to the disclosure obligation reaches, exceeds
or falls below 3, 5, 10, 15, 20, 25, 331/3, 50 or 662/3 per cent of the voting rights of Swisscom Ltd.
In the year under review, no participations subject to the disclosure obligation were reported to
Swisscom Ltd. No disclosure notifications were therefore published on the disclosure and publication
platform of the Disclosure Office of SIX Swiss Exchange. Information on significant shareholders can
be found in Note 8 to the financial statements of Swisscom Ltd.
See report
page 207
1.3 Cross-shareholdings
No cross-shareholdings exist between Swisscom Ltd and other public limited companies.
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2 Capital structure
2.1 Capital
At 31 December 2014, the share capital of Swisscom Ltd amounted to CHF 51,801,943, divided into
registered shares with a nominal value of CHF 1 per share. The shares are fully paid up.
2.2 Authorised and conditional capital
There is no authorised or conditional share capital.
2.3 Changes in capital
The share capital was unchanged in the years 2012 to 2014. During this period, changes in share-
holders’ equity of Swisscom Ltd in the individual financial statements drawn up under Swiss com-
mercial law were as follows:
In CHF million
Balance at 1 January 2012
Net income
Dividends paid
Balance at 31 December 2012
Net income
Dividends paid
Balance at 31 December 2013
Net income
Dividends paid
Balance at 31 December 2014
Share capital
Capital surplus
reserves
Retained
earnings
52
–
–
52
–
–
52
–
–
52
21
–
–
21
–
–
21
–
–
21
4,462
1,749
(1,140)
5,071
239
(1,140)
4,170
2,472
(1,140)
5,502
Total
equity
4,535
1,749
(1,140)
5,144
239
(1,140)
4,243
2,472
(1,140)
5,575
The Annual General Meetings held on 4 April 2012, 4 April 2013 and 7 April 2014 approved an ordi-
nary dividend of CHF 22 per share respectively.
2.4 Shares and participation certificates
Each registered share of Swisscom Ltd has a par value of CHF 1. Each share entitles the holder to
one vote. Shareholders may only exercise their voting right, however, if they have been entered
with voting rights in the share register of Swisscom Ltd. All registered shares with the exception
of treasury shares held by Swisscom are eligible for a dividend. There are no preferential rights. For
further details, see section 6 “Shareholders’ participation rights”.
Registered shares of Swisscom Ltd are not issued in certificate form, but are held as book-entry
securities in the depositary holdings of SIX SIS AG, up to a maximum limit determined by the Swiss
Confederation. Shareholders may at any time request confirmation of the registered shares they
hold. However, they have no right to request the printing and delivery of certificates for their shares
(registered shares with no right to printed certificates).
Swisscom Ltd has issued no participation certificates.
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2.5 Profit-sharing certificates
Swisscom Ltd has issued no profit-sharing certificates.
2.6 Limitations on transferability and nominee registrations
Swisscom shares are freely transferable, and the voting rights of the shares registered in the share
register in accordance with the Articles of Incorporation are not subject to any special restrictions.
The statutory provisions on restricted transferability are described in section 6.1 “Voting right
restrictions and proxies”.
Swisscom has issued special regulations governing the registration of trustees and nominees in the
share register. To facilitate tradability of the company’s shares on the stock exchange, the Articles
of Incorporation allow the Board of Directors, by means of regulations or agreements, to permit
the fiduciary entry of registered shares with voting rights by trustees and nominees exceeding
the threshold of 5%, provided they disclose their trustee capacity. In addition, they must be sub-
ject to supervision by a banking or financial market supervisory authority or otherwise provide the
necessary assurance of acting for the account of one or more unrelated parties. They must also
be able to provide evidence of the names, addresses and holdings of the beneficial owners of the
shares. In accordance with this provision in the Articles of Incorporation, which can be revised with
an absolute majority of the voting shares cast, the Board of Directors has issued regulations gov-
erning the entry of trustees and nominees in the Swisscom Ltd share register. The entry of trustees
and nominees as shareholders with voting rights is subject to application and the conclusion of an
agreement specifying the entry restrictions and disclosure obligations of the trustee or nominee. In
particular, each trustee or nominee undertakes, within the limit of 5%, to request entry as a share-
holder with voting rights for the account of an individual beneficial owner for no more than 0.5% of
the registered share capital of Swisscom Ltd entered in the commercial register.
No exceptions for the fiduciary entry of registered shares with voting rights above the aforemen-
tioned percentage restriction were granted in the 2014 financial year.
2.7 Convertible bonds, debenture bonds and options
See report
page 177
See report
page 162
Swisscom has no convertible bonds outstanding. Details of the debenture bonds are given in
Note 26 to the consolidated financial statements.
Swisscom does not issue options on registered shares of Swisscom Ltd to its employees. The
Swisscom Ltd equity-share-based payments are described in Note 11 to the consolidated financial
statements.
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3 Board of Directors
3.1 Members of the Board of Directors
The Board of Directors of Swisscom Ltd currently comprises nine members, none of whom holds or
has held an executive role within the Swisscom Group in any of the three business years prior to the
period under review. The Board members have no significant commercial links with Swisscom Ltd
or the Swisscom Group. The Swiss Confederation, represented on the Board by Hans Werder, is the
majority shareholder. Customer and supplier relationships exist between the Swiss Confederation
and Swisscom. Details of these are given in Note 37 to the consolidated financial statements.
See report
page 197
Members of the Board of Directors at 31 December 2014 are as follows:
Name
Year of birth
Function
Taking office at the
Appointed until
Annual General Meeting Annual General Meeting
Hansueli Loosli 1, 2, 3, 4, 5
Frank Esser 1
Barbara Frei 7
Hugo Gerber 2
Michel Gobet 1
Torsten G. Kreindl 3, 6
Catherine Mühlemann 1
Theophil Schlatter 3, 8
Hans Werder 2, 3, 9
1955
1958
1970
1955
1954
1963
1966
1951
1946
Chairman
Member
Member
Member, representative of the employees
Member, representative of the employees
Member
Member
Deputy Chairman
Member, representative of the Confederation
2009
2014
2012
2006
2003
2003
2006
2011
2011
2015
2015
2015
2015
2015
2015
2015
2015
2015
1 Member of the Finance Committee.
2 Member of the Audit Committee.
3 Member of the Remuneration Committee (Hansueli Loosli without voting rights).
4 Since 21 April 2009 Member of the Board of Directors, since 1 September 2011 Chairman.
5 Chairman of Nomination Committee (ad hoc).
6 Chairman of Finance Committee.
7 Chairwoman of Remuneration Committee.
8 Chairman of Audit Committee.
9 Designated by the Swiss Confederation.
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3.2 Education, professional activities and affiliations
Details on the qualifications and career of each member of the Board of Directors are provided
below. This section also discloses the mandates of each Board member outside the Group as well
as other significant activities such as permanent functions in important interest groups.
Pursuant to the Articles of Incorporation, the Board members may perform no more than three
additional mandates in listed companies and no more than ten additional mandates in non-listed
companies, with a total of no more than ten such additional mandates being permitted. These
numerical restrictions shall not apply to mandates performed by a Board member by order of
Swisscom or to mandates in interest groups, charitable associations, institutions and foundations
as well as employee benefit foundations. The number of these mandates is, however, limited to
seven or ten. Prior to accepting new mandates outside the Swisscom Group, the Board members
are obligated to consult the Chairman of the Board of Directors. Details on the regulation of exter-
nal mandates, in particular the definition of the term “mandate” and information on other man-
dates that do not fall under the aforementioned numerical restrictions for listed and non-listed
companies, are set out in the Articles of Incorporation (Article 8.3 of the Articles of Incorporation),
which can be accessed on the Swisscom website under “Basic principles”.
No member of the Board of Directors exceeds the set limits for mandates.
See
www.swisscom.ch/
basicprinciples
Hansueli Loosli
Swiss citizen
Education: Commercial apprenticeship; Swiss Certified Expert in Financial Accounting
and Controlling
Career history: 1982–1985 Mövenpick Produktions AG, Adliswil, Controller and
Deputy Director; 1985–1992 Waro AG, Volketswil, latterly as Managing Director;
1992–1996 Coop Switzerland, Wangen, Director of Non-Food Product Procurement;
1992–1997 Coop Zurich, Zurich, Managing Director; 1997–2000 Coop Switzerland,
Basel, Chairman of the Executive Committee and Coop Group Executive Committee;
January 2001–August 2011 Coop Genossenschaft, Basel, Chairman of the Executive
Committee
Mandates in listed companies: Chairman of the Board of Directors, Bell AG, Basel
Mandates in non-listed companies: Chairman of the Board of Directors, Coop-
Gruppe Genossenschaft, Basel; Chairman of the Board of Directors, Transgour-
met Holding AG, Basel; Chairman of the Board of Directors, Coop Mineraloel AG,
Allschwil; member of the Advisory Board, Deichmann SE, Essen; member of the Board
of Directors, Heinrich Benz AG, Weiach
Mandates by order of Swisscom: Member of the Board of Directors and Executive
Committee of economiesuisse
Mandates in interest groups, charitable associations, institutions and foundations
as well as employee benefit foundations: –
Other significant activities: –
Frank Esser
German citizen
Education: PhD in business administration, Dr. rer. pol.
Career history: 1988–2000 Mannesmann Deutschland, latterly from 1996 as a mem-
ber of the Executive Board, Mannesmann Eurokom; 2000-2005 Société Française
Radiotéléphonie (SFR), Chief Operating Officer (COO), from 2002 CEO; 2005–2012
Vivendi Group, member of the Group Executive Board
Mandates in listed companies: Member of the Board of Directors, AVG Technolo-
gies N.V., Amsterdam; member of the Supervisory Board, Rentabiliweb Group S.A.S.,
Brussels; member of the Board of Directors, InterXion Holding N.V., Amsterdam,
since June 2014
Mandates in non-listed companies: –
Mandates by order of Swisscom: –
Mandates in interest groups, charitable associations, institutions and foundations
as well as employee benefit foundations: –
Other significant activities: –
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Barbara Frei
Swiss citizen
Education: Degree in mechanical engineering, ETH; doctorate (Dr. sc. techn.), ETH;
Master of Business Administration, IMD Lausanne
Career history: Since 1998 various managerial positions in the ABB Group, in particular
2008–2010 ABB s.r.o., Prague, Country Manager; 2010–2013 ABB S.p.A., Sesto San
Giovanni, Country Manager and Regional Manager Mediterranean; since November
2013 Drives and Control Unit, Managing Director
Mandates in listed companies: –
Mandates in non-listed companies: Member of the Board of Directors, ABB Beijing
Drive Systems Co. Ltd., Beijing
Mandates by order of Swisscom: –
Mandates in interest groups, charitable associations, institutions and foundations
as well as employee benefit foundations: –
Other significant activities: –
Hugo Gerber
Swiss citizen
Education: Diploma in postal services; IMAKA management programme; diploma
in personnel and organisational development, Solothurn University of Applied
Sciences, Northwestern Switzerland
Career history: 1986–1990 Swiss Association of Christian Postal Workers (ChPTT),
Central Secretary; 1991–1999 Association of the unions of the Christian transport
and government personnel (VGCV), General Secretary; 2000–2003 Transfair Union,
General Secretary; 2003–2008 Transfair Union, Chairman; since 2009 independent
consultant; July to December 2014 Federal Administrative Court, St. Gallen, Deputy
Head of Human Resources on an ad interim basis
Mandates in listed companies: –
Mandates in non-listed companies: Member of the Board of Directors, POSCOM
Ferien Holding AG, Berne
Mandates by order of Swisscom: –
Mandates in interest groups, charitable associations, institutions and foundations
as well as employee benefit foundations: Member of the Board of Trustees, RUAG
Pension Fund, Berne
Other significant activities: Member of the Board of Directors, Worklink AG, Berne
Michel Gobet
Swiss citizen
Education: Degree in history
Career history: PTT Union, General Secretary and Deputy General Secretary; since
1999 syndicom Trade Union, Central Secretary
Mandates in listed companies: –
Mandates in non-listed companies: Member of the Board of Directors, Swiss Post Ltd,
Berne; member of the Board of Directors, GDZ AG, Zurich; member of the Board of
Directors, Swiss Travel Fund (Reka) Cooperative, Berne
Mandates by order of Swisscom: –
Mandates in interest groups, charitable associations, institutions and foundations
as well as employee benefit foundations: –
Other significant activities: Member of the World Executive Committee, the Euro-
pean Executive Committee and the European ICTS Steering Committee, UNI Global
Union, Nyon
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Torsten G. Kreindl
Austrian citizen
Education: Doctorate in industrial engineering (Dr. techn.)
Career history: Chemie Holding AG; W. L. Gore & Associates Inc.; Booz Allen &
Hamilton, member of the Management Board, Germany; 1996–1999 Deutsche
Telekom AG CEO, Broadband Cable Business, and CEO, MSG Media Services;
1999–2005 Copan Inc., Partner; since 2005, Grazia Group Equity GmbH, Stuttgart,
Germany, Partner
Mandates in listed companies: Independent Director of Hays plc, London
Mandates in non-listed companies: Member of the Supervisory Board, Pictet Digital
Communications/Pictet Fund Management, Geneva; member of the Board of Directors,
Starboard Storage Systems Inc., Boulder, Colorado, USA
Mandates by order of Swisscom: –
Mandates in interest groups, charitable associations, institutions and foundations
as well as employee benefit foundations: –
Other significant activities: –
Catherine Mühlemann
Swiss citizen
Education: Lic. phil I; Swiss Certified PR Consultant
Career history: 1994–1997 Swiss Television DRS, Head of Media Research; 1997–
1999 SF1 and SF2, programme researcher; 1999–2001 TV3, programme director;
2001–2003 MTV Central, Managing Director; 2003–2005 MTV Central & Emerging
Markets, Managing Director; 2005–2008 MTV Central & Emerging Markets and Viva
Media AG (Viacom), Managing Director; since 2008 Andmann Media Holding GmbH,
Baar, partner, until December 2012 owner
Mandates in listed companies: –
Mandates in non-listed companies: Member of the Supervisory Board, Messe Berlin
GmbH, until June 2014; member of the Board of Directors of Switzerland Tourism;
member of the Supervisory Board, Tele Columbus AG, Berlin, since September 2014
Mandates by order of Swisscom: –
Mandates in interest groups, charitable associations, institutions and foundations
as well as employee benefit foundations: –
Other significant activities: –
Theophil Schlatter
Swiss citizen
Education: Degree in business administration (lic. oec. HSG); Swiss Certified Public
Accountant
Career history: 1979–1985 STG Coopers & Lybrand, public accountant; 1985–1991
Holcim Management und Beratung AG, controller; 1991–1995 Sihl Papier AG, CFO
and member of the Executive Committee; 1995–1997 Holcim (Switzerland) Ltd,
Head of Finance/Administration and member of the Executive Committee; 1997–
March 2011 Holcim Ltd., CFO and member of the Group Executive Board
Mandates in listed companies: –
Mandates in non-listed companies: Chairman of the Board of Directors, PEKAM AG,
Mägenwil; member of the Board of Directors, Schweizerische Cement-Industrie-
Aktiengesellschaft, Rapperswil-Jona
Mandates by order of Swisscom: –
Mandates in interest groups, charitable associations, institutions and foundations
as well as employee benefit foundations: –
Other significant activities: –
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Hans Werder
Swiss citizen
Education: Dr. rer. soc.; lic. iur.
Career history: 1987–1996 Berne Directorate of Public Works, Transport and Energy
(BVE), General Secretary; 1996–2010 Federal Department of the Environment,
Transport, Energy and Communications (DETEC), General Secretary
Mandates in listed companies: –
Mandates in non-listed companies: Member of the Board of Directors, BLS AG, Berne
Mandates by order of Swisscom: –
Mandates in interest groups, charitable associations, institutions and foundations
as well as employee benefit foundations: –
Other significant activities: –
3.3 Composition, election and term of office
With the exception of the representative of the Swiss Confederation, the Board of Directors of
Swisscom Ltd is elected by shareholders at the Annual General Meeting. Under the terms of the
Articles of Incorporation it may comprise between seven and nine members, and, if necessary, the
number can be increased temporarily. It currently comprises nine members. The Annual General
Meeting elects the members and the Chairman of the Board of Directors and the members of the
Compensation Committee individually for a term of one year. The term of office runs until the con-
clusion of the following Annual General Meeting. It is possible to be re-elected. If the office of the
Chairman is vacant or the number of members of the Compensation Committee falls below the
minimum number of three members, the Board of Directors nominates a chairman from among
its members or appoints the missing member(s) of the Compensation Committee to serve until the
conclusion of the next Annual General Meeting. Otherwise, the Board of Directors constitutes itself.
The maximum term of office for members elected by the Annual General Meeting is generally a
total of twelve years. Members who reach the age of 70 retire from the Board as of the date of the
next Annual General Meeting.
Under the Articles of Incorporation of Swisscom Ltd, the Swiss Confederation is entitled to appoint
two representatives to the Board of Directors of Swisscom Ltd. Hans Werder is currently the sole
representative. The maximum term of office or age limit for the federal representative is deter-
mined by the Federal Council. Under the terms of the Telecommunications Enterprise Act (TEA),
employees must be granted appropriate representation on the Board of Directors of Swisscom Ltd.
The Articles of Incorporation also stipulate that the Board of Directors must include two employee
representatives. These are currently Hugo Gerber and Michel Gobet.
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3.4
Internal organisation
The Board of Directors is convened by the Chairman and meets as often as business requires. If
the Chairman is unavailable, the meeting is convened by the Vice Chairman. The CEO and CFO
Swisscom Ltd are regularly invited to the meetings of the Board of Directors. The Chairman sets the
agenda. Any Board member may request the inclusion of further items on the agenda. Board mem-
bers receive documents prior to the meeting to allow them to prepare for the items on the agenda.
The Board of Directors may invite members of the Group Executive Board, senior employees of
Swisscom, auditors or other internal and external experts to attend its meetings on specific issues
in order to ensure appropriate reporting to members of the Board. Furthermore, the Chairman of
the Board of Directors and the CEO report to each meeting of the Board of Directors on particular
events, on the general course of business and major business transactions, as well as on any measures
that have been implemented.
The Board of Directors has three standing committees and one ad hoc committee tasked with
carrying out detailed examinations of matters of importance. The committees usually consist of
three to six members. Each member of the Board of Directors also sits on at least one of the stand-
ing committees. Subject to being appointed to the Compensation Committee (without voting
rights), the Chairman is a member of all standing committees; they all are chaired by other Board
members, however. The latter brief the Board of Directors on the committee meetings held. All
members of the Board of Directors also receive copies of all Finance and Audit Committee meeting
minutes. The duties and responsibilities of the Board of Directors are defined in the Organisational
Regulations, those of the standing committees in the relevant committee regulations, which can
be accessed on the Swisscom website under “Basic principles”.
The Board of Directors and the committees conduct self-assessments, usually once a year. New
members are given a task-specific introduction to their new activity. The Board of Directors sup-
ports ongoing education for Board members. A one-day mandatory training course was held at
the beginning of 2014. Each quarter, the members of the Board of Directors also had the oppor-
tunity to explore in-depth the upcoming challenges facing the Group and business divisions as
part of so-called company experience days. In addition, various members of the Board of Directors
attended selected presentations and seminars during the year. Wherever possible, the Board of
Directors attends the Swisscom Group’s annual management meeting.
The following table gives an overview of the Board of Directors’ meetings, conference calls and
circular resolutions taken in 2014.
Meetings
Conference calls
Circular resolutions
See
www.swisscom.ch/
basicprinciples
Total
Average duration (in hours)
Participation:
Hansueli Loosli, Chairman
Frank Esser 1
Barbara Frei
Hugo Gerber
Michel Gobet
Torsten G. Kreindl
Catherine Mühlemann
Richard Roy 2
Theophil Schlatter
Hans Werder
1 Elected as of 7 April 2014.
2 Resigned as of 7 April 2014.
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8:10
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10
10
10
9
3
10
10
3
0:50
3
2
3
3
3
3
3
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3
3
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1
1
1
1
1
1
1
–
1
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3.5 Committees of the Board of Directors
Finance Committee
Torsten G. Kreindl is Chairman of the Finance Committee; the other members are Frank Esser,
Michel Gobet, Hansueli Loosli and Catherine Mühlemann. The CEO, CFO and the Head of Group
Strategy & Board Services usually attend meetings of the Finance Committee. Depending on the
agenda, other members of the Group Executive Board, the Management Boards of the strategic
Group companies or project managers are also called upon to attend the meetings. The Committee
prepares materials for the attention of the Board of Directors on transaction-related matters, for
example, in connection with establishing or dissolving significant Group companies, acquiring or
disposing of significant shareholdings, or entering into or terminating strategic alliances. The Com-
mittee also acts in an advisory capacity on matters relating to major investments and divestments.
The Finance Committee has the ultimate decision-making authority when it comes to approving
rules of procedure and directives in the areas of Mergers & Acquisitions and Corporate Ventur-
ing. Details of the Committee’s activities are set out in the Finance Committee Rules of Procedure,
which can be accessed on the Swisscom website under “Basic principles”.
The following table gives an overview of the Finance Committee’s meetings, conference calls and
circular resolutions taken in 2014.
Meetings
Conference calls
Circular resolutions
See
www.swisscom.ch/
basicprinciples
Total
Average duration (in hours)
Participation:
Torsten G. Kreindl, Chairman
Frank Esser 1
Michel Gobet
Hansueli Loosli
Catherine Mühlemann
1 Elected as of 7 April 2014.
3
2:50
3
2
3
3
3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Audit Committee
The Audit Committee is chaired by Theophil Schlatter, who is a financial expert; other members
are Hugo Gerber, Hansueli Loosli and Hans Werder, representative of the Swiss Confederation. The
CEO, CFO, Head of Accounting, Head of Internal Audit and the external auditors also attend the
Audit Committee meetings. Depending on the agenda, other management members are called
upon to attend. The Audit Committee is also authorised to involve independent third parties such
as lawyers, public accountants and tax consultants. The members of the Audit Committee neither
work nor have worked for Swisscom in an executive capacity, nor do they maintain any significant
commercial links with Swisscom Ltd or the Swisscom Group. Customer and supplier relationships
exist between the Swiss Confederation and Swisscom. Details of these are given in Note 37 to
the consolidated financial statements. The majority of members are experienced in the fields of
finance and accounting.
The Audit Committee handles all financial management business (for example, accounting, finan-
cial controlling, financial planning and financing), assurance (risk management, the internal control
system, compliance and the internal audit) and the external audit. It also handles matters dealt
with by the Board of Directors that call for specific financial expertise (the dividend policy, for
example). The Committee is therefore the Board of Directors’ most important controlling instru-
ment and is responsible for monitoring the Group-wide assurance functions. It formulates posi-
tions on business matters which lie within the decision-making authority of the Board of Directors
and has the final say on those business matters for which it has the corresponding competence.
Details of the Committee’s activities are set out in the Audit Committee Rules of Procedure, which
can be accessed on the Swisscom website under “Basic principles”.
See report
page 197
See
www.swisscom.ch/
basicprinciples
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The following table gives an overview of the Audit Committee’s meetings, conference calls and
circular resolutions taken in 2014.
Meetings
Conference calls
Circular resolutions
Total
Average duration (in hours)
Participation:
Theophil Schlatter, Chairman
Hugo Gerber
Hansueli Loosli
Richard Roy 1
Hans Werder
1 Resigned as of 7 April 2014.
5
5:20
5
5
5
1
5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
See report
page 115
Compensation Committee
For information on the Compensation Committee, refer to the section “Remuneration Report”.
Nomination Committee
The Nomination Committee is formed on an ad hoc basis for the purpose of preparing the ground-
work for electing new members to the Board of Directors and the Group Executive Board. The
Committee is presided over by the Chairman and the composition is determined on a case-by-case
basis. The Committee carries out its work based on a specific requirements profile defined by the
Board of Directors and presents suitable candidates to the Board of Directors. The Board of Direc-
tors elects the members of the Group Executive Board or submits the proposal for presentation to
the Annual General Meeting for the election and approval of members of the Board of Directors.
No Nomination Committee meetings were held in the 2014 financial year.
3.6 Assignment of powers of authority
The Telecommunications Enterprise Act (TEA) makes reference to the Swiss Code of Obligations in
respect of the non-transferable and irrevocable duties of the Board of Directors of Swisscom Ltd.
Pursuant to Article 716a of the Code of Obligations, the Board of Directors is responsible first and
foremost for the overall management and supervision of persons entrusted with managing the
company’s operations.
It decides on the appointment and removal of members of the Group Executive Board of Swisscom
Ltd. The Board of Directors also determines the strategic, organisational, financial planning and
accounting guidelines, taking into account the four-year targets set by the Federal Council in
accordance with the provisions of the Telecommunications Enterprise Act (TEA) and the will of the
Swiss Confederation in its role as principal shareholder.
The Board of Directors has delegated day-to-day business management to the CEO in accordance
with the TEA, the Articles of Incorporation and the Organisational Regulations. In addition to its
statutory duties, the Board of Directors decides on business transactions of major importance to
the Group, such as the acquisition or disposal of companies with a financial exposure in excess of
CHF 20 million, or investments or divestments with a financial exposure in excess of CHF 50 million.
The division of powers between the Board of Directors and the CEO is set out in annex 2 to the
Organisational Regulations (see function table in the Rules of Procedure and Accountability), which
can be accessed on the Swisscom website under “Basic principles”.
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See
www.swisscom.ch/
targets_2014-2017
See
www.swisscom.ch/
basicprinciples
3.7
Information instruments of the Board of Directors vis-à-vis the Group Executive Board
The Chairman of the Board of Directors and the CEO meet once or twice a month to discuss fun-
damental issues concerning Swisscom Ltd and its Group companies. The CEO also reports in detail
at each ordinary meeting of the Board of Directors on the general course of business, major events
and any measures taken. The Board of Directors also receives a monthly report on all key perfor-
mance indicators relating to the Group and all segments containing important Group companies.
In addition, the Board of Directors receives quarterly detailed information on the course of busi-
ness and on the financial position, results of operations, cash flows and risk position of the Group
and the segments. It also receives projections for the income statement, cash flow statement and
balance sheet for the current financial year. Internal financial reporting is carried out in accordance
with the same accounting principles and standards as external reporting. Reporting also includes
key non-financial information for controlling and steering purposes. Each member of the Board of
Directors is entitled to request information on any matters relating to the Group at any time, pro-
vided this does not conflict with any abstention provisions or confidentiality obligations. The Board
of Directors is informed immediately of any events of an exceptional nature.
The Board of Directors deals with the oral and written reports of the assurance functions of risk
management, the financial reporting internal control system (ICS) and compliance management
once a year. The Audit Committee examines the reports of the Risk Management unit, the ICS
and Internal Audit on a quarterly basis. In urgent cases the Chairman of the Audit Committee is
informed without delay about any significant new risks. He is also informed in a timely manner if
there is a significant change in assessed compliance or ICS risks or if serious breaches in compliance
(including violation of rules that are designed to ensure reliable financial reporting) are detected or
currently being investigated.
3.8 Controlling instruments of the Board of Directors vis-à-vis the Group Executive Board
The Board of Directors is responsible for establishing and monitoring the Group-wide assurance
functions of risk management, the internal control system, compliance and internal audit.
3.8.1 Risk management
The Board of Directors aims to safeguard the company’s enterprise value through the implemen-
tation of Group-wide risk management. A risk-aware corporate culture is designed to support the
achievement of this objective. Swisscom has therefore implemented a Group-wide and central risk
management system based on COSO II and ISO 31000. It maintains level-appropriate and compre-
hensive reporting and appropriate documentation. The objective is to identify, assess and address
significant risks in good time. To this end, the central Risk Management unit collaborates closely
with the Controlling department, the Strategy department, other assurance functions and line
functions. Swisscom assesses its risks according to their probability of occurrence and their quan-
titative effects in the event of occurrence. It manages these risks on the basis of a risk strategy and
evaluates the risks in terms of their impact on key performance indicators reported by Swisscom.
Swisscom reviews and updates its risk profile on a quarterly basis. The Audit Committee and the
Group Executive Board are informed about significant risks, their potential effects and the status of
remedial measures on a quarterly basis, and the Board of Directors on an annual basis. Significant
risk factors are described in the Risks section of the Management Commentary.
3.8.2 Financial reporting internal control system
The internal control system (ICS) ensures the reliability of financial reporting with an appropriate
degree of assurance. It acts to prevent, uncover and correct substantial errors in the consolidated
financial statements, the financial statements of the Group companies and the Remuneration
Report. The ICS encompasses the following internal control components: control environment,
assessment of financial statement accounting risks, control activities, monitoring activities, infor-
mation and communication. A central ICS team assigned to Group Business Steering and Internal
Audit periodically monitors the existence and effectiveness of the ICS. Significant shortcomings in
the ICS identified during the monitoring activities are reported together with the corrective meas-
ures in a status report to the Audit Committee on a quarterly basis and to the Board of Directors on
an annual basis. Corrective measures to remedy shortcomings are monitored centrally. The Audit
Committee assesses the performance and reliability of the ICS on the basis of the periodic reporting.
See report
pages 86–87
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3.8.3 Compliance management
The Board of Directors has set the objective of protecting the Swisscom Group, its executive bod-
ies and employees against legal sanctions, financial losses and reputational damage by ensuring
Group-wide compliance. A corporate culture which promotes the willingness to behave in a way
that complies with the relevant regulations should support the achievement of this objective.
Swisscom has therefore implemented a Group-wide and central compliance system based on
COSO II and IDW PS 980 (principles for the proper auditing of compliance management systems,
2011). Within the framework of the system, Group Compliance each year identifies areas of legal
compliance using a risk-based approach which require monitoring by the central system. Within
these areas of legal compliance, the business activities of the Group companies are reviewed in a
periodic and proactive manner in order to identify risks in good time and determine the required
measures. The employees affected are informed of these measures and their implementation is
monitored. The suitability and effectiveness of the system is reviewed annually by Group Compli-
ance. Within the Health business division (Curabill) of Swisscom Switzerland Ltd and in the area of
billing for added-value services, an audit of the implemented measures is also performed by exter-
nal auditors (financial intermediation). Group Compliance informs the Risk Management unit of
identified significant risks on a quarterly basis and reports to the Audit Committee and the Board
of Directors each year on its activities and risk assessments. Should there be significant changes in
the risk assessment or if serious breaches are identified, the Chairman of the Audit Committee is
informed in a timely manner.
3.8.4 Internal auditing
Internal auditing is carried out by the Internal Audit unit. Internal Audit supports the Swisscom
Ltd Board of Directors and its Audit Committee in fulfilling their statutory and regulatory super-
visory and controlling obligations. Internal Audit also supports management by highlighting areas
of potential for improving business processes. It documents the audit findings and monitors the
implementation of measures.
Internal Audit is responsible for planning and performing audits throughout the Group in compli-
ance with professional auditing standards. It conducts an objective evaluation and audit of the
appropriateness, efficiency and effectiveness of, in particular, the governance and control systems
of the operational processes as well as the assurance functions of risk management, the internal
control system and compliance management in all organisational units of the Swisscom Group.
Internal Audit possesses maximum independence. Organisationally it is under the control of the
Chairman of the Board of Directors and reports to the Audit Committee. At its meetings, and at
least on a quarterly basis, the Audit Committee is briefed on audit findings and the status of any
corrective measures implemented. In addition to ordinary reporting, Internal Audit also informs the
Audit Committee of any irregularities which come to its attention.
Internal Audit liaises closely and exchanges information with the external auditors. The external
auditors have unrestricted access to the audit reports and audit documents of Internal Audit. Inter-
nal Audit closely coordinates audit planning with the external auditors. The integrated strategic
audit, which includes the coordinated annual plan of both the internal and external auditors, is pre-
pared annually on the basis of a risk analysis and presented to the Audit Committee for approval.
Independently of this audit, the Audit Committee can commission special audits based on informa-
tion received on the whistle-blowing platform operated by Internal Audit. This reporting procedure
approved by the Audit Committee ensures the anonymous and confidential receipt and handling of
objections raised relating to external reporting, financial reporting and assurance function issues.
The Chairman of the Board of Directors and the Chairman of the Audit Committee are informed of
notifications received and a report is drawn up at least once a year for the Audit Committee.
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4 Group Executive Board
4.1 Members of the Group Executive Board
In accordance with the Articles of Incorporation, the Group Executive Board must comprise one or
more members who may not simultaneously be members of the Board of Directors of Swisscom Ltd.
Temporary exceptions are only permitted in exceptional cases. Accordingly, the Board of Directors
has delegated responsibility for overall executive management of Swisscom Ltd to the CEO. The
CEO is entitled to delegate his powers to subordinates, in the first instance to other members of
the Group Executive Board. The members of the Group Executive Board are appointed by the Board
of Directors.
The Group Executive Board is composed of the CEO Swisscom Ltd, the heads of the Group divisions
Group Business Steering and Group Human Resources, and the heads of the divisions Residential Cus-
tomers, Small and Medium-Sized Enterprises, Enterprise Customers and IT, Network & Innovation.
See report
page 24
An overview of the composition of the Group Executive Board at 31 December 2014 is given below.
Andreas König, the former Head of Enterprise Customers, left the Group Executive Board at the end
of March 2014.
Name
Urs Schaeppi 1
Mario Rossi 2
Hans C. Werner
Marc Werner
Year of birth
Function
1960
CEO Swisscom Ltd
1960
CFO Swisscom Ltd
1960
CPO Swisscom Ltd
1967
Head of the division Residential Customers
Roger Wüthrich-Hasenböhler 3
1961
Head of the division Small and Medium-Sized Enterprises
Christian Petit 4
Heinz Herren 4
1963
Head of the division Enterprise Customer
1962
Head of the division IT, Network & Innovation
1 Since 2006 member of the Group Executive Board, from July to November 2013 CEO ad interim.
2 From March 2006 to December 2007 CFO Swisscom Ltd and member of the Group Executive Board.
3 From January 2011 to December 2012 member of the Group Executive Board.
4 From August 2007 to December 2012 member of the Group Executive Board.
Appointed as of
November 2013
January 2013
September 2011
January 2014
January 2014
April 2014
January 2014
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4.2 Education, professional activities and affiliations
Details of career and qualifications are provided below for each member of the Group Executive
Board. This section also discloses the mandates of each Group Executive Board member outside
the Group as well as other significant activities such as permanent functions in important inter-
est groups. Pursuant to the Articles of Incorporation, the members of the Group Executive Board
may perform no more than one additional mandate at a listed company and no more than two
additional mandates at non-listed companies, with a total of no more than two such additional
mandates being permitted. Mandates performed by a member of the Group Executive Board by
order of Swisscom or mandates in interest groups, charitable associations, institutions and founda-
tions as well as employee benefit foundations are not subject to these numerical restrictions. The
number of these mandates is, however, limited to ten or seven respectively. Prior to accepting new
mandates outside the Swisscom Group, the members of the Group Executive Board are obligated
to obtain the approval of the Chairman of the Board of Directors. Details on the regulation of exter-
nal mandates, in particular the definition of the term “mandate” and information on other man-
dates that do not fall under the aforementioned numerical restrictions for listed and non-listed
companies, are set out in the Articles of Incorporation (Article 8.3 of the Articles of Incorporation),
which can be accessed on the Swisscom website under “Basic principles”.
No member of the Group Executive Board exceeds the set limits for mandates.
See
www.swisscom.ch/
basicprinciples
Urs Schaeppi
Swiss citizen
Education: Degree in engineering (Dipl. Ing. ETH) and business administration (lic. oec.
HSG)
Career history: 1994–1998 Papierfabrik Biberist, plant manager; 1998–2006
Swisscom Mobile, Head of Commercial Business and member of the Executive
Board; 2006–2007 Swisscom Solutions Ltd, CEO; 2007–August 2013 Swisscom (Swit-
zerland) Ltd, Head of Corporate Business division; January–December 2013 Swisscom
(Switzerland) Ltd, Head; 23 July–6 November 2013 Swisscom Ltd, CEO ad interim;
since 7 November 2013 CEO
Since March 2006 member of the Swisscom Group Executive Board
Mandates in listed companies: –
Mandates in non-listed companies: –
Mandates by order of Swisscom: Member of the Executive Board, Association
Suisse des Télécommunications (asut), Berne; member of the Advisory Board, Ven-
ture Foundation, Windisch, since May 2014; member of the Foundation Board, IMD
International Institute for Management Development, Lausanne, from January 2015
Mandates in interest groups, charitable associations, institutions and foundations
as well as employee benefit foundations: –
Other significant activities: Member of the Board of Directors, Swiss-American
Chamber of Commerce, Zurich, since June 2014; member of the Executive Board,
Glasfasernetz Schweiz, Berne, since June 2014
Mario Rossi
Swiss citizen
Education: Commercial apprenticeship; dipl. Certified Public Accountant
Career history: 1998–2002 Swisscom Ltd, Head of Group Controlling; 2002–2006
Swisscom Fixnet Ltd, Chief Financial Officer (CFO); 2006–2007 Swisscom Ltd, CFO
and member of the Group Executive Board; 2007–2009 Fastweb S.p.A., CFO; 2009–
2012 Swisscom (Switzerland) Ltd, CFO; since January 2013 Swisscom Ltd, CFO
Since January 2013 member of the Swisscom Group Executive Board
Mandates in listed companies: –
Mandates in non-listed companies: –
Mandates by order of Swisscom: Vice President of the Board of Trustees, comPlan,
Baden, until December 2014; President of the Board of Trustees, comPlan, from Jan-
uary 2015
Mandates in interest groups, charitable associations, institutions and foundations
as well as employee benefit foundations: –
Other significant activities: Member of the Sanctions Committee, SIX Swiss
Exchange Ltd, Zurich
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Hans C. Werner
Swiss citizen
Education: PhD in business administration, Dr oec.
Career history: 1997–1999 Kantonsschule Büelrain, Winterthur, Rector; 1999–2000
Swiss Re, Head of Technical Training and Business Training; 2001 Swiss Re, Divi-
sional Operation Officer, Reinsurance & Risk Division; 2002–2003 Swiss Re, Head of
HR Corporate Centre and HR Shared Services; 2003–2007 Swiss Re, Head of Global
Human Resources; 2007–2009 Schindler Aufzüge AG, Head of HR and Training;
2010–2011 Europe North and East Schindler, HR Vice President; since September
2011 Swisscom Ltd, Chief Personnel Officer (CPO)
Since September 2011 member of the Swisscom Group Executive Board
Mandates in listed companies: –
Mandates in non-listed companies: –
Mandates by order of Swisscom: Member of the Board, Swiss Employer’s Association,
Zurich; member of the Board of Trustees, comPlan, Basel
Mandates in interest groups, charitable associations, institutions and foundations
as well as employee benefit foundations: –
Other significant activities: Member of the Advisory Board of the International
Institute of Management in Technology (iimt) at the University of Fribourg
Marc Werner
Swiss and French citizen
Education: Technical apprenticeship with Maturity Certificate, Swiss Certified Mar-
keting Executive; Senior Management Programme (University of St. Gallen), Senior
Executive Programme (London Business School)
Career history: 1997–2000 Minolta (Schweiz) AG, Head of Marketing and Sales and
member of the Board of Directors; 2000–2004 Bluewin AG, Head of Marketing & Sales,
member of the Executive Board; 2005–2007 Swisscom Fixnet Ltd, Head of Marketing
& Sales Residential Customers; 2008–2011 Swisscom (Switzerland) Ltd, Head of Mar-
keting & Sales Residential Customers and Deputy Head of Residential Customers;
2012–2013 Swisscom (Switzerland) Ltd, Head of Customer Service Residential Cus-
tomers and Deputy Head of Residential Customers; since September 2013 Swisscom,
Head of Residential Customers division
Since January 2014 member of the Swisscom Group Executive Board
Mandates in listed companies: –
Mandates in non-listed companies: Member of the Board of Directors, Net-Metrix AG,
Zurich; Member of the Executive Board, simsa – Swiss Internet Industry Association,
Zurich
Mandates by order of Swisscom: –
Mandates in interest groups, charitable associations, institutions and foundations
as well as employee benefit foundations: –
Other significant activities: Member of the Executive Board, IAA (International
Advertising Association) Swiss Chapter, Zurich, until April 2014; member of the
Executive Board, Swiss Advertising Association (SW), Zurich, since May 2014
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Roger Wüthrich-Hasenböhler
Swiss citizen
Education: Degree in electronic engineering (HTL), Executive MBA HSG
Career history: 1997–1999 Swisscom Ltd, Network Services, Head of Zurich branch;
1999–2000 Swisscom Ltd, Marketing & Sales, Sales Director Zurich SME; 2000–2005
Swisscom Mobile Ltd, Head of Business Customer Sales; 2006–2007 Swisscom
Solutions Ltd, Head of Marketing and Sales; 2008–2010 Swisscom (Switzerland)
Ltd, Head of Marketing and Sales, Swisscom Corporate Business, and CEO, Webcall
GmbH; 2011–2013 Swisscom (Switzerland) Ltd, Head of Small and Medium-Sized
Enterprises division; 2011-2012 Swisscom, member of the Group Executive Board;
since January 2014 Swisscom, Head of Small and Medium-Sized Enterprises division
Since January 2014 member of the Swisscom Group Executive Board
Mandates in listed companies: –
Mandates in non-listed companies: Member of the Board of Directors, Raiffeisen-
bank am Ricken Genossenschaft, Eschenbach
Mandates by order of Swisscom: Member of the Board of Directors, basecamp-
4hightech (bc4ht) cooperative, Berne
Mandates in interest groups, charitable associations, institutions and foundations
as well as employee benefit foundations: –
Other significant activities: –
Christian Petit
French citizen
Education: MBA ESSEC, Cergy-Pontoise
Career history: 1993–1999 debitel France; 2000–2003 Swisscom Mobile Ltd, Head of
Operations; 2003–2006 Swisscom Mobile, Head of Product Marketing; 2006–June
2007 Hospitality Services Plus SA, CEO; August 2007–December 2012 Swisscom,
member of the Group Executive Board; August 2007–August 2013 Swisscom (Swit-
zerland) Ltd, Head of Residential Customers division; September 2013–December
2013 Swisscom (Switzerland) Ltd, Head of Corporate Business division; January–
March 2014 Swisscom (Switzerland) Ltd, Head of the Enterprise Solution Center;
since April 2014 Swisscom, Head of Enterprise Customers division
Since April 2014 member of the Swisscom Group Executive Board
Mandates in listed companies: –
Mandates in non-listed companies: –
Mandates by order of Swisscom: Member of the Board of Trustees, Stiftung IT
Berufsbildung Schweiz, Berne
Mandates in interest groups, charitable associations, institutions and foundations
as well as employee benefit foundations: –
Other significant activities: –
Heinz Herren
Swiss citizen
Education: Degree in electronic engineering (HTL)
Career history: 1994–2000 3Com Corporation; 2000 Inalp Networks Inc.; 2001–
2005 Swisscom Fixnet Ltd, Head of Marketing Wholesale; 2005–2007 Swisscom
Fixnet Ltd, Head of Small and Medium-Sized Enterprises; 2007–2010 Swisscom
(Switzerland) Ltd, Head of Small and Medium-Sized Enterprises division; 2011–2013
Swisscom (Switzerland) Ltd, Head of Network & IT; August 2007–December 2012
Swisscom, member of the Group Executive Board; since January 2014 Swisscom,
Head of IT, Network & Innovation division
Since January 2014 member of the Swisscom Group Executive Board
Mandates in listed companies: –
Mandates in non-listed companies: –
Mandates by order of Swisscom: Member of the Board of Directors, Belgacom Inter-
national Carrier Services S.A., Brussels
Mandates in interest groups, charitable associations, institutions and foundations
as well as employee benefit foundations: –
Other significant activities: –
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4.3 Management agreements
Neither Swisscom Ltd nor any of the Group companies included in the scope of consolidation have
entered into management agreements with third parties.
5 Remuneration, shareholdings and loans
See report
page 115
All information on the remuneration of the Board of Directors and the Group Executive Board of
Swisscom Ltd is provided in the separate Remuneration Report.
6 Shareholders’ participation rights
6.1 Voting right restrictions and proxies
Each registered share entitles the holder to one vote. Voting rights can only be exercised if the
shareholder is entered in the share register of Swisscom Ltd with voting rights. The Board of Direc-
tors may refuse to recognise an acquirer of shares as a shareholder or beneficial holder with voting
rights if the latter’s total holding, when the new shares are added to any voting shares already reg-
istered in its name, would then exceed the limit of 5% of all registered shares entered in the com-
mercial register. The acquirer is entered in the register as a shareholder or beneficial holder without
voting rights for the remaining shares. This restriction on voting rights also applies to registered
shares acquired through the exercise of subscription, option or conversion rights. A Group clause
applies to the calculation of the percentage restriction.
The 5% voting right restriction does not apply to the Swiss Confederation which, under the terms
of the Telecommunications Enterprise Act (TEA), holds the capital and voting majority of Swisscom
Ltd. The Board of Directors may also recognise an acquirer of shares with more than 5% of all reg-
istered shares as a shareholder or beneficial holder with voting rights, in particular in the following
exceptional cases:
> Where shares are acquired as a result of a merger or business combination
> Where shares are acquired as a result of a non-cash contribution or an exchange of shares
> Where shares are acquired with a view to establishing a long-term partnership or strategic alliance
In addition to the percentage restriction on voting rights, the Board of Directors may refuse to
recognise and enter as a shareholder or beneficial holder with voting rights any person acquiring
shares who fails to expressly declare upon request that he/she has acquired the shares in his/her
own name and for his/her own account or as beneficial holder. Should an acquirer of shares refuse
to make such a declaration, he/she will be entered as a shareholder without voting rights.
In addition, where an entry has been made on the basis of false statements by the acquirer, the
Board of Directors may, after consulting the party concerned, delete their share register entry as
a shareholder with voting rights and enter him/her as a shareholder without voting rights. The
acquirer must be notified of the deletion immediately.
The statutory restrictions on voting rights may be lifted by resolution by the Annual General Meeting,
for which an absolute majority of valid votes cast would be required.
During the year under review, the Board of Directors did not recognise any acquirers of shares with
more than 5% of all registered shares as a shareholder or beneficial holder with voting rights, did
not reject any requests for recognition or registration and did not remove any shareholders with
voting rights from the share register due to the provision of false data.
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6.2 Statutory quorum requirements
The Annual General Meeting of Shareholders of Swisscom Ltd adopts its resolutions and holds its
elections by the absolute majority of valid votes cast. Abstentions are not deemed to be votes cast.
In addition to the specific quorum requirements under the Swiss Code of Obligations, the Articles of
Incorporation require a two-thirds majority of the voting shares represented in the following cases:
> Introduction of restrictions on voting rights
> Conversion of registered shares to bearer shares and vice versa
> Change in the Articles of Incorporation concerning special quorums for resolutions
6.3 Convocation of the Annual General Meeting
The Board of Directors must convene the Annual General Meeting at least 20 days prior to the date
of the meeting by means of an announcement in the Swiss Commercial Gazette. The meeting can
also be convened by registered or unregistered letter to all registered shareholders.
6.4 Agenda items
Shareholders representing shares with a par value of at least CHF 40,000 may request that an item
be placed on the agenda. This request must be submitted in writing to the Board of Directors at
least 45 days prior to the Annual General Meeting, stating the agenda item and the proposal.
6.5 Representation at the Annual General Meeting
Shareholders may be represented at the Annual General Meeting by another shareholder with vot-
ing rights or by the independent proxy elected by the Annual General Meeting. Partnerships and
legal entities may also be represented by authorised signatories, while minors and wards may be
represented by their legal representative even if the latter is not a shareholder. The authorisation
must be issued in writing. Once a shareholder has opened a shareholder account on the Sherpany
Internet platform, the shareholder involved also authorise the independent proxy via this platform
and issue instructions to him. Shareholders who are represented by a proxy may issue instructions
for each agenda item and also for all unannounced agenda items and motions, stating whether
they wish to vote for or against a motion or abstain. The independent proxy must cast the votes
entrusted to him by shareholders according to their instructions. If it receives no instructions, it shall
abstain. Abstentions are not deemed to be cast votes (Article 5.7.4 of the Articles of Incorporation).
The Articles of Incorporation do not include any regulations which differ from the OaEC as regards
the appointment of the independent proxy, any statutory regulations on the issuing of instructions
to the independent proxy or any statutory regulations with regard to electronic participation in the
Annual General Meeting.
6.6 Registrations in the share register
Shareholders entered in the share register with voting rights are entitled to vote at the Annual Gen-
eral Meeting. The Board of Directors determines the relevant date, which shall lie a few days before
the respective Annual General Meeting. As in previous years, the share register was not closed before
the Annual General Meeting for the 2013 financial year that was held on 7 April 2014. Shareholders
registered in the share register with voting rights by 4 p.m. on 2 April 2014 were entitled to vote.
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7 Change of control and defensive measures
7.1 Duty to make an offer
Under the terms of the Telecommunications Enterprise Act (TEA), the Swiss Confederation must
hold the majority of the capital and voting rights in Swisscom Ltd. This requirement is also set out
in the Articles of Incorporation. There is thus no duty to submit a takeover bid as defined in the
Federal Act on Stock Exchanges and Securities Trading, since this would contradict the TEA.
7.2 Clause on change of control
See report
page 115
Details on clauses on change of control are given in the section “Remuneration Report”.
8 Auditor
8.1 Duration and term of office of the Auditor-in-charge
The statutory auditors are appointed annually by the Annual General Meeting. KPMG AG, Muri
bei Bern, has acted as the statutory auditor of Swisscom Ltd and its Group companies (with the
exception of Fastweb, which is audited by PriceWaterhouseCoopers S.p.A.) since 1 January 2004.
Rolf Hauenstein of KPMG AG is responsible for the mandate as Auditor-in-charge (since 2011).
8.2 Audit fees
Fees for auditing services provided by KPMG AG in 2014 amounted to CHF 3,149 thousand (prior
year: CHF 3,315 thousand). Fees for additional audit-related services amounted to CHF 548 thou-
sand (prior year: CHF 675 thousand). PricewaterhouseCoopers S.p.A. as auditors for Fastweb
received remuneration of CHF 785 thousand in 2014 (prior year: CHF 881 thousand) and fees for
additional audit-related services provided to Fastweb in the amount of CHF 133 thousand (prior
year: CHF 228 thousand).
8.3 Supplementary fees
Supplementary fees of KPMG AG for non-audit services (other services) amounted to CHF 635 thou-
sand (prior year: CHF 583 thousand). The supplementary fees primarily comprise advisory services
in connection with company takeover projects and tax consulting.
8.4 Supervision and controlling instruments vis-à-vis the auditors
The Audit Committee verifies the qualifications, independence and performance of the statutory
auditors as a licensed, state-supervised auditing firm on behalf of the Board of Directors and sub-
mits proposals to the Board of Directors concerning auditors to be appointed or discharged by the
Annual General Meeting. It is also responsible for observing the statutory rotation principle for
the auditor-in-charge. The Audit Committee approves the integrated strategic audit plan, which
includes the annual audit plan of both the internal and external auditors, and the annual fee for the
auditing services provided to the Group and Group companies. The Audit Committee has drawn up
guidelines for additional service mandates (including a list of prohibited services). In order to ensure
independence, the Audit Committee (where the fee exceeds CHF 300,000) or the CFO of the local
Group company must also approve additional assignments. The Audit Committee reports quarterly
and the auditors annually on current mandates being performed by the auditors, broken down into
audit services, audit-related services and non-audit services. The statutory auditors, represented
by the Auditor-in-charge and his deputy, usually attend all Audit Committee meetings. They report
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to the Committee in detail on the conduct and results of their work, in particular regarding the
annual financial statement audit. They submit a written report to the Board of Directors and the
Audit Committee on the conduct and results of the audit of the annual financial statements, as
well as on their findings with regard to accounting and the internal control system. The Chairman
of the Audit Committee liaises closely with the Auditor-in-charge outside the meetings of the Audit
Committee and regularly reports to the Board of Directors.
9
Information policy
Swisscom pursues an open, active information policy vis-à-vis the general public and the financial
markets. It publishes comprehensive, consistent and transparent financial information on a quar-
terly basis.
Swisscom meets investors regularly throughout the year, presents its financial results at analysts’
meetings and road shows, attends selected conferences for financial analysts and investors and
keeps its shareholders regularly informed about its business through press releases. Those respon-
sible for investor relations can be contacted via the website, e-mail, telephone or by post. Contact
details are provided in the legal notice on the site.
See report
page 225
9.1 The results for the 2015 financial year will be published on the following dates:
> Interim report: 6 May 2015
> Interim report: 19 August 2015
> Interim report: 5 November 2015
> Annual report: February 2016
9.2 The Annual General Meeting will be held on:
> 8 April 2015 in the Hallenstadion in Zurich-Oerlikon
See
www.swisscom.ch/
financialreports
See
www.swisscom.ch/adhoc
The interim reports and annual report are available on the Swisscom website under Investor Rela-
tions or may be ordered directly from Swisscom. All press releases, presentations and the latest
financial calendar are also available on the Swisscom website under Investor Relations.
Push and pull links for the distribution of ad hoc communications can also be found on the
Swisscom website.
See
www.swisscom.ch/
generalmeeting
The minutes of the Annual General Meeting of 7 April 2014 and the webcast are available on the
Swisscom website.
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Remuneration Report
Remuneration paid to the Board of Directors and the Group Executive
Board is tied to the generation of sustainable returns, thus creating
an incentive to achieve long-term corporate success as well as added
value for shareholders.
1 Principles
This Remuneration Report outlines the principles behind, and the elements of, the remuneration
paid to the Board of Directors and Group Executive Board (Executive Board as defined in Article
4 of the Articles of Incorporation) of Swisscom Ltd, and the decision-making powers. It discloses
information about the amount of remuneration paid to the Board of Directors and Group Executive
Board and the shares they hold in Swisscom Ltd. The Remuneration Report is based on sections
3.5 and 5 of the annex to the Corporate Governance Directive issued by SIX Swiss Exchange and
Art. 13 to 16 of the Ordinance Against Excessive Compensation in Listed Stock Companies (OaEC).
Swisscom is implementing the requirements of the OaEC. The Annual General Meeting resolved to
make the necessary changes to the Articles of Incorporation on 7 April 2014. Swisscom also com-
plies with the recommendations of the Swiss Code of Best Practice for Corporate Governance 2014
issued by economiesuisse, the umbrella organisation representing Swiss business.
Swisscom’s internal principles are primarily set out in the Articles of Incorporation, the Organi-
sational Regulations and the Regulations of the Compensation Committee. The latest version of
these documents as well as revised or superseded versions can be viewed online on the Swisscom
website under “Basic principles”.
As in previous years, the Remuneration Report will be put to a consultative vote at the Annual
General Meeting on 8 April 2015.
The compensation paid in 2014 was accrued in accordance with the International Financial
Reporting Standards (IFRS).
See
www.swisscom.ch/
basicprinciples
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2 Decision-making powers
2.1 Division of tasks between the Annual General Meeting,
the Board of Directors and the Compensation Committee
The Annual General Meeting approves the maximum total remuneration amounts payable to the
Board of Directors and the Group Executive Boards for the following financial year at the request
of the Board of Directors. Details of the relevant regulation and the consequences of a negative
decision by the Annual General Meeting are set out in the Articles of Incorporation (Articles 5.7.7
and 5.8.8). The Articles of Incorporation also define the requirements for and the maximum level
of the additional amount that can be paid to a member of the Group Executive Board who is newly
appointed during a period for which the Annual General Meeting has already approved the remu-
neration.
The Board of Directors approves, inter alia, the personnel and remuneration policy for the entire
Group, as well as the general terms and conditions of employment for members of the Group
Executive Board. It defines the remuneration for each member of the Board of Directors and the
CEO as well as the total remuneration for the Group Executive Board. For the remuneration in the
2016 financial year, the Board of Directors will for the first time have to comply with the maximum
amounts approved by the 2015 Annual General Meeting for the remuneration to be paid to the
Board of Directors and the Group Executive Board.
The Compensation Committee handles all business matters of the Board of Directors concerning
remuneration, submits proposals to the Board of Directors in this context, and, within the frame-
work of the approved total remuneration, is empowered to decide upon the remuneration of the
individual Group Executive Board members (with the exception of the CEO). Neither the CEO nor
the other members of the Group Executive Board are entitled to participate in meetings at which
their remuneration is discussed or decided.
The decision-making powers are defined in the Articles of Incorporation, the Organisational Regu-
lations of the Board of Directors and the Regulations of the Compensation Committee, which can
be found on the Swisscom website under “Basic principles”.
The table below shows the division of responsibilities between the Annual General Meeting, the
Board of Directors and the Compensation Committee.
See
www.swisscom.ch/
basicprinciples
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Subject
Remuneration
Committee
Board
of Directors
Annual
General Meeting
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Maximum total amounts for remuneration of the Board of Directors
and Group Executive Board
Additional amount for remuneration of newly appointed
members of the Group Executive Board
Principles for performance-related and participation schemes
Personnel and remuneration policy
Principles for benefit plans and social security services
Concept of remuneration to members of the Board of Directors
Equity success and participation plans of the Group
General terms and conditions of the Group Executive Board
Determination of the targets for the variable performance-related salary component
Remuneration of the Board of Directors
Remuneration of the CEO Swisscom Ltd
Total remuneration of the Group Executive Board
V 1
V
V
V
V
V
V
V
V
V
V
V
Remuneration of the members of the Group Executive Board (excl. CEO)
G 5, 6
1 V stands for preparation and proposal to the Board of Directors.
2 A stands for proposal to the Annual General Meeting.
3 G stands for approval.
4 In the framework of the Articles of Incorporation.
5 In the framework of the maximum total remuneration defined by the Annual General Meeting.
6 In the framework of the total remuneration defined by the Board of Directors.
A 2
A
A
G 4
G
G 4
G 4
G 4
G 4
G 5
G 5
G 5
–
G 3
G
G
–
–
–
–
–
–
–
–
–
–
2.2 Election, composition and modus operandi of the Compensation Committee
The Compensation Committee consists of three to six members. They are elected individually each
year by the Annual General Meeting. If the number of members falls below three, the Board of
Directors appoints the missing member(s) from its midst until the conclusion of the next Annual
General Meeting. The Board of Directors appoints the Chairman of the Compensation Committee,
which constitutes itself. If the Annual General Meeting elects the Chairman of the Board of Direc-
tors to the Compensation Committee, he has no voting rights. He does not participate in meetings
in which discussions take place or decisions are made with regard to his own remuneration. The
CEO and CPO attend the meetings in an advisory capacity, unless agenda items exclusively concern
the Board of Directors or the CEO and CPO themselves, in which case the CEO and CPO are not
present. Other members of the Board of Directors, auditors or experts may also be called upon
to attend the meetings in an advisory capacity. Minutes are kept of the meetings. The Chairman
reports orally on the activities of the Compensation Committee at the next meeting of the Board
of Directors.
The details are defined in the Articles of Incorporation (Article 6.5), the Organisational Regulations
of the Board of Directors and the Regulations of the Compensation Committee, which can be
found on the Swisscom website under “Basic principles”.
The following table gives an overview of the composition of the Committee, the Committee meet-
ings, conference calls and circular resolutions taken in 2014. The members of the Compensation
Committee neither work nor have worked for Swisscom in an executive capacity, nor do they main-
tain any significant commercial links with Swisscom Ltd or the Swisscom Group. Customer and
supplier relationships exist between the Swiss Confederation and Swisscom. Details of these are
given in Note 37 to the consolidated financial statements.
Meetings
Conference calls
Circular resolutions
See
www.swisscom.ch/
basicprinciples
See report
page 197
Total
Average duration (in hours)
Participation:
Richard Roy, Chairman 1
Barbara Frei, Chairwoman 2
Torsten G. Kreindl
Theophil Schlatter
Hans Werder 3
Hansueli Loosli 4
3
1:50
1
3
3
3
3
3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1 Resigned as of 7 April 2014.
2 Since 1 January 2014 Member of the Remuneration Committee, since 7 April 2014 Chairwoman.
3 Representative of the Confederation.
4 Participation without voting rights.
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3 Remuneration paid to the Board of Directors
3.1 Principles
The remuneration system for the members of the Board of Directors is designed to attract and
retain experienced and motivated people for the Board of Directors’ function. It also seeks to
align the interests of the members of the Board of Directors with those of the shareholders. The
remuneration is commensurate with the activities and level of responsibility of each member and
reflects the normal market remuneration for comparable functions. The basic principles regarding
the remuneration of the Board of Directors and the allocation of equity shares are set out in the
Articles of Incorporation (Articles 6.4 and 8.1), which can be accessed on the Swisscom website
under “Basic principles”.
The remuneration is made up of a Director’s fee related to the member’s function, meeting attend-
ance fees as well as pension fund and any fringe benefits. No variable profit-related emoluments
are paid. The members of the Board of Directors are obligated to draw a portion of their fee in the
form of equity shares and to comply with the requirements on minimum shareholdings, thus ensur-
ing they directly participate financially in the performance of Swisscom’s shares. The remuneration
is reviewed every December for the following year for ongoing appropriateness. In December 2013,
the Board of Directors opted not to adjust its remuneration for the 2014 financial year. The Board of
Directors judged the appropriateness of the remuneration as part of a discretionary decision based
on the publicly accessible ethos study published in 2012. This study provides information for the
2011 financial year on the remuneration of the management of Switzerland’s 100 largest listed
companies.
3.2 Remuneration components
Director’s fee
The Director’s fee is made up of a basic emolument and functional allowances as compensation for
the individual functions. The basic emolument for all members of the Board of Directors excluding
employee social insurance contributions is CHF 120,000 (net).
The functional allowances total CHF 265,000 net for the Chairman, CHF 20,000 net each for the
Vice Chairman and the Chairmen of the Finance and Compensation Committees, CHF 50,000 net
for the Chairman of the Audit Committee and CHF 40,000 net for the representative of the Swiss
Confederation. Remuneration of CHF 10,000 net is awarded for membership in a standing com-
mittee. No functional allowance is paid for participation in ad-hoc committees appointed on a
case-by-case basis.
Under the Management Incentive Plan, the members of the Board of Directors are obligated to
draw 25% of their Director’s fee in the form of shares, with Swisscom adding a 50% top-up to the
amount invested in shares. In this manner, the compensation (excluding meeting attendance fees,
pension fund benefits and fringe benefits) is made up of a two-thirds’ cash portion and a one-third
equity share portion. The amount of the share purchase obligation can vary in the case of members
who join, leave, assume or give up a function during the year. Shares are allocated on the basis of
their value accepted for tax purposes, rounded up to the next whole number of shares, and are
subject to a blocking period of three years. The shares which are allocated in April of each report-
ing year are recorded at market value on the date of allocation. The share-based compensation is
augmented by a factor of 1.19 in order to take account of the difference between the tax value and
the market value. Further information on the Management Incentive Plan can be found in Note 11
to the consolidated financial statements. In April 2014, a total of 1,374 shares were allocated to the
members of the Board of Directors (prior year: 1,667 shares) for a tax value of CHF 449 per share
(prior year: CHF 371). Their market value was CHF 534.50 (prior year: CHF 442) per share.
Meeting attendance fees
For meetings, attendance fees of CHF 1,250 net are paid for each full day and CHF 750 net for each
half-day.
See
www.swisscom.ch/
basicprinciples
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See Report
page 162
Pension fund and fringe benefits
Swisscom assumes the full costs of social insurance, in particular old-age and survivors’ insurance and
unemployment insurance, for the members of the Board of Directors. The disclosed compensation to
the Members of the Board of Directors includes the employee’s share of social security contributions.
The employer’s share of contributions is disclosed separately but included in total remuneration.
With regards to the disclosure of services rendered and non-cash benefits and expenses, these are
dealt with from a tax point of view. No significant non-cash benefits are paid nor services rendered.
Out-of-pocket expenses are reimbursed on the basis of actual costs incurred. Accordingly, neither
services rendered and non-cash benefits nor expenses are included in the reported remuneration.
3.3 Total remuneration
Total remuneration paid to the individual members of the Board of Directors for the financial years
2014 and 2013 is presented in the tables below, broken down into individual components. Hugo Ger-
ber’s remuneration for his mandate as a member of the Board of Directors of Worklink AG, previously
reported in a footnote, is included in total remuneration for the first time 2014. The lower amount
of total remuneration for 2014 is attributable to the fact that there were fewer meetings in 2014.
2014, in CHF thousand
Hansueli Loosli
Frank Esser 1
Barbara Frei
Hugo Gerber 2
Michel Gobet
Torsten G. Kreindl
Catherine Mühlemann
Richard Roy 3
Theophil Schlatter
Hans Werder
Base salary
and functional allowances
Cash
remuneration
Share-based
payment
Meeting
attendance fees
Employer
contributions
to social security
Total 2014
330
69
114
111
104
127
104
48
162
142
195
57
71
61
61
75
61
7
99
84
35
15
22
26
22
26
21
8
26
25
31
8
12
11
11
13
11
4
16
11
591
149
219
209
198
241
197
67
303
262
Total remuneration to members
of the Board of Directors
1,311
771
226
128
2,436
1 Elected as of 7 April 2014.
2 Since 2014 the cash remuneration (including meeting attendance fees) of CHF 8,500 for the mandate as member of the Board of Directors
of Worklink AG has been included.
3 Resigned as of 7 April 2014.
2013, in CHF thousand
Hansueli Loosli
Barbara Frei
Hugo Gerber 1
Michel Gobet
Torsten G. Kreindl
Catherine Mühlemann
Richard Roy
Theophil Schlatter
Hans Werder
Base salary
and functional allowances
Cash
remuneration
Share-based
payment
Meeting
attendance fees
Employer
contributions
to social security
Total 2013
330
104
104
104
127
104
144
152
142
195
61
61
61
75
61
85
90
84
43
28
30
28
33
27
33
31
34
30
11
11
11
13
11
15
16
12
598
204
206
204
248
203
277
289
272
Total remuneration to members
of the Board of Directors
1,311
773
287
130
2,501
1 In addition, a cash remuneration (including meeting attendance fees) of CHF 9,000 was paid as member of the Board of Directors
of Worklink AG.
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3.4 Minimum shareholding requirement
Since 2013, the members of the Board of Directors have been required to maintain a minimum
shareholding equivalent to one annual emolument (basic emolument plus functional allowance).
The members of the Board of Directors have four years to build up the required minimum share-
holding, in the form of the blocked shares paid as part of remuneration and, if necessary, through
share purchases on the open market. Compliance with the shareholding requirement is reviewed
annually by the Compensation Committee. If a member’s shareholding falls below the minimum
requirement due to a drop in the share price, the difference must be made up by no later than the
time of the next review. In justified cases such as personal hardship or legal obligations, the Chair-
man of the Board of Directors can approve individual exceptions at his discretion.
3.5 Shareholdings of the members of the Board of Directors
Blocked and non-blocked shares held by members of the Board of Directors and/or related parties
as at 31 December 2014 and 2013 are listed in the table below:
Number
Hansueli Loosli
Frank Esser 1
Barbara Frei
Hugo Gerber
Michel Gobet
Torsten G. Kreindl
Catherine Mühlemann
Richard Roy 2
Theophil Schlatter
Hans Werder
Total shares of the members of the Group Executive Board
1 Elected as of 7 April 2014.
2 Resigned as of 7 April 2014.
31.12.2014
31.12.2013
1,682
101
409
1,129
1,496
1,195
1,119
–
887
839
8,857
1,335
–
283
1,020
1,387
1,061
1,010
1,269
711
688
8,764
No share of the voting rights of any person required to make disclosure thereof exceeds 0.1% of the
share capital.
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4 Remuneration paid to the Group Executive Board
4.1 Principles
The remuneration policy of Swisscom applicable to the Group Executive Board is designed to
attract and retain highly skilled and motivated specialists and executive staff over the long term
and provide an incentive to achieve a lasting increase in the enterprise value. It is systematic, trans-
parent and long-term oriented and is predicated on the following principles:
> Total remuneration is competitive and is in an appropriate relation to the market as well as the
internal salary structure.
> Remuneration is based on performance in line with the results achieved by Swisscom and the
contribution made to results by the area for which the member of the Group Executive Board is
responsible.
> Through direct financial participation in the performance of Swisscom’s shares, the interests of
management are aligned with the interests of shareholders.
The remuneration of the Group Executive Board is a balanced combination of fixed and variable
salary components. The fixed component is made up of a base salary, fringe benefits (primarily use
of a company car) and pension benefits. The variable remuneration includes a performance-related
component settled in cash and shares.
The members of the Group Executive Board are required to maintain a minimum sharehold-
ing, which strengthens their direct financial participation in the medium-term performance of
Swisscom’s share and thus aligns their interests with those of shareholders. To facilitate compli-
ance with the minimum shareholding requirement, Group Executive Board members have the
opportunity to draw up to 50% of the variable performance-related component of their salary in
shares.
The basic principles regarding the performance-related remuneration and the profit and partici-
pation plans of the Group Executive Board are set out in the Articles of Incorporation (Article 8.1),
which can be accessed on the Swisscom website under “Basic principles”.
Remuneration
Assets
See
www.swisscom.ch/
basicprinciples
Instruments
Fixed remuneration
Base salary
Pension benefits
Fringe benefits
Variable remuneration
Performance-related
component in cash
and shares
Shareholding
requirement
Requirement to hold a
minimum amount of
Swisscom shares
Determining factors
Function, experience
and qualifications,
Market
Achievement of
annual performance
objectives
Long-term
growth of
enterprise value
Purpose
Employee attraction
& retention and
risk protection
Focus on annual
objectives and long-term
business success
Alignment with
shareholders interests
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As a rule, the Compensation Committee reviews individual remuneration paid to members of the
Group Executive Board every three years of employment. The Compensation Committee decides at
its discretion on the level of remuneration, taking into consideration the external market value of
the function in question, the internal salary structure and individual performance.
For the purpose of assessing market values, Swisscom regularly takes part in market compari-
sons carried out by renowned consultancy firms. In the year under review, Swisscom referred to
two comparative studies: The “Swiss Headquarters Executive Total Compensation Measurement
Study” by Aon Hewitt covers 78 Swiss companies and international groups in all sectors with global
or regional headquarters in Switzerland, average revenues of CHF 2.4 billion and an average work-
force of 6,500. The international “European Executive Survey”, also produced by Aon Hewitt, covers
37 European groups, mainly telecommunications companies, with average revenues of around
CHF 30 billion and an average workforce of 73,000 (FTEs). Due to their numerous reference com-
panies, both studies provide the basis for a representative comparison. In the evaluation of these
studies, Swisscom takes into account the sector as well as the extent of responsibility in terms
of revenue, number of employees and international scope. During the reporting year, Swisscom
adjusted the remuneration of two Group Executive Board members to reflect these benchmarks,
to take account of their additional functions and to ensure a salary that is in line with the market.
For one of these members, the increase will be made in two steps in April 2014 and April 2015.
4.2 Changes to the remuneration system from 2014
With effect from 1 January 2014, Swisscom adjusted the remuneration system for the Group Exec-
utive Board so that the variable component of total remuneration in the event that targets are
exceeded may not exceed one year’s base salary. This adjustment did not change the total remu-
neration of each individual Group Executive Board member. The performance-related bonus for
Group Executive Board members now amounts to up to 70% of the adjusted annual base salary,
depending on the function. The Board of Directors has also introduced a restricted share plan
which will serve to support the recruitment and retention of employees in key positions. Under
this plan, the Board of Directors can, where necessary, pay part of the remuneration of individ-
ual Group Executive Board members in the form of restricted share units. These shares must be
earned over a three year vesting period. During the reporting year, Swisscom did not allocate any
restricted share units to members of the Group Executive Board. As part of the implementation of
the OaEC, the Board of Directors added a provision to the employment contracts of the members
of the Group Executive Board in 2014 according to which Swisscom may allow wrongfully awarded
or paid remuneration to expire or reclaim such remuneration.
4.3 Remuneration components
Base salary
The base salary is the remuneration paid according to the function, qualifications and performance
of the individual member of the Group Executive Board. It is determined based on a discretionary
decision taking into account the external market value for the function and the salary structure for
the Group’s executive management. The base salary is paid in cash.
Variable performance-related salary component
The members of the Group Executive Board are entitled to a variable, performance-related salary
component which depending on individual function represents 50–70% of the base salary if objec-
tives are achieved (target bonus). The amount of the performance-related component paid out
depends on the extent to which the targets are achieved. The extent of the target achievement
is set by the Compensation Committee, taking into account the performance evaluation by the
CEO. If targets are exceeded, up to 130% of the target bonus may be paid. The maximum perfor-
mance-related salary component is thus limited to 65%–91% of the base salary, depending on the
function. This ensures that the maximum performance-related salary component does not exceed
the annual base salary, even taking account of the market value of the component paid in shares.
The variable performance-related salary component was paid to the member of the Group Execu-
tive Board who left in the first quarter of the reporting year on the basis of the rules applicable in
2013 (target bonus of 117% of the base salary).
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Targets for the variable performance-related component
The targets underlying the variable performance-related component are adopted annually in
December for the following year by the Board of Directors following a proposal submitted by the
Compensation Committee. The relevant targets set for the reporting year are based on the Swisscom
Group’s budget figures for 2014, and are assigned to three target levels: “Group”, “Customers” and
“Segments”. All Group Executive Board members are measured against Group and customer tar-
gets. Group targets consist of financial targets. The customer targets for the reporting year are
measured using the Net Promoter Score – a recognised indicator of customer loyalty – taking into
consideration the customer group for which the Group Executive Board member is responsible. The
segment targets are tailored to the relevant function of each Group Executive Board member and
consist of financial and non-financial targets.
Swisscom’s target structure aims to strike a balance between financial performance and market
performance, taking into account the specific area of responsibility of the individual Group Executive
Board member.
The following table illustrates the target structure valid for the CEO and other Group Executive
Board members in the year under review, showing the three target levels, individual targets and
the respective weighting.
Target levels
Group
Customers
Segments
Total
Objectives
Net revenue
EBITDA margin
Operating free cash flow
Net Promoter Score
Targets of segments
Weighting of targets level
CEO
Weighting of targets level
other members of the Group
21%
21%
28%
30%
100%
12–18%
12–18%
16–24%
25%
15–35%
100%
Achievement of targets
The Compensation Committee determines the level of target achievement in the following year
once the consolidated financial statements become available. Its decision is based on a quantitative
assessment of the extent to which targets have been met using a scale for the overachievement
and underachievement of each target. In determining the level of target achievement, the Com-
pensation Committee also has a degree of discretion in assessing the effective management per-
formance, allowing special factors such as fluctuations in exchange rates to be taken into account.
Based on the level of target achievement, the Compensation Committee submits a proposal for
approval to the Board of Directors for the amount of the performance-related salary component to
be paid to the Group Executive Board and the CEO.
Most of the financial Group targets were met and some exceeded in the year under review. Cus-
tomer targets were not all fully met. The other targets of the segments were largely achieved and
partially exceeded.
Payment of the variable performance-related component
The variable performance-related component is paid in April of the following year, with 25% being
paid in the form of Swisscom shares, in accordance with the Management Incentive Plan. Group
Executive Board members may increase this share up to a maximum of 50%. The remaining por-
tion of the performance-related component is settled in cash. The decision of what percentage of
the variable performance-related salary component is to be drawn in the form of shares must be
communicated prior to the end of the reporting year, but no later than in November following pub-
lication of the third-quarter results. The shares are allocated on the basis of the tax value, rounded
up to whole numbers of shares, and are subject to a three-year blocking period. The share-based
remuneration disclosed in the year under review is augmented by a factor of 1.19 in order to take
account of the difference between the market value and the tax value. The market value is deter-
mined as of the date of allocation. Shares in respect of the current year are allocated in April 2015.
Further information on the Management Incentive Plan can be found in Note 11 to the consoli-
dated financial statements.
In April 2014, a total of 1,599 shares (2012: 2,707 shares) with a tax value of CHF 449 (2012: CHF 371)
per share and a market value of CHF 534.50 (2012: CHF 442) per share were allocated for the 2013
financial year to the members of the Group Executive Board.
See Report
page 162
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Pension fund and fringe benefits
The members of the Group Executive Board, like all eligible employees in Switzerland, are insured
against the risks of old age, death and disability through the comPlan pension plan (see pension
fund regulations at www.pk-complan.ch). The disclosed pension benefits (amounts which give rise
to or increase pension entitlements) encompass all savings, guarantee and risk contributions paid
by the employer to the pension plan. It also includes the pro rata costs of the AHV bridging pension
paid by comPlan in the event of early retirement and the premium for the supplementary life insur-
ance concluded for Swisscom management staff in Switzerland.
With regards to the disclosure of services rendered and non-cash benefits and expenses, these are
dealt with from a tax point of view. The members of the Group Executive Board are entitled to the
use of a company car. The disclosed services rendered and non-cash benefits therefore include an
amount for private use of the company car. Out-of-pocket expenses are reimbursed on a lump-sum
basis in accordance with expense reimbursement rules approved by the tax authorities, and other
expenses are reimbursed on an actual cost basis. They are not included in the reported remuneration.
4.4 Total remuneration
The following table shows total remuneration paid to the members of the Group Executive Board
for the 2014 and 2013 financial years, broken down into individual components and including the
highest amount paid to one member. Any remuneration paid to those stepping down from the
Group Executive Board includes the respective maximum remuneration up to the end of the notice
period of those members of the Group Executive Board who stepped down in the relevant report-
ing year. During the reporting period, one member left the Group Executive Board. Members of the
Group Executive Board stepping down receive the full variable performance-related component
in cash. The increase in the base salary relative to the previous year and the associated reduction
in the variable performance-related component is attributable to the change to the remuneration
system from 2014. In the year under review, the variable performance-related salary component
(CHF 2,681 million in total) was 74% of the base salary (CHF 3,622 million in total). The total remu-
neration paid to the highest-earning member of the Group Executive Board (CEO, Urs Schaeppi)
increased by 3.5% compared to the prior year. The reason for this is that the remuneration of the
CEO, which was adjusted upon his assumption of the position in November 2013, affects the entire
year in 2014. The reduction in total remuneration paid to the Group Executive Board (excluding
remuneration paid to those stepping down from the Group Executive Board) is mainly attributable
to the changed composition of the body as of 1 January 2014.
In CHF thousand
Fixed base salary paid in cash
Variable earnings-related remuneration paid in cash
Variable earnings-related remuneration paid in shares 1
Service-related and non-cash benefits
Employer contributions to social security 2
Retirement benefits
Total remuneration to members of the Group Executive Board
Benefits paid following retirement from Group Executive Board 4
Total remuneration to members of the Group Executive Board
including benefits paid following retirement
from Group Executive Board
Total
Group
Executive Board
2014
Total
Group
Executive Board
2013
Thereof
Urs Schaeppi
2014
Thereof
Urs Schaeppi
2013
3,622
1,969
712
60
481
696
7,540
252
3,183
2,640
853
45
488
738 3
7,947
1,481 5
882
463
184
18
116
110
1,773
–
622
566
298
16
105
106
1,713
–
7,792
9,428
1,773
1,713
1 The shares are reported at market value and are blocked from sale for three years.
2 Employer contributions to social security (AHV, IV, EO and FAK, incl. administration costs, and daily sickness benefits and accident insurance)
are included in the total remuneration.
3 As compensation for deferred entitlement to shares/option plans, which expired as a result of the switch to Swisscom, an additional CHF 165,000
was deposited into the retirement provision of a member of the Group Executive Board in 2013.
(A total of CHF 500,000 gross was awarded to him over the reporting years 2012-2014).
4 This amount includes the employer social security contributions as well as retirement benefits.
5 This amount also includes 2014 retirement benefits as compensation for deferred entitlement to shares/option plans.
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4.5 Minimum shareholding requirement
Since 2013, the members of the Group Executive Board have been required to hold a minimum
amount of Swisscom shares. The minimum shareholding to be held by the CEO shall be equiva-
lent to two years’ base salary. The remaining members shall maintain a shareholding equivalent to
one year’s base salary. The members of the Group Executive Board have four years to build up the
required minimum shareholding in the form of the blocked shares paid as part of remuneration
and, if necessary, through share purchases on the open market. Compliance with the shareholding
requirement is reviewed annually by the Compensation Committee. If a member’s shareholding
falls below the minimum requirement due to a drop in the share price or a salary adjustment, the
difference must be made up by no later than the time of the next review. In justified cases such as
personal hardship or legal obligations, the Chairman of the Board of Directors can approve individual
exceptions.
4.6 Shareholdings of the members of the Group Executive Board
Blocked and non-blocked shares held by current members of the Group Executive Board or related
parties as at 31 December 2014 and 2013 are listed in the table below:
Number
Urs Schaeppi (CEO) 1
Mario Rossi
Hans C. Werner
Marc Werner 2
Christian Petit 3
Roger Wüthrich-Hasenböhler 2
Heinz Herren 2
Andreas König 4
Total shares of the members of the Board of Directors
1 From 23 July to 6 November 2013 CEO ad interim and from 7 November 2013 CEO.
2 Joined the Group Executive Board as of 1 January 2014.
3 Joined the Group Executive Board as of 1 April 2014.
4 Resigned from the Group Executive Board as of 31 March 2014.
31.12.2014
31.12.2013
2,275
634
421
106
1,332
879
1,122
–
6,769
1,716
383
257
–
–
–
–
170
2,526
No share of the voting rights of any person required to make disclosure thereof exceeds 0.1% of the
share capital.
4.7 Employment contracts
The employment contracts of the members of the Group Executive Board are subject to a twelve-
month notice period. No termination benefits are payable in addition to the salary payable for
a maximum of twelve months. The employment contracts stipulate that Swisscom may allow
wrongfully awarded or paid remuneration to expire or reclaim such remuneration. They do not
contain a clause on change of control.
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5 Other remuneration
5.1 Additional remuneration
Swisscom may pay remuneration to members of the Board of Directors for mandates in group
companies and for mandates performed by order of Swisscom (Article 6.4 of the Articles of Incor-
poration). In 2014, Hugo Gerber was the only member to receive remuneration for an additional
mandate for his mandate as a member of the Board of Directors of the Swisscom Group company
Worklink AG. The director’s fee amounts to CHF 7,500 gross per year. For meetings, attendance fees
of CHF 1,000 gross are paid for each full day and CHF 500 gross for each half-day. Out-of-pocket
expenses are reimbursed on the basis of actual costs incurred. The remuneration reflects the level
of responsibility and scope of activities. It is determined by the Board of Directors of Work link AG
based on a discretionary decision and reviewed every two years for ongoing appropriateness.
The members of the Group Executive Board are not entitled to separate remuneration for any
directorships they hold either within or outside the Swisscom Group.
5.2 Remuneration for former members of the Board of Directors or Group Executive Board
and related parties
In the year under review, no compensation was paid to former members of the Board of Directors
or the Group Executive Board in connection with their earlier activities as a member of a governing
body of the company and/or which are not at arm’s length. There were also no payments made to
individuals who are closely related to any member of the Board of Directors or the Group Executive
Board which are not at arm’s length.
Related parties are spouses and common-law spouses, close relatives who are financially dependent
on the member of the governing body or live in the same household, other persons who are finan-
cially dependent on such individuals as well as partnerships or corporate entities that are controlled
by the member of the governing body or over which the member of the governing body exercises a
significant influence. Close relatives include parents, siblings and children.
5.3 Loans and credits granted
Swisscom Ltd has no statutory basis for the granting of loans, credit facilities and pension benefits
apart from the retirement benefits paid to the members of the Board of Directors and Group
Executive Board.
In the 2014 financial year, Swisscom provided no guarantees, loans, advances or credit facilities
of any kind either to former or current members of the Board of Directors or related parties, or
to former or current members of the Group Executive Board or related parties. Nor are there any
receivables of any kind outstanding.
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Report of the Statutory Auditor
Report of the Statutory Auditor on the remuneration report
to the General Meeting of Shareholders of Swisscom Ltd, Ittigen (Berne)
Report of the Statutory Auditor on the remuneration
We have audited the accompanying remuneration report dated 31 December 2014 of Swisscom Ltd
for the year ended 31 December 2014. The audit was limited to the information according to articles
14–16 of the Ordinance against Excessive compensation in Stock Exchange Listed Companies con-
tained in the sections 3.2 to 3.3, 4.4 and 5.2 to 5.3 on pages 115 to 126 of the remuneration report.
Responsibility of the Board of Directors
The Board of Directors is responsible for the preparation and overall fair presentation of the remu-
neration report in accordance with Swiss law and the Ordinance against Excessive compensation in
Stock Exchange Listed Companies (Ordinance). The Board of Directors is also responsible for designing
the remuneration system and defining individual remuneration packages.
Auditor’s Responsibility
Our responsibility is to express an opinion on the accompanying remuneration report. We conducted
our audit in accordance with Swiss Auditing Standards. Those standards require that we comply
with ethical requirements and plan and perform the audit to obtain reasonable assurance about
whether the remuneration report complies with Swiss law and articles 14–16 of the Ordinance.
An audit involves performing procedures to obtain audit evidence on the disclosures made in the
remuneration report with regard to compensation, loans and credits in accordance with articles
14–16 of the Ordinance. The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatements in the remuneration report, whether due to fraud
or error. This audit also includes evaluating the reasonableness of the methods applied to value com-
ponents of remuneration, as well as assessing the overall presentation of the remuneration report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Opinion
In our opinion, the remuneration report for the year ended 31 December 2014 of Swisscom Ltd
complies with Swiss law and articles 14–16 of the Ordinance.
KPMG AG
Rolf Hauenstein
Licensed Audit Expert
Auditor in Charge
Gümligen-Berne, 4. February 2015
Daniel Haas
Licensed Audit Expert
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“No one wants to wait for their
new Internet connection. I take care
of the IT systems that make it possible
for the connection to be functioning
on the date promised.”
Jana Niederöst
Senior ICT Architect
IT, Network & Innovation
Financial Statements
Through targeted
investments
we are providing
the very best
infrastructure
for our customers.
1.75 billion CHF
was invested by Swisscom in 2014
in Switzerland’s network and
IT infrastructure.
1.75 billion CHF
Topics
Consolidated
financial statements
132 Consolidated income statement
133 Consolidated statement of comprehensive income
134 Consolidated balance sheet
135 Consolidated statement of cash flows
136 Consolidated statement of changes in equity
137 Notes to the consolidated financial statements
1 General information
2 Basis of preparation
3 Summary of significant accounting policies
4 Significant accounting judgments, estimates and assumptions
in applying accounting policies
5 Business combinations
6 Segment information
7 Net revenue
8 Goods and services purchased
9 Personnel expense
10 Post-employment benefits
11 Share-based payments
12 Other operating expense
13 Capitalised costs of self-constructed assets and other income
14 Financial income and financial expense
15 Income taxes
16 Earnings per share
17 Cash and cash equivalents
18 Trade and other receivables
19 Other financial assets
20 Inventories
21 Other non-financial assets
22 Non-current assets held for sale
23 Property, plant and equipment
24 Goodwill and other intangible assets
25 Investments in associates
26 Financial liabilities
27 Trade and other payables
28 Provisions
29 Contingent liabilities
30 Other non-financial liabilities
31 Additional information concerning equity
32 Dividends
33 Financial risk management and supplementary disclosures
regarding financial instruments
34 Supplementary information on the statement of cash flows
35 Future commitments
36 Research and development
37 Related parties
38 Service concession agreements
39 Risk assessment process
40 Events after the balance sheet date
41 List of Group companies
202 Report of the Statutory Auditor
Financial statements
of Swisscom Ltd
204 Income statement
205 Balance sheet
206 Notes to the financial statements
1 General information
2 Contingent liabilities
3 Fire insurance values of property, plant and equipment
4 Amounts payable to pension funds
5 Debenture bonds issued
6 Treasury shares
7 Equity
8 Significant shareholders
9 Participations and recording of dividends from subsidiaries
10 Assets subject to restriction
11 Information on risk assessment process
12 Shareholdings of the members of the Board of Directors
and the Group Executive Board
209 Proposed appropriation of retained earnings
210 Report of the Statutory Auditor
Consolidated financial statements
Consolidated income statement
In CHF million, except for per share amounts
Net revenue
Goods and services purchased
Personnel expense
Other operating expense
Capitalised self-constructed assets and other income
Note
6, 7
8
9, 10, 11
12
13
Operating income before depreciation, amortisation and impairment losses (EBITDA)
Depreciation, amortisation and impairment losses on tangible and intangible assets
23, 24
Operating income (EBIT)
Financial income
Financial expense
Share of results of associates
Income before income taxes
Income tax expense
Net income
Share of net income attributable to equity holders of Swisscom Ltd
Share of net income attributable to non-controlling interests
Basic and diluted earnings per share (in CHF)
14
14
25
15
16
2014
2013
11,703
11,434
(2,369)
(2,751)
(2,540)
370
4,413
(2,091)
2,322
112
(372)
26
2,088
(382)
1,706
1,694
12
32.70
(2,338)
(2,706)
(2,476)
388
4,302
(2,044)
2,258
81
(340)
30
2,029
(334)
1,695
1,685
10
32.53
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Consolidated statement
of comprehensive income
In CHF million
Net income
Other comprehensive income
Actuarial gains and losses from defined benefit pension plans
Income tax expense
Items that will not be reclassified to income statement, net of tax
Foreign currency translation adjustments of foreign subsidiaries
Change in fair value of available-for-sale financial assets
Change in fair value of cash flow hedges
Gains and losses from cash flow hedges transferred to income statement
Income tax expense
Items that are or may be reclassified subsequently to income statement, net of tax
Other comprehensive income
Comprehensive income
Share of comprehensive income attributable to equity holders of Swisscom Ltd
Share of comprehensive income attributable to non-controlling interests
Note
10, 31
15, 31
31
31
31
31
15, 31
2014
1,706
(1,161)
242
(919)
(46)
–
10
5
12
(19)
(938)
768
757
11
2013
1,695
847
(169)
678
63
1
7
6
(15)
62
740
2,435
2,423
12
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Consolidated balance sheet
In CHF million
Assets
Cash and cash equivalents
Trade and other receivables
Other financial assets
Inventories
Current income tax assets
Other non-financial assets
Non-current assets held for sale
Total current assets
Property, plant and equipment
Goodwill
Other intangible assets
Investments in associates
Other financial assets
Deferred tax assets
Other non-financial assets
Total non-current assets
Total assets
Liabilities and equity
Financial liabilities
Trade and other payables
Current income tax liabilities
Provisions
Other non-financial liabilities
Total current liabilities
Financial liabilities
Defined benefit obligations
Provisions
Deferred tax liabilities
Other non-financial liabilities
Total non-current liabilities
Total liabilities
Share capital
Capital reserves
Retained earnings
Other reserves
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Share of equity attributable to equity holders of Swisscom Ltd
Share of equity attributable to non-controlling interests
Total equity
Total liabilities and equity
Note
31.12.2014
31.12.2013
17
18
19
20
15
21
22
23
24
24
25
19
15
21
26
27
15
28
30
26
10
28
15
30
31
31
302
2,586
40
149
17
252
80
3,426
9,720
4,987
1,921
171
233
417
57
723
2,516
160
152
22
210
13
3,796
9,156
4,809
2,053
153
193
279
57
17,506
20,932
16,700
20,496
1,580
1,876
172
112
718
4,458
7,024
2,441
820
357
375
11,017
15,475
52
136
6,856
(1,590)
5,454
3
5,457
20,932
1,656
1,870
184
132
759
4,601
7,167
1,293
667
456
310
9,893
14,494
52
136
7,356
(1,571)
5,973
29
6,002
20,496
Consolidated statement
of cash flows
In CHF million
Net income
Share of results of associates
Income tax expense
Depreciation, amortisation and impairment losses
Expense for share-based payments
Gain on sale of property, plant and equipment
Loss on disposal of property, plant and equipment
Financial income
Financial expense
Change in net operating assets and liabilities
Income taxes paid
Cash flow provided by operating activities
Note
25
15
23, 24
11
13
12
14
14
34
15
Capital expenditure for tangible and other intangible assets
23, 24, 34
Proceeds from sale of tangible and other intangible assets
Proceeds from sale of non-current assets held for sale
Acquisition of subsidiaries, net of cash and cash equivalents acquired
Investments in associates
Purchase of other financial assets
Proceeds from other financial assets
Interest received
Dividends received
Cash flow used in investing activities
Issuance of financial liabilities
Repayment of financial liabilities
Interest paid
Dividends paid to equity holders of Swisscom Ltd
Dividends paid to non-controlling interests
Acquisition of non–controlling interests
Purchase of treasury shares for share-based payments
Other cash flows from financing activities
Cash flow used in financing activities
(Net decrease) Net increase in cash and cash equivalents
Cash and cash equivalents at 1 January
Foreign currency translation adjustments in respect of cash and cash equivalents
Cash and cash equivalents at 31 December
22
5
25
25
26
26
32
31
11, 31
34
2014
1,706
(26)
382
2,091
5
(60)
11
(112)
372
(213)
(386)
3,770
(2,460)
35
205
(305)
(3)
(25)
167
10
30
(2,346)
1,500
(1,765)
(245)
(1,140)
(16)
(162)
(5)
(14)
2013
1,695
(30)
334
2,044
6
(16)
13
(81)
340
104
(278)
4,131
(2,445)
23
5
(60)
(1)
(158)
24
10
43
(2,559)
993
(956)
(253)
(1,140)
(14)
–
(6)
(12)
(1,847)
(1,388)
(423)
723
2
302
184
538
1
723
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Consolidated statement
of changes in equity
In CHF million
Share
capital
Capital
reserves
Retained
earnings
Treasury
shares
Equity
attributable
to equity
holders of
Swisscom
Other
reserves
Non-
controlling
interests
Balance at 31 December 2012
52
136
Net income
Other comprehensive income
Comprehensive income
Dividends paid 32
Purchase of treasury shares
for share-based payments 31
Allocation of treasury shares
for share-based payments 11,31
–
–
–
–
–
–
Additions from acquisition of subsidiaries 5 –
Transactions with
non-controlling interests
Balance at 31 December 2013
Net income
Other comprehensive income
Comprehensive income
Dividends paid 32
Purchase of treasury shares
for share-based payments 31
Allocation of treasury shares
for share-based payments 11,31
Transactions with
non-controlling interests 31
Balance at 31 December 2014
–
52
–
–
–
–
–
–
–
52
6,135
1,685
676
2,361
(1,140)
–
–
–
–
7,356
1,694
(918)
776
(1,140)
–
–
(136)
–
–
–
–
–
–
–
–
136
–
–
–
–
–
–
–
–
–
–
–
–
(6)
6
–
–
–
–
–
–
–
(5)
5
–
–
(1,633)
–
62
62
–
–
–
–
–
(1,571)
–
(19)
(19)
–
–
–
–
4,690
1,685
738
2,423
(1,140)
(6)
6
–
–
5,973
1,694
(937)
757
(1,140)
(5)
5
(136)
(1,590)
5,454
Reference numbers relate to the notes to the consolidated financial statements.
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6,856
Total
equity
4,717
1,695
740
2,435
(1,154)
(6)
6
19
(15)
6,002
1,706
(938)
768
27
10
2
12
(14)
–
–
19
(15)
29
12
(1)
11
(16)
(1,156)
–
–
(5)
5
(21)
3
(157)
5,457
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Notes to the consolidated
financial statements
This financial report is a translation from the original German version. In case of any inconsistency
the German version shall prevail.
1 General information
The Swisscom Group (hereinafter referred to as “ Swisscom”) provides telecommunication services
and is active primarily in Switzerland and Italy. A more detailed description of Swisscom’s business
activities is to be found in Notes 3.16 and 6. The consolidated financial statements as of and for the
year ended 31 December 2014 comprise Swisscom Ltd, the parent company, and its subsidiaries.
A table of the Group subsidiaries is set out in Note 41. Swisscom Ltd is a limited-liability company
incorporated in Switzerland under a private statute and has its registered office in Ittigen (Berne).
Its address is: Swisscom Ltd, Alte Tiefenaustrasse 6, 3048 Worblaufen. Swisscom Ltd is listed on the
SIX Swiss Exchange. As of 31 December 2014, the Swiss Confederation (“Confederation”), as major-
ity shareholder, held 51.0% of the voting rights and issued capital of Swisscom Ltd. The Confeder-
ation is obligated by current law to hold the majority of the capital and voting rights. The Board of
Directors of Swisscom has approved the issuance of these consolidated financial statements on
4 February 2015. The consolidated financial statements must be approved at the Annual General
Meeting of Shareholders of Swisscom Ltd to be held on 8 April 2015.
2 Basis of preparation
The consolidated financial statements of Swisscom have been prepared in accordance with
International Financial Reporting Standards (IFRS) and in compliance with the provisions
of Swiss law. The reporting period covers twelve months. The consolidated financial state-
ments are presented in Swiss francs (CHF). Unless otherwise indicated, all amounts are stated
in millions of Swiss francs. The balance sheet is classified according to maturities. Assets
and liabilities due within one year are classified as current. The income statement is classi-
fied based upon the nature of the income/expense. The consolidated financial statements
have been prepared on the historical cost basis, unless a Standard or Interpretation prescribes
another measurement basis for a particular caption in the consolidated financial statements.
Certain financial-statement captions are measured at fair value. Fair value is the price that would
be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. Fair value is determined on the basis of stock exchange
quotations or by using recognised valuation models, such as the discounting of anticipated future
cash flows. Unless otherwise indicated in the notes to the consolidated financial statements, fair
values correspond approximately to the carrying values reported in the balance sheet at the time
of drawing up the financial statements.
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3 Summary of significant accounting policies
3.1 Consolidation
Subsidiaries
Subsidiaries are all companies over which Swisscom Ltd has the effective ability of controlling their
financial and business policies. Control is generally assumed where Swisscom Ltd directly or indi-
rectly holds the majority of the voting rights or potential voting rights of the company. Subsidi-
aries are included in consolidation from the date on which they are acquired and deconsolidated
from the date they are disposed of. Intercompany balances and transactions, income and expenses,
shareholdings and dividends as well as unrealised gains and losses are fully eliminated. Unrealised
losses on an asset which has been transferred within the Group may be an indication of an impair-
ment in value and trigger an impairment test. Non-controlling interests in subsidiary companies
are reported within equity separately from that attributable to the shareholders of Swisscom Ltd.
The non-controlling interests in net income or loss are shown in the consolidated income state-
ment as a component of the consolidated net income or loss. Movements in shareholdings of sub-
sidiary companies are reported as transactions within equity insofar as control existed previously
and continues to exist. Written put options to owners of non-controlling interests are disclosed as
financial liabilities. The balance sheet date for all consolidated subsidiaries is 31 December. There
are no material restrictions on the transfer of funds from the subsidiaries to the parent company.
Investments in associates
Shareholdings in associates over which Swisscom exercises significant influence but does not have
control are accounted for using the equity method. A significant influence is generally assumed
to exist whenever between 20% and 50% of the voting rights are held. Under the equity method,
investments in associates are initially recognised at their purchase cost at the date of acquisition.
Purchase cost comprises the share of net assets acquired and any applicable goodwill arising. In
subsequent accounting periods, the carrying amount of the investment is adjusted by the share of
current profits and losses together with the share of movements in other equity captions, less the
share of dividends distributed. Unrealised gains and losses from transactions with associates are
eliminated on a pro-rata basis.
3.2 Foreign currency translation
Foreign currency transactions which are not denominated in the functional currency are trans-
lated into the functional currency using the exchange rates prevailing at the dates of the trans-
actions. Monetary items as of the balance sheet date are translated into the functional currency
at the exchange rate prevailing at the balance sheet date and non-monetary items are translated
using the exchange rate on the date of the transaction. Translation differences are recognised in
the income statement. The consolidated financial statements are presented in Swiss francs. Assets
and liabilities of subsidiaries and associates reporting in a different functional currency are trans-
lated at the exchange rates prevailing on the balance sheet date whereas the income statement
and the cash flow statement are translated at average exchange rates. Translation differences aris-
ing from the translation of net assets and income statements are not taken to income but recorded
directly in equity as part of other comprehensive income. Upon sale of a foreign Group company,
the cumulative foreign exchange differences previously included in the foreign currency translation
reserve under equity are taken to income as part of the gain or loss on disposal.
For the consolidated financial statements, the most significant foreign currencies during the
reporting years were translated at the following exchange rates:
Currency
1 EUR
1 USD
Closing rate
Average rate
31.12.2014
31.12.2013
31.12.2012
1.202
0.990
1.228
0.890
1.207
0.915
2014
1.213
0.920
2013
1.229
0.924
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3.3 Cash and cash equivalents
Cash and cash equivalents include cash on hand, sight balances and time deposits with financial insti-
tutions with a maximum term of three months from the acquisition date. This definition is equally
applied for the cash flow statement. Cash and cash equivalents are accounted for at amortised cost.
3.4 Trade and other receivables
Trade and other receivables are measured at amortised cost less impairment losses. Any impair-
ment losses are recorded through the use of valuation allowance accounts. All realised losses lead
to the de-recognition of the related receivable.
Receivables and payables are netted whenever Swisscom has a legal right of set-off as of the bal-
ance sheet date and intends to either settle on a net basis or realise the asset and settle the liability
simultaneously. The right of set-off must exist as of the balance sheet date and it shall be legally
enforceable both in the ordinary course of business as well as in the case of the insolvency of the
contracting party.
3.5 Other financial assets
Other financial assets are classified either as “at fair value through profit or loss”, “loans and
receivables”, “held-to-maturity” or “available-for-sale”. The classification depends on the purpose
for which the financial asset was acquired. Management determines the classification of finan-
cial assets at the time of acquisition and reviews the classification as of each balance sheet date.
Trade date accounting is applied for routine purchases and sales of financial assets. Financial assets
are initially recognised at their fair values, including directly related transaction costs. Transaction
costs relating to financial assets at fair value through profit or loss are not capitalised on acqui-
sition but expensed immediately as incurred. Financial assets are partially or fully derecognised
if Swisscom’s rights to the cash flows arising therefrom have either elapsed or were transferred
and Swisscom is neither exposed to any risks arising from these assets nor has any entitlement to
income from them.
Financial assets at fair value through profit or loss
Financial assets valued at fair value through profit or loss are either held for trading purposes or are
classified as such upon initial recognition. They are measured at their fair value. Any gains or losses
resulting from subsequent remeasurement are taken to income. Swisscom classifies only derivative
financial instruments in this category.
Loans and receivables
After their initial recognition at amortised cost, loans and receivables are measured using the effec-
tive interest method. Foreign exchange gains and losses are taken to income. The caption loans and
receivables primarily reflects term deposits with original maturities exceeding three months which
Swisscom places directly, or through an agent, with the borrower.
Financial assets held to maturity
Held-to-maturity financial assets are fixed-term financial assets for which Swisscom has the ability
and intention to hold to maturity. After their initial recognition at amortised cost, financial assets are
accounted for using the effective interest method less provisions for impairment. Foreign exchange
gains and losses are taken to income. Swisscom has not classified any financial assets in this category.
Available-for-sale financial assets
All other financial assets are classified as available-for-sale. Available-for-sale financial assets are
accounted for at fair value and all unrealised changes in fair value are recorded in equity. Foreign
exchange gains and losses on available-for-sale debt instruments are recognised in the income
statement. When available-for-sale financial assets are sold, impaired or otherwise disposed of, the
cumulative gains and losses since acquisition that had been recognised in equity are reclassified
from equity and recorded as financial income or expense. If the fair value of an unlisted equity
instrument cannot be reliably determined, the instrument is accounted for at cost less provisions
for impairment.
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3.6
Inventories
Inventories are measured at the lower of cost and net realisable value. The cost of inventories
includes all costs of acquisition and manufacture as well as other costs incurred in order to bring
the inventories to their present location and condition as intended by management. The cost of
inventories is determined using the weighted average cost method. Write-downs are raised for
inventories that are difficult to sell. Unsaleable inventories are fully written off.
3.7 Property, plant and equipment
Property, plant and equipment is recorded at cost less accumulated depreciation/amortisa-
tion and impairment losses. In addition to the purchase cost and the costs directly attribut-
able to bringing the asset to the location and condition necessary for it to be capable of oper-
ating in the manner intended by management, purchase or manufacturing cost also includes
the estimated costs for dismantling and restoration of the site. The construction costs of self-
constructed assets include directly attributable costs as well as indirect costs of material, man-
ufacture and administration. Borrowing costs are capitalised insofar as they can be allocated
directly to the acquisition or production of a qualifying asset. Costs of replacement, renewal or
renovation of property, plant and equipment are capitalised as replacement investments if a
future inflow of economic benefits is probable and the purchase or manufacturing costs can be
measured reliably. The carrying amount of the parts replaced is de-recognised. Maintenance costs
and repairs which are not capable of being capitalised are expensed. Systematic depreciation is
calculated using the straight-line method with the exception of land, which is not depreciated.
The estimated useful lives for the main categories of property, plant and equipment are:
Category
Buildings and leasehold improvements
Cables 1
Ducts 1
Transmission and switching equipment 1
Other technical installations 1
Other installations
1 Technical installations.
Years
10 to 40
30
40
4 to 15
3 to 15
3 to 15
Whenever significant parts of an item of property, plant and equipment comprise individual com-
ponents with differing useful lives, each component is depreciated/amortised separately. The esti-
mated useful lives and residual values are reviewed at least annually as of the balance sheet date
and, if necessary, adjusted. Leasehold improvements and installations in leased premises are amor-
tised on a straight-line basis over the shorter of their estimated useful lives and the remaining min-
imum lease term. The carrying amount of an item of property, plant and equipment is written off
on disposal or whenever no future economic benefits are expected from its use. Gains and losses
arising on the disposal of property, plant and equipment are calculated as the difference between
the disposal proceeds and the carrying amount of the item of property, plant and equipment. They
are taken to income and recorded as other income or other operating expenses.
3.8 Business combinations and goodwill
Business combinations are accounted for using the acquisition method. As of the date of the
business combination, acquisition costs are recognised at fair value. The purchase consideration
includes the amount of cash paid as well as the fair value of the assets ceded, liabilities incurred
or assumed as well as own equity instruments ceded. Liabilities depending on future events based
upon contractual agreements are recognised at fair value. At the time of acquisition, all identifiable
assets and liabilities that satisfy the recognition criteria are recognised at their fair values. The dif-
ference between the cost of acquisition and the fair value of the identifiable assets and liabilities
acquired or assumed is accounted for as goodwill after taking into account any non-controlling
interests. Any negative difference, after further review, is expensed directly. Goodwill acquired in
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connection with a business combination is recognised under intangible assets. The goodwill is not
amortised on a systematic basis but reviewed for impairment at least annually. When an entity is
disposed of, the carrying amount of the goodwill is derecognised and recorded as a component of
the gain or loss on disposal.
3.9 Other intangible assets
Research and development costs
Research costs are not capitalised but expensed as incurred. Development costs are capitalised as
intangible assets only if they can be identified as an intangible asset which will generate future
economic benefits and the costs of this asset can be determined reliably.
Other intangible assets
Mobile phone licenses, self-developed software as well as other intangible assets are recorded at
purchase or manufacturing cost less accumulated amortisation. Intangible assets resulting from
business combinations, such as brands and customer relationships, are recorded at acquisition cost
corresponding to fair value as of the date of acquisition, less accumulated amortisation. Systematic
amortisation of mobile phone licenses is based on the term of the contract. It begins as soon as the
related network is operational, unless other information is at hand which would suggest the need
to modify the useful life.
Useful lives of other intangible assets
Systematic amortisation is computed using the straight-line method based on the following
estimated useful lives:
Category
Software internally generated and purchased
Customer relationships
Brands
Other intangible assets
Years
3 to 7
7 to 11
5 to 10
3 to 16
The estimated useful lives are reviewed at least once per year as of the balance sheet date and,
where necessary, adjusted.
3.10 Non-current assets held for sale
A non-current asset or a disposal group is classified as being held for sale if its carrying amount will
be recovered mainly as a result of a sales transaction and not through continued use. This condition
is only considered as being met if the non-current asset or disposal group is immediately available
for sale in its present condition and disposal is highly likely. In this respect, it must be assumed that
the disposal process to which management has committed itself will be completed within one year
from the date of such reclassification. Non-current assets or disposal groups that are held for sale
are reported in the balance sheet separately under current assets and liabilities. The assets or dis-
posal groups are valued at the lower of their carrying amount and fair value less costs of disposal.
Impairment losses resulting from the initial classification are recognised in the income statement.
Assets classified as held for sale and disposal groups are no longer depreciated or amortised.
3.11 Impairment losses
Impairment of financial assets
As of each balance sheet date, the carrying amounts of those financial assets for which changes
in fair value are not recognised in the income statement are reviewed for any objective indica-
tions of impairment in value. An impairment loss is recognised where there is objective evidence of
impairment, such as where the borrower is in bankruptcy, in default or other significant financial
difficulties. The impairment of a financial asset which is recorded at amortised cost is calculated
as the difference between its carrying amount and the present value of estimated future cash
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flows, discounted at the asset’s original effective interest rate. Available-for-sale financial assets
whose fair value is less than their acquisition cost for a prolonged period or to a significant degree
are considered to be value impaired. In the event of impairment, the losses are reclassified out
of equity and recognised as financial expense. As of each balance sheet date, significant financial
assets are individually reviewed for impairment. The recording of impairment losses on trade and
other receivables varies as a function of the nature of the underlying transaction either in the form
of specific valuation allowances or as portfolio-based lump-sum valuation allowances which cover
the anticipated default risk. As regards portfolio-based lump-sum valuation allowances, financial
assets are regrouped on the basis of similar credit risk characteristics and reviewed on a collective
basis for impairment in value; where applicable, an allowance is raised. In determining the antici-
pated future cash flows of the portfolio, historic default rates are taken into account in addition to
the contractually agreed payment conditions. Impairment losses on trade and other receivables are
recognised as other operating expenses. Impairment losses on other financial assets are recorded
as financial expense.
Impairment of goodwill
For the purposes of the impairment test, goodwill is allocated to cash-generating units. The impair-
ment test is performed in the fourth quarter after completion of business planning. If there is any
indication during the year that goodwill may be impaired, the cash-generating unit is tested for
impairment at that time. An impairment loss is recognised if the recoverable amount of a cash-
generating unit is lower than its carrying amount. The recoverable amount is the greater of the
fair value less costs to sell and the value in use. The method used to test impairment is described
in Note 24. Any impairment loss on goodwill recognised in prior periods may not be reversed in
subsequent periods.
Impairment of property, plant and equipment and other intangible assets
If indications exist that the value of an asset may be impaired, the recoverable amount of the asset
is determined. If the recoverable amount of the asset, which is the greater of the fair value less cost
to sell and the value in use, is less than its carrying amount, the carrying amount is reduced to the
recoverable amount.
3.12 Leases
Finance leases
A lease is recorded as a finance lease when substantially all of the risks and rewards incidental to
ownership of an asset are transferred. The asset is initially recorded at the lower of its fair value and
the present value of the minimum lease payments and is amortised over the lesser of the asset’s
useful life and the lease term. The interest component of the lease payments is recognised as inter-
est expense over the lease term using the effective interest method. Leases for land and buildings
are recorded separately if the lease payments can be reliably allocated. Gains on sale-and-leaseback
transactions are deferred and released on a straight-line basis over the lease term as other income.
Losses on sale-and-leaseback transactions are recognised immediately.
Operating leases
Lease arrangements which do not transfer all the significant risks and rewards of ownership
are classified as operating leases. Payments are recorded as other operating expense using the
straight-line method over the lease period. Gains and losses on sale-and-leaseback transactions are
recorded directly in the income statement.
3.13 Financial liabilities
Financial liabilities are initially measured at fair value less direct transaction costs. In subsequent
accounting periods, they are re-measured at amortised cost using the effective interest method.
3.14 Trade and other payables
Trade and other payables are recorded at amortised cost.
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3.15 Provisions
Provisions for termination benefits
Costs relating to the implementation of personnel downsizing programmes are expensed in the
period when management commits itself to a downsizing plan, it is probable that a liability has
been incurred, the amount thereof can be reliably estimated and the implementation of the pro-
gramme has started or the individuals involved have been advised in sufficient detail as to the main
terms of the downsizing programme. A public announcement and/or communication to personnel
organisations are deemed to be equivalent to commencing the implementation of the programme.
Provisions for dismantling and restoration costs
Swisscom is legally obligated to dismantle transmitter stations and telecommunication instal-
lations located on land belonging to third parties following decommissioning and to restore the
property owned by third parties in the locations where these installations are located to its original
state. The costs of dismantling are capitalised as part of the acquisition costs of the installations
and are amortised over the useful lives of the installations. The provisions are recorded at the pres-
ent value of the aggregate future costs and are reported under long-term provisions. Whenever
the provision is remeasured, the present value of the changes in the liability are either added to or
deducted from the cost of the related capitalised asset. The amount deducted from the cost of the
related capitalised asset shall not exceed its carrying amount. Any excess is taken directly to the
income statement.
Other provisions
Provisions are raised whenever a legal or de facto liability exists as a result of an occurrence in the
past, an outflow of resources to settle the liability is probable and the amount of the liability can be
estimated reliably. Provisions are discounted if the effect is material.
3.16 Segmentation and revenue recognition
General
Net revenue is measured at the fair value of the consideration received less value-added taxes,
price reductions, volume rebates and other reductions in sales proceeds. Revenues are recognised
when it is probable that a future benefit from the transaction will accrue to Swisscom and the
amount can be reliably estimated. When Swisscom acts as principal, revenues are recorded gross.
However, when, from an economic point of view, Swisscom acts only as a broker or agent, reve-
nues are reported net of related costs. In multi-component contracts, revenue is determined and
reported separately for each identifiable component part. Total consideration for a multi-compo-
nent contract is distributed over the various component parts at fair value on a pro-rata basis.
Services by segments
Residential Customers
The segment Residential Customers comprises mainly connection fees for broadband services,
fixed-network and mobile phone subscriptions as well as national and international telephone and
data traffic for residential customers. The segment also includes value-added services, TV offerings,
the sale of terminal equipment and the operation of a directories database.
Small and Medium-Sized Enterprises
The segment Small and Medium-Sized Enterprises primarily comprises connection fees for broad-
band services, fixed-network and mobile phone subscriptions as well as national and international
telephone and data traffic for small and medium-sized enterprises.
Corporate Business
The Corporate Business segment focuses on complete communication solutions for large business
customers. The product offerings in the field of business ICT infrastructure cover everything from
individual products to complete solutions.
Wholesale
Wholesale comprises mainly the use of Swisscom fixed and mobile networks by other telecom-
munication service providers and the use of third-party networks by Swisscom. It also consists
of roaming with foreign operators whose customers use Swisscom’s mobile networks, as well as
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broadband services and regulated products as a result of the unbundling of the “last mile” for other
telecommunication service providers.
Network & IT
Network & IT encompasses primarily the planning, operation and maintenance of Swisscom’s
network infrastructure and related IT systems, both for fixed and mobile phone networks. Net-
work & IT also includes support functions for Swisscom Switzerland in the fields of finance, human
resources and strategy.
Fastweb
Fastweb is one of the largest providers of broadband services in Italy. Its product portfolio com-
prises voice, data, Internet and IP-TV services as well as video-on-demand for residential and cor-
porate customers. In addition, Fastweb offers mobile phone services on the basis of an MVNO
contract (as a virtual network operator). It also provides comprehensive network services and cus-
tomised solutions.
Other Operating Segments
Other Operating Segments mainly comprises Swisscom IT Services, Swisscom Real Estate and Par-
ticipations. It also comprises the areas Health, Connected Living and Swisscom Hospitality Services.
Swisscom IT Services is a provider of information technology services. Its core business consists
of the integration and operation of complex IT infrastructures. In addition, Swisscom IT Services
provides comprehensive services to the financial industry in the area of system integration and
business process outsourcing. Furthermore, Swisscom IT Services offers a full range of SAP ser-
vices. Participations comprise mainly the subsidiaries Alphapay Ltd, Billag Ltd, Business Fleet Man-
agement Ltd, cablex Ltd and Swisscom Broadcast Ltd. Alphapay Ltd is active as a debt collection
agent and is specialised in receivables management for third parties. Billag Ltd collects radio and TV
license fees on behalf of the Swiss Confederation. Business Fleet Management Ltd offers mobility
services. cablex Ltd operates in the field of construction and maintenance of wired and wireless
networks in Switzerland, primarily in the field of telecommunication. Swisscom Broadcast Ltd is
the leading provider in Switzerland of radio services, of cross-platform services for customers in the
media field and of securitised radio transmissions.
Revenue generated from services
Fixed networks
Fixed network services encompass primarily connection fees to residential and corporate custom-
ers, national and international telephony traffic for residential and business customers, leased lines,
the use of Swisscom’s fixed network by other telecommunication service providers, payphone ser-
vices, operator services as well as prepaid calling cards and the sale of terminal equipment. Instal-
lation and connection fees are deferred and released to income over the minimum term of the
contract on a straight-line basis. If no minimum contract term has been agreed, the revenue is
recorded on the date of installation or connection. Revenue from telephony services is recorded at
the time the calls are made. Revenue from the sale of prepaid call cards is deferred and released to
income as and when actual minutes are used or when the cards expire. Revenue from leased lines
is recorded on a straight-line basis over the duration of the contract. Revenue arising from the sale
of equipment is recorded at the time of delivery.
Mobile
Mobile-phone services encompass mainly basic subscription charges, domestic and international
mobile phone traffic for calls made by Swisscom customers in Switzerland or abroad and roaming
by foreign operators whose customers use Swisscom’s networks. Mobile services also include val-
ue-added services, data traffic as well as the sale of mobile handsets. Revenue from mobile teleph-
ony is recorded on the basis of the actual minutes used. In part, subscriptions with a fixed monthly
flat-rate fee are offered, the revenue from which is recognised on a straight-line basis over the term
of the contract. Connection fees are deferred and released to income over the minimum term of
the contract on a straight-line basis. If no minimum contract term has been agreed, revenue is
recognised on the date of connection. Roaming services are recorded as revenue on the basis of
the minutes used or the agreed contractual rates at the time the service is provided. Revenue from
roaming services with other telecommunication service providers is recorded gross. Value-added
services as well as text or multimedia news and the sale of mobile handsets are recognised as rev-
enue at the time the service is provided.
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Broadband
Internet services include the range of broadband access lines offered to residential and corporate
customers as well as broadband access lines for wholesale customers. Revenues in connection with
the provision of these services are deferred and released to income over the minimum contract
term on a straight-line basis. If no minimum contract term has been agreed, the revenue is recog-
nised on the date of installation or connection.
Digital TV
In the TV sector, revenue is generated from the range of digital TV services and video-on-demand
offered for residential and corporate customers. Revenue from TV services contains non-recur-
ring installation and connection charges and recurring subscription fees. Installation and connec-
tion fees related to installations are deferred and released to income over the minimum contract
term on a straight-line basis. If no minimum contract term has been agreed upon, the revenue is
recorded on the date of installation or connection.
Communication and IT solutions
Services in the field of communication and IT solutions primarily include consultancy services as
well as the implementation and maintenance and operation of communication infrastructures.
Furthermore, they include applications and services as well as the integration, operation and main-
tenance of data networks and outsourcing services. Revenues from customer-specific construc-
tion contracts are accounted for using the percentage-of-completion method which is based on
the ratio of costs incurred to-date to the estimated total costs. Revenue for long-term outsourcing
contracts is recorded based on the volume of services provided to the customer. Start-up costs and
integration of new outsourcing transactions are capitalised as other assets and amortised on a
straight-line basis over the duration of the contract. Revenue from maintenance is recorded evenly
over the term of the maintenance contracts.
3.17 Subscriber acquisition and loyalty-programme costs
Swisscom pays commissions to dealers for the acquisition and retention of Swisscom customers.
The commission payable is dependent on the type of subscription. Subscriber acquisition and loy-
alty-programme costs are expensed immediately, since these costs do not meet the criteria for the
recognition of an intangible asset.
3.18 Post-employment benefits
Defined benefit obligations and the related pension expense are determined on an actuarial basis
using the projected unit credit method. This reflects the number of years of service completed by
employees through the date of measurement and the assumptions made concerning future salary
growth. The latest actuarial valuation was undertaken as at 31 December 2014. Current pension
entitlements are charged to income in the period in which they arise. Actuarial gains and losses are
recorded under other comprehensive income in the reporting period in which they arise.
3.19 Share-based payments
The cost of shares issued to employees, members of the Group Executive Board and of the Board of
Directors is equal to the fair value of the shares at the date of issuance. The related costs are recorded
as personnel expense in the period in which the entitlement arose.
3.20 Income taxes
Income taxes include all current and deferred taxes which are based on income. Taxes which are
not based on income, such as taxes on real estate and on capital are recorded as other operating
expenses. Deferred taxes are computed using the balance sheet liability method whereby deferred
tax is recognised in principle on all temporary differences. Temporary differences arise between the
value of an asset or liability reported for tax purposes and its carrying amount in the financial state-
ments and which will reverse in future periods. Deferred tax assets and liabilities are determined
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using the tax rates that are expected to apply when the temporary difference reverses and based
on the tax rates which are in force or announced as of the balance sheet date. Deferred tax assets
are only recognised as assets to the extent that it is probable that they can be offset against future
taxable income. Income tax liabilities on undistributed profits of Group companies are only recorded
if the distribution of profits is to be made in the foreseeable future. Current and deferred tax assets
and liabilities are netted when they relate to the same taxing authority and taxable entity.
3.21 Derivative financial instruments
Derivative financial instruments are initially recorded at fair value and subsequently remeasured
at fair value. The method of recording the fluctuations in fair value is dependent on the underlying
transaction and the intention with regards thereto upon purchase or issuance of this underlying
transaction. On the date a derivative contract is entered, management designates the purpose
of the hedging relationship: hedge of the fair value of an asset or liability (“fair value hedge”) or
a hedge of future cash flows in the case of future transactions (“cash flow hedge”). Changes in
the fair value of derivative financial instruments that were designated as hedging instruments for
“fair value hedges” are recognised in the income statement. Changes in the fair value of derivative
financial instruments that were designated as “cash flow hedges” are recognised in the hedging
reserve as part of equity. If the recognition of a non-financial asset or non-financial liability results
from an anticipated future transaction, the cumulative revaluation gains and losses are reclassified
from equity and included in the acquisition cost of the asset or liability. If a hedge of a future trans-
action later results in the recording of a financial asset or financial liability, the amount included in
equity is transferred to the income statement in the same period in which the financial asset or
financial liability impacts the result. Otherwise, the amounts recorded in equity are recognised in
the income statement as income or expense in the same period the cash flows of the intended or
agreed future transaction occur. Changes in the fair value of derivative financial instruments that
are not designated as hedging instruments are taken immediately to income.
3.22 New and amended Standards and Interpretations
Amended International Financial Reporting Standards and Interpretations
which will have to be applied for the first time in the accounting period
As from 1 January 2014 onwards, Swisscom adopted various amendments to existing International
Financial Reporting Standards (IFRS) and Interpretations, which have no material impact on the
results or financial position of the Group.
Standard
Name
Amendments to IFRS 10,
IFRS 12 and IAS 27
Definition of Investment entities
Amendments to IAS 39
Novation of OTC derivatives and continuing designation for hedge accounting
IFRIC 21
Levies
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Amended International Financial Reporting Standards and Interpretations,
whose application is not yet mandatory
The following Standards and Interpretations published up to the end of 2014 are mandatory for
accounting periods beginning on or after 1 January 2015:
Standard
IFRS 9
Name
Financial instruments
Amendments to IFRS 10
and IAS 28
Sale or contribution of assets between an investor
and its associate or joint venture
Amendments to IFRS 11
Accounting for acquisitions of interests in a joint operation
IFRS 14
IFRS 15
Regulatory accrual item
Revenue from contracts with customers
Amendments to IAS 1
Disclosure initiative
Amendments to IAS 16
and IAS 38
Amendments to IAS 16
and IAS 41
Clarification acceptable methods of depreciation and amortisation
Agriculture: Bearer plants
Amendments to IAS 19
Defined benefit plans: employee contributions
Amendments to IAS 27
Equity method in separate financial statements
Various
Various
Various
Improvements to IFRS 2010–2012
Improvements to IFRS 2011–2013
Improvements to IFRS 2012–2014
Effective from
1 January 2018
1 January 2016
1 January 2016
1 January 2016
1 January 2017
1 January 2016
1 January 2016
1 January 2016
1 January 2015
1 January 2016
1 January 2015
1 January 2015
1 January 2016
Swisscom will review its financial reporting for the impact of the new and amended Standards
which take effect on or following 1 January 2015 and for which Swisscom did not make voluntary
early application. At present, Swisscom anticipates no material impact on consolidated financial
reporting with the exception of the amendment described in the following paragraph.
IFRS 15 “Revenue from Contracts with Customers”: in contrast to the revenue recognition stand-
ards currently in force, the new Standard provides for a single, principles-based, five-step model
which is to be applied to all contracts with customers. In accordance with IFRS 15, the amount
which is expected to be received from customers as consideration for the transfer of goods and
services is to be recognised as revenue. As regards determining the time or period, it is no longer
a question of the transfer of risks and opportunities but of the transfer of control over the goods
and services to the customers. As regards multi-component contracts, IFRS 15 explicitly rules that
the transaction price is to be allocated to each distinct performance obligation in relation to the
relative stand-alone selling prices. Furthermore, the new Standard contains new rules regarding
the costs of fulfilment and obtaining a contract as well as guidelines as to the question when such
costs are to be capitalised. In addition, the new Standard requires new, more detailed note disclo-
sure information. Swisscom anticipates that the wide-ranging amendments, in particular in the
area of accounting for multi-component contracts and the prescribed capitalisation of customer
acquisition costs, will impact consolidated financial reporting. However, a reliable estimate of the
impact of IFRS 15 can only be made once a detailed analysis has been performed in a conclusive
manner.
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4 Significant accounting judgments, estimates and assumptions
in applying accounting policies
The preparation of consolidated financial statements is dependent upon estimates and assump-
tions being made in applying the accounting policies for which management can exercise a cer-
tain degree of judgment. In applying the relevant accounting policies to the consolidated financial
statements, certain assumptions and estimates have to be made about the future that may have a
material influence on the amount and presentation of assets and liabilities, revenues and expenses
as well as the disclosures in the notes. The estimates used in drawing up the consolidated finan-
cial statements and valuations are based on empirical values and other factors which are deemed
appropriate in the given circumstances. The following estimates used and assumptions made in
applying the accounting policies have a critical influence on the consolidated financial statements.
Goodwill
As of 31 December 2014, the carrying amount of goodwill from acquisitions totalled CHF 4,987 mil-
lion. The recoverability of goodwill is tested for impairment annually during the fourth quarter. In
addition, an extraordinary review is undertaken whenever there are indications that impairment
has occurred. The value of goodwill is primarily dependent upon projected cash flows, the discount
rate (WACC) and long-term growth rate. The significant assumptions are disclosed in Note 24.
Changes to these assumptions may result in an impairment loss in the following year.
Post-employment benefits
Defined-benefit obligations are calculated on the basis of various financial and demographic
assumptions. The key assumptions for valuing the retirement-benefit obligations are the discount
rate, future salary and pension increases, interest on pension plan savings as well as life expec-
tancy. As of 31 December 2014, the funding deficit of CHF 2,441 million was recognised as a liabil-
ity in the consolidated balance sheet. Changes in estimates can impact recorded defined-benefit
obligations. The equal distribution of risk prescribed by law and in the regulations in the event of a
funding deficit is not taken into account when measuring the obligation. See Note 10.
Provisions for dismantling and restoration costs
Provisions are raised for costs incurred in connection with dismantling and restoring telecommu-
nication installations and transmitter stations. As of 31 December 2014, the carrying amount of
these provisions totalled CHF 646 million. The level of the provisions is primarily determined by
estimates of future costs for dismantling and restoration and the timing of the dismantling. An
increase in the estimated costs by 10% would result in an increase in the provision of CHF 60 mil-
lion. A postponement of the date of dismantling by ten years would lead to a decrease in the provi-
sions of CHF 29 million. See Note 28.
Provisions for regulatory proceedings
Various proceedings are in course in connection with the setting of prices for regulated access
services. Swisscom has set up provisions on the basis of its own estimate of the expected financial
outcome thereof. As of 31 December 2014, the provisions for regulatory proceedings aggregated
CHF 106 million. Further developments in the proceedings or a decision by the competent court
may result in a revised assessment of the financial outcome in subsequent years, thereby leading
to an increase or decrease of the recorded provisions. See Note 28.
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Proceedings conducted by the Competition Commission
The Competition Commission (ComCo) is conducting an investigation into ADSL prices against
Swisscom. The proceedings are described in Note 29. In the event that Swisscom is deemed to
have violated Antitrust Law, ComCo is entitled to impose sanctions. On the basis of a legal opinion,
Swisscom considers it unlikely that ComCo will impose direct sanctions. Accordingly, no provisions
were recognised in the 2014 consolidated financial statements in connection with these proceed-
ings. Further developments in the proceedings may result in a revised assessment of the financial
outcome in subsequent years and lead to the need to record provisions.
Allowances for doubtful receivables
Allowances for doubtful receivables are recorded in order to cover foreseeable losses arising from a
customer’s inability to pay. As of 31 December 2014, the carrying value of allowances for trade and
other receivables totalled CHF 210 million. In determining the appropriateness of the allowance,
several factors are considered. These include the ageing structure of receivables, the current finan-
cial solvency of the customer and the historical experience with receivable losses. The actual level
of receivable losses may be higher than the amount recognised if the actual financial situation of
the customers is worse than originally expected. See Note 18.
Deferred income tax assets
The recognition of deferred tax assets and liabilities is based on the judgment of management.
Deferred tax assets on tax loss carry-forwards are only recognised if it is probable that they can
be used. Whether or not they can be used depends on whether taxable profits can be achieved in
the future which can be offset against the available tax loss carry-forwards. In order to assess the
probability of their future use, estimates must be made of various factors such as future profita-
bility. If the actual results differ from the estimates, this can lead to a change in the assessment
of recoverability of the deferred tax assets. On 31 December 2014, recognised deferred tax assets
amounted to CHF 950 million. See Note 15.
Useful lives of property, plant and equipment
As of 31 December 2014, the carrying amount of property, plant and equipment totalled
CHF 9,720 million. In assessing the useful life of an item of property, plant and equipment, the
expected use of the asset by the company, expected physical wear and tear, technological develop-
ments as well as past experience with comparable assets are considered. The assessment of useful
lives is based upon the judgment of management. A change in the useful lives may impact the
future level of depreciation and amortisation recorded. See Notes 3.7 and 23.
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5 Business combinations
Business combinations in 2014
In 2014, Swisscom made payments totalling CHF 305 million for the acquisition of Group companies.
Of this amount, CHF 288 million relates to the takeover of PubliGroupe in September 2014.
Public takeover of PubliGroupe SA
In June 2014, Swisscom launched a public takeover bid for PubliGroupe SA (PubliGroupe). Swisscom
offered the shareholders of PubliGroupe a price of CHF 214 per share, which corresponds to a total
purchase consideration of CHF 474 million. Upon expiration of the offer period on 25 August 2014,
Swisscom held 98.37% of the share capital of PubliGroupe and the takeover was consummated on
5 September 2014. The purchase consideration for the 98.37% of the share capital was CHF 466 mil-
lion. Because the threshold of 98% within the framework of public takeover bid was exceeded,
Swisscom may initiate a procedure to have the remaining non-controlling interests cancelled in
consideration for the payment of the offer price of CHF 214 per share. The purchase consideration
of CHF 8 million for the remaining 1.63% of the share capital was recognised as a liability in the third
quarter of 2014.
The takeover of PubliGroupe was primarily to achieve full control over and further develop the Local
Group. PubliGroupe is active primarily in the Swiss directories market and owns a 51% shareholding
in LTV Yellow Pages Ltd and a 49% shareholding in Swisscom Directories Ltd and local.ch Ltd (Local
Group). Prior to the acquisition, Swisscom had held a 49% interest in LTV Yellow Pages Ltd and a
51% shareholding in Swisscom Directories Ltd and local.ch Ltd. Until then, Swisscom Directories
Ltd and local.ch Ltd were treated as fully consolidated subsidiaries in the consolidated financial
statements of Swisscom and LTV Yellow Pages Ltd was accounted for as an associated company.
Of the purchase consideration, an amount of CHF 162 million represents the acquisition of the out-
standing non-controlling interests in Swisscom Directories Ltd and local.ch Ltd. As Swisscom held
a controlling interest in Swisscom Directories Ltd and local.ch Ltd prior to the takeover, the trans-
action is dealt with in shareholders’ equity. The carrying value in Swisscom’s consolidated financial
statements of its 49% shareholding in LTV Yellow Pages Ltd at the time of the takeover amounted
to CHF 26 million. In accordance with IFRS, the difference of CHF 82 million between the carrying
value and the fair value was recognised as other financial income in the third quarter of 2014. Fol-
lowing the takeover, LTV Yellow Pages Ltd and local.ch Ltd were merged into Swisscom Directories
Ltd. PubliGroupe holds, in addition, further shareholdings in media companies and media service
providers as well as being the owner of real estate properties. Swisscom plans to sell the sharehold-
ings as well as the real-estate properties to the media companies. For further information see Note
22. Swisscom will examine all options regarding the further shareholdings. By the end of 2014,
various investments were sold to media companies for a price of CHF 57 million.
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In accordance with IFRS, the acquisition costs for the acquisition of PubliGroupe amounted to
CHF 420 million. This is comprised of the purchase price for PubliGroupe shares of CHF 474 million
and the fair value of the previous 49% participation in LTV Yellow Pages Ltd of CHF 108 million,
less the fair value of the non-controlling shares of Swisscom Directories Ltd and local.ch Ltd of
CHF 162 million. The business combination was accounted for provisionally in the consolidated
financial statements as at 31 December 2014, since not all the necessary information concerning
the acquired foreign operations was available at the time of preparing these year-end financial
statements. The provisional allocation of acquisition costs to the net assets of PubliGroupe may be
analysed as follows:
In CHF million
Cash and cash equivalents
Other financial assets
Non-current assets held for sale. See Note 22.
Investments in associates. See Note 25.
Property, plant and equipment
Other intangible assets
Receivables from pension plans
Other current and non-current assets
Deferred tax liabilities
Financial liabilities
Other current and non-current liabilities
Identifiable assets and liabilities
Goodwill
Purchase consideration
Cash and cash equivalents acquired
Investments in associates. See Note 25.
Deferred payment of purchase price
Total cash outflow
2014
16
42
137
48
4
63
15
48
(11)
(20)
(114)
228
192
420
(16)
(108)
(8)
288
The gross value of the trade receivables acquired amounts to CHF 47 million. At the time of the
takeover, it was anticipated that, of this amount, CHF 7 million was irrecoverable. The main reasons
for the recognition of goodwill are the future anticipated synergies and additional market shares
as well as the qualified employees. Transaction costs of CHF 1 million were recorded as other oper-
ating expenses in connection with the takeover of PubliGroupe. Swisscom’s consolidated finan-
cial statements as of and for the year ended 31 December 2014 reflect additional net revenues
of CHF 41 million as well as net income of CHF 6 million since the takeover of PubliGroupe on
5 September 2014. On the assumption that PubliGroupe had been included in the consolidated
financial statements as from 1 January 2014, there would have resulted consolidated pro-forma
net revenues of CHF 11,753 million and a consolidated pro-forma net income of CHF 1,712 million.
Business combinations in 2013
Payments totalling CHF 60 million were made in 2013 for the acquisition of Group companies. Of
this amount, CHF 3 million relates to deferred consideration for business combinations in prior
years and CHF 57 million for businesses acquired in 2013. The newly acquired companies in 2013
are viewed individually as non-significant business combinations and are thus reported on an
aggregate basis.
In February 2013, Hospitality Services acquired the operating business of Deuromedia. Deuromedia
provides IP-based infotainment solutions for the hospitality market.
At the end of March 2013, Datasport Ltd acquired the entire share capital of Abavent GmbH. Abav-
ent GmbH is a German provider of sporting events.
In April 2013, Swisscom IT Services acquired the business platform from Entris Banking and in doing
so, the entire capital of Entris Integrator AG. Using the business platform of Entris Integrator AG,
banks execute their banking activities such as the processing of payment transactions, credit and
security settlements or e-banking. Following acquisition, the investee changed its name to Swisscom
151
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Banking Provider Ltd. In addition, in June 2013, Swisscom IT Services Ltd acquired the entire share
capital of Entris Operations AG. Entris Operations AG processes primarily the cash and securities
settlement operations for some 50 banks. Following acquisition, Entris Operations AG was merged
into Swisscom Banking Provider Ltd.
Furthermore, Swisscom increased its shareholding in CT Cinetrade Ltd (Cinetrade) from 49% to 75%
in April 2013. Cinetrade offers TV-related services, Pay-TV, transmissions of sporting events and
video-on-demand. Cinetrade additionally operates one of the leading cinema chains in Switzerland.
In December, Swisscom Switzerland acquired a 67% equity holding in DL-Groupe GMG Ltd, which
provides services in the field of IP-based managed unified communication and collaboration services.
The aggregate allocation of acquisition costs to the net assets may be analysed as follows:
In CHF million
Cash and cash equivalents
Property, plant and equipment
Other intangible assets
Other current and non-current assets
Deferred tax liabilities
Other current and non-current liabilities
Identifiable assets and liabilities
Share of identifiable net assets attributable to non-controlling interests
Goodwill
Purchase costs
Cash and cash equivalents acquired
Investments in associates. See Note 25.
Option from business combinations. See Note 33.
Cash outflow from business combinations of the current year
Cash outflow from business combinations of prior years
Total cash outflow from business combinations
2013
55
32
66
43
(15)
(84)
97
(19)
159
237
(55)
(105)
(20)
57
3
60
152
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The main reasons for the recognition of goodwill are the future anticipated synergies and addi-
tional market shares as well as the qualified employees. In the 2013 consolidated financial state-
ments, additional net revenues of CHF 172 million and net income of CHF 17 million were gener-
ated from these business combinations. Assuming that the subsidiary companies acquired in 2013
had been included in the consolidated financial statements as from 1 January 2013, there would
have resulted consolidated pro-forma net revenues of CHF 11,529 million and a consolidated pro-
forma net income of CHF 1,700 million.
6 Segment information
Operating segments requiring to be reported are determined on the basis of the management
approach. Accordingly, external segment reporting reflects the internal organisational and man-
agement structure used within the Group as well as internal financial reporting to the Chief Operat-
ing Decision Maker. The segment information disclosed is in line with that of the internal reporting
systems. Reporting is divided into the segments “Residential Customers”, “Small and Medium-Sized
Enterprises”, “Corporate Business”, “Wholesale” and “Network & IT” which are grouped under
Swisscom Switzerland, “Fastweb” and “Other Operating Segments”. In addition, unallocated costs
are reported separately under “Group Headquarters”.
In segment reporting, the business divisions of Swisscom Switzerland are reported as individual
segments. The support functions of finance, human resources and strategy of Swisscom Switzer-
land are embedded in the division Network & IT. No network costs are recharged for the financial
management of customer segments. The results of the customer segments Residential Customers,
Small and Medium-Sized Enterprises, Corporate Business and the segment Wholesale thus report
their contribution margins prior to network costs. Network costs are planned, monitored and con-
trolled by the business division Network & IT which is managed as a cost centre. For this reason,
no revenue is credited to the Network & IT division within segment reporting. The segment results
of Network & IT consist of operating expenses and depreciation and amortisation less capitalised
self-constructed assets and other income. The sum of the segment results of Swisscom Switzer-
land corresponds in aggregate to the operating results (EBIT) of Swisscom Switzerland. Fastweb
is one of the largest fixed-network operators and a leading provider of IP-based services in Italy.
It is reported in the consolidated financial statements as a separate segment. Other Operating
Segments principally comprise Swisscom IT Services, Swisscom Real Estate and the area Participa-
tions. Group Headquarters which includes unallocated costs, comprises mainly the Group central
divisions of Swisscom, Swisscom Re Ltd and the employment company Worklink Ltd.
The services offered by each operating segment are described in Note 3.16. The segment results
of the segments Fastweb and Other Operating Segments correspond to the operating result (EBIT)
of these units. The latter reflects the net revenues from external customers and other segments
less segment expenses and depreciation, amortisation and impairment losses on property, plant
and equipment and intangible assets. Segment expenses include the costs of materials and ser-
vices, personnel costs and other operating costs less capitalised self-constructed assets and other
income. The segment expense includes ordinary employer contributions as retirement-benefit
expense. The difference between the ordinary employer contributions and the retirement-benefit
expense as provided for under IAS 19 is reported in the column “Eliminations”. In 2014, no costs
are included in the column “Eliminations” as a reconciling item to retirement-benefit expense in
accordance with IAS 19 (prior year: gain of CHF 17 million).
Group Headquarters charges no management fees to other segments for its financial management
services; similarly, the segment Network & IT recharges no network costs to the other segments.
Other inter-segment services are recharged at market prices. Unrealised gains and losses may arise
as a result of recharging services and sales of assets between the segments. These are eliminated
and are reported in the segment information in the column “Eliminations”. Capital expenditures by
segment include additions to property, plant and equipment and other intangible assets.
Segment information for 2014 of Swisscom may be analysed as follows:
2014, in CHF million
Swisscom
Switzerland
Fastweb
Other
operating
segments
Group
Head-
quarters
Net revenue from external customers
8,571
2,043
1,088
Net revenue with other segments
Net revenue
Segment result
Financial income and financial expense, net
Share of results of associates
Income before income taxes
Income tax expense
Net income
Associates
Assets held for sale
Capital expenditure in property, plant and
equipment and other intangible assets
Depreciation, amortisation and impairment losses
Gain (loss) on disposal of property,
plant and equipment, net
Share of results of associates
60
8,631
2,403
68
–
1,571
1,173
(2)
26
4
801
2,047
1,889
1
1
2
(119)
186
(126)
47
–
682
744
–
–
56
80
236
175
51
–
–
–
–
5
–
–
Elimi-
nation
Total
–
11,703
(866)
(866)
(22)
–
–
(29)
(6)
–
–
–
11,703
2,322
(260)
26
2,088
(382)
1,706
171
80
2,460
2,091
49
26
153
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N
Segment information 2014 of Swisscom Switzerland is to be analysed as follows:
2014, in CHF million
Small and
Medium-
Sized
Enterprises
Residential
Customers
Corporate
Business
Whole-
sale
Network
& IT
Elimi-
nation
Total
Swisscom
Switzer-
land
Net revenue from external customers
5,168
1,139
1,694
Net revenue with other segments
Net revenue
Segment result
Associates
Capital expenditure in property, plant and
equipment and other intangible assets
158
5,326
2,823
3
172
Depreciation, amortisation and impairment losses
128
Gain (loss) on disposal of property,
plant and equipment, net
Share of results of associates
(1)
2
20
94
1,159
1,788
850
832
–
25
6
–
–
–
83
68
–
–
570
359
929
381
64
–
–
–
24
–
–
–
(2,483)
1
1,291
971
(1)
–
–
8,571
(571)
(571)
–
–
–
–
–
–
60
8,631
2,403
68
1,571
1,173
(2)
26
Segment information 2013 of Swisscom is to be analysed as follows:
2013, in CHF million
Swisscom
Switzerland
Fastweb
Other
operating
segments
Group
Head-
quarters
Net revenue from external customers
8,389
2,013
1,032
5
787
2,018
1,819
(120)
108
(135)
–
1
1
Elimi-
nation
Total
–
11,434
(853)
(853)
(38)
–
11,434
2,258
(259)
30
2,029
(334)
1,695
153
13
2,445
2,044
3
30
49
–
695
740
–
–
11
13
244
195
13
–
–
–
–
8
–
–
–
–
(10)
(3)
–
–
Net revenue with other segments
Net revenue
Segment result
Financial income and financial expense, net
Share of results of associates
Income before income taxes
Income tax expense
Net income
Associates
Assets held for sale
Capital expenditure in property, plant and
equipment and other intangible assets
Depreciation, amortisation and impairment losses
Gain (loss) on disposal of property,
plant and equipment, net
Share of results of associates
60
8,449
2,443
93
–
1,516
1,104
(10)
30
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Segment information 2013 of Swisscom Switzerland is to be analysed as follows:
2013, in CHF million
Small and
Medium-
Sized
Enterprises
Residential
Customers
Corporate
Business
Whole-
sale
Network
& IT
Elimi-
nation
Total
Swisscom
Switzer-
land
Net revenue from external customers
4,985
1,128
1,688
Net revenue with other segments
Net revenue
Segment result
Associates
Capital expenditure in property, plant and
equipment and other intangible assets
160
5,145
2,790
29
199
Depreciation, amortisation and impairment losses
108
Gain (loss) on disposal of property,
plant and equipment, net
Share of results of associates
–
9
23
99
1,151
1,787
859
832
–
17
5
–
–
–
92
75
(1)
–
588
378
966
384
63
–
–
–
21
–
–
–
(2,423)
1
1,208
917
(9)
–
–
8,389
(600)
(600)
1
–
–
(1)
–
–
60
8,449
2,443
93
1,516
1,104
(10)
30
Disclosures by geographical regions
Swisscom’s operations are conducted mainly in Switzerland where it provides a comprehensive
range of telecommunication services. Business activities abroad mainly relate to Fastweb and
Swisscom Hospitality Services. Fastweb primarily provides fixed-network and IP-based products
in Italy. Swisscom Hospitality Services is a provider of broadband and Internet-based solutions for
hotel guests in virtually all of Europe, the United States and Asia. Net revenues and assets are allo-
cated to regions. Net revenues and assets are allocated according to the registered office of the
related Group company.
In CHF million
Switzerland
Italy
Other countries in Europe
Other countries outside Europe
Not allocated
Total
Disclosures by products and services
In CHF million
Mobile access lines single subscriptions
Fixed access lines single subscriptions
Bundles
Other
Not allocated
Total net revenue
Net
revenue
9,586
2,048
55
14
–
2014
Non-current
assets
13,423
3,281
151
–
651
Net
revenue
9,358
2,020
48
8
–
2013
Non-current
assets
12,726
3,414
87
1
472
11,703
17,506
11,434
16,700
2014
2,852
3,832
1,938
3,080
1
2013
2,874
4,027
1,576
2,956
1
11,703
11,434
155
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N
The products and services offered by each operating segment are described in Note 3.16.
Significant customers
Swisscom has a large number of customers. No individual customers accounted for more than 10%
of segment revenue in 2013 and 2014.
7 Net revenue
In CHF million
Net revenue from services
Net revenue from sale of merchandise
Net revenue from the right of use of intangible assets
Total net revenue
2014
10,874
828
1
2013
10,556
875
3
11,703
11,434
Further information on Swisscom’s business activities is set out in Notes 3.16 and 6.
8
Goods and services purchased
In CHF million
Raw materials and supplies
Services purchased
Customer premises equipment and merchandise
National traffic fees
International traffic fees
Traffic fees of foreign subsidiaries
Total goods and services purchased
9 Personnel expense
In CHF million
Salary and wage costs
Social security expenses
Expense of defined benefit plans. See Note 10.
Expense of defined contribution plans. See Note 10.
Expense of share-based payments. See Note 11.
Salary and wage costs of the employment company Worklink
Termination benefits
Other personnel expense
Total personnel expense
Termination benefit programmes
2014
42
503
1,103
176
246
299
2013
24
502
1,022
180
265
345
2,369
2,338
2014
2,194
232
244
10
5
5
(1)
62
2,751
2013
2,132
224
258
11
6
2
6
67
2,706
Swisscom supports employees affected by downsizing through a social plan. Depending on the
relevant social plan as well as age and length of service, certain employees affected by downsizing
may transfer to the employment company Worklink Ltd. The employment company Worklink Ltd
hires out participating employees to third parties on a temporary basis. For further information see
Note 28.
156
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10 Post-employment benefits
Defined-benefit plans
Swisscom maintains several pension plans for employees in Switzerland and Italy. Expenses of
defined benefit plans totalled CHF 268 million in 2014 (prior year: CHF 295 million). Of this amount,
CHF 244 million (prior year: CHF 258 million) was recorded as personnel expense and CHF 24 million
(prior year: CHF 37 million) as finance expense.
comPlan
The majority of Swisscom’s employees in Switzerland are insured for the risks of old age, death and
disability by the independent pension plan, comPlan. The benefits of comPlan exceed the minimum
laid down in the Federal Law on Occupational Retirement, Survivors’ and Disability Insurance (BVG).
The ordinary employer contributions encompass risk contributions of 3.35% and contributions var-
ying with age of 5-13% of the insured salary to be credited to the individual retirement savings’
accounts. The standard retirement age is 65. Employees qualify for early retirement at the earliest
on their 58th birthday, whereby the rate of conversion is reduced in line with the longer expected
duration of pension payments. Furthermore, employees may choose to take their entire pension
or part thereof in the form of a capital payment. The amount of the pension paid results from the
conversion rate which is applied to the accumulated savings of the individuals concerned in the
case of retirement. For individuals retiring at the age of 65, the rate of conversion is 6.4% up to
the end of 2013. From 2014 onwards, the conversion rate was reduced to 6.11%. The accumulated
savings result from employee and employer contributions which are paid into the individual sav-
ings account of each individual insured person as well as the interest accruing on the accumulated
savings. The interest rate to be applied to the accumulated pension savings is defined annually by
the Foundation Council of comPlan. comPlan has the legal form of a foundation. The Foundation
Council, which is constituted by an equal number of representatives of the employer and employ-
ees, is responsible for the management of the Foundation. The duties of the Foundation Council
are laid down in the BVG and the Pension Fund Rules. In accordance with BVG, a temporary short-
fall is permitted. The Foundation Council must take appropriate measures in order to solve the
shortfall within a reasonable time. Pursuant to BVG, additional employer and employee contribu-
tions may be incurred whenever a significant shortfall in accordance with BVG arises. In such cases,
the risk is split between the employer and employees and the employer is not legally obligated to
assume more than 50% of the additional contributions. As of 31 December 2014, the funding ratio
as defined by BVG of comPlan was 111% (prior year: 106%). The Investment Commission is the
central management, coordination and monitoring body for the management of the pension plan
assets. The pension plan assets are administered using mandated, independent financial service
providers. Monitoring is supported by an external investment controller. The Foundation Council
determines the investment strategy within the framework of the legal provisions. Within its terms
of reference, the Investment Commission may undertake the asset allocation.
Other pension plans
In addition to various smaller pension plans in Switzerland, other pension plans include the pen-
sion plan for Fastweb employees and the pension plan of the PubliGroupe. Employees of the Ital-
ian subsidiary Fastweb have acquired entitlements to future pension benefits up to the end of
2006. These benefits are recorded in the balance sheet as defined-benefit obligations. With the
PubliGroupe pension fund, employees of PubliGroupe Group companies in Switzerland are insured
against the risks of age, death and disability. The amount of the pension paid results from the con-
version rate which is applied to the accumulated savings of the individuals concerned in the case of
retirement. For individuals retiring at the age of 65, the rate of conversion is 6.4%. The accumulated
savings result from employee and employer contributions which are paid into the individual sav-
ings account of each individual insured person as well as the interest accruing on the accumulated
savings.
157
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Pension cost
Defined-benefit pension plans
In CHF million
Current service cost
Plan amendments
Administration expense
Employment termination benefits
Total recognised in personnel expense
Interest cost on net defined benefit obligations
Total recognised in financial expense
Total expense of defined benefit plans
recognised in income statement
comPlan Other plans
2014
comPlan Other plans
234
–
3
–
237
24
24
261
6
–
1
–
7
–
–
7
240
244
–
4
–
244
24
24
–
3
6
253
37
37
268
290
7
(3)
1
–
5
–
–
5
2013
251
(3)
4
6
258
37
37
295
In addition, other comprehensive income includes an actuarial loss of CHF 1,161 million (prior year:
actuarial gain of CHF 847 million) which may be analysed as follows:
In CHF million
comPlan Other plans
2014
comPlan Other plans
2013
Actuarial gains and losses from:
Change of the financial assumptions
Experience adjustments to defined benefit obligations
Return on plan assets excluding the
recognised part of financial result
Total expense (income) of defined benefit plans
recognised in other comprehensive income
1,536
(102)
52
–
1,588
(102)
(384)
(165)
(24)
2
(408)
(163)
(315)
(10)
(325)
(272)
(4)
(276)
1,119
42
1,161
(821)
(26)
(847)
Defined-contribution pension plans
Expenses in 2014 for defined-contribution plans aggregated CHF 10 million (prior year: CHF 11 million).
158
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a
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o
C
s
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n
e
m
e
t
a
t
s
l
a
i
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n
a
n
fi
d
e
t
a
d
i
l
o
s
n
o
c
e
h
t
o
t
s
e
t
o
N
Status of pension plans
In CHF million
comPlan Other plans
2014
comPlan Other plans
2013
Defined benefit obligations
Balance at 1 January
Current service cost
Interest cost on defined benefit obligations
Employee contributions
Benefits paid
Actuarial losses (gains)
Additions from acquisition of subsidiaries
Plan amendments
Employment termination benefits
Transfer of pension plans to comPlan
Balance at 31 December
Plan assets
Balance at 1 January
Interest income on plan assets
Employer contributions
Employee contributions
Benefits paid
Return on plan assets excluding the
recognised part of financial result
Additions from acquisition of subsidiaries
Plan amendments
Administration expense
Transfer of pension plans to comPlan
Balance at 31 December
Net defined benefit obligations
9,533
162
9,695
9,823
107
9,930
234
218
162
(259)
1,434
–
–
–
84
11,406
6
–
–
–
52
589
–
–
(84)
725
240
218
162
(259)
1,486
589
–
–
–
244
188
152
(331)
(549)
–
–
6
–
7
2
2
(6)
(22)
85
(13)
–
–
251
190
154
(337)
(571)
85
(13)
6
–
12,131
9,533
162
9,695
8,286
116
8,402
7,772
50
7,822
194
259
162
(259)
315
–
–
(3)
72
9,026
–
7
–
–
10
604
–
(1)
(72)
664
194
266
162
(259)
325
604
–
(4)
–
151
273
152
(331)
272
–
–
(3)
–
2
3
2
(4)
4
70
(10)
(1)
–
153
276
154
(335)
276
70
(10)
(4)
–
9,690
8,286
116
8,402
Net defined benefit obligations recognised at 31 December
2,380
61
2,441
1,247
46
1,293
Movements in recognised defined-benefit obligations are to be analysed as follows:
In CHF million
Balance at 1 January
Pension cost, net
Employer contributions and benefits paid
Additions from acquisition of subsidiaries
Expense (income) of defined benefit plans
recognised in other comprehensive income
Transfer of pension plans to comPlan
Balance at 31 December
comPlan Other plans
2014
comPlan Other plans
1,247
261
(259)
–
1,119
12
2,380
46
7
(7)
(15)
42
(12)
61
1,293
2,051
268
(266)
(15)
1,161
–
290
(273)
–
(821)
–
2,441
1,247
57
5
(5)
15
(26)
–
46
2013
2,108
295
(278)
15
(847)
–
1,293
The weighted average duration of the net present value of the recorded pension obligations is
18 years (prior year: 17 years).
Breakdown of pension plan assets
comPlan
The breakdown of the comPlan’s pension assets by the various investment categories and invest-
ment strategy is as follows:
159
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o
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o
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t
a
t
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d
e
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a
d
i
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o
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n
o
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h
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o
t
s
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t
o
N
Category
Government bonds Switzerland
Corporate bonds Switzerland
Investment
strategy
10.0%
8.0%
Quoted
5.3%
8.7%
Government bonds World-developed markets
11.0%
11.0%
Corporate bonds World-developed markets
Government bonds World-emerging markets
Private Debt
Third-party debt instruments
Equity shares Switzerland
8.0%
6.0%
5.0%
7.9%
6.6%
–
48.0%
39.5%
5.0%
6.2%
Equity shares world developed markets
12.0%
12.7%
Equity shares world emerging markets
Equity instruments
Real estate Switzerland
Real estate World
Real estate
Commodities
Private markets
Hedge Funds
8.0%
25.0%
11.0%
4.0%
8.1%
27.0%
8.1%
4.1%
15.0%
12.2%
4.0%
7.0%
–
1.2%
–
–
–
–
–
–
–
1.0%
8.7%
–
–
–
–
2.3%
–
2.3%
2.6%
5.1%
–
31.12.2014
31.12.2013
Not
quoted
Total
Quoted
7.7%
13.0%
8.7%
11.0%
7.9%
6.6%
1.0%
10.8%
11.2%
10.2%
1.2%
5.5%
–
Not
quoted
8.4%
–
–
–
–
–
Total
19.2%
11.2%
10.2%
1.2%
5.5%
–
48.2%
38.9%
8.4%
47.3%
6.2%
7.7%
12.7%
14.4%
8.1%
27.0%
10.4%
4.1%
6.0%
28.1%
6.6%
3.8%
–
–
–
–
1.0%
–
7.7%
14.4%
6.0%
28.1%
7.6%
3.8%
14.5%
10.4%
1.0%
11.4%
3.8%
5.1%
–
3.0%
1.3%
0.7%
–
3.6%
–
3.0%
4.9%
0.7%
4.6%
Cash and cash equivalents and other investments
1.0%
1.4%
1.4%
–
4.6%
Cash and cash equivalents and
alternative investments
12.0%
1.2%
9.1%
10.3%
5.0%
8.2%
13.2%
Total plan assets
100.0%
79.9%
20.1%
100.0%
82.4%
17.6%
100.0%
The investment strategy pursues the goal of achieving the highest possible return on assets within
the framework of its risk tolerance and thus of generating income on a long-term basis in order
to meet all financial obligations. This is achieved through a broad diversification of risks over var-
ious investment categories, markets, currencies and industry segments in both developed and
emerging markets. The interest-rate duration of interest-bearing investments is 5.71 years (prior
year: 4.74 years) and the average rating of these investments is A. Within the overall portfolio, all
foreign-currency positions are hedged against the Swiss franc following a currency strategy to
the extent necessary to meet a pre-determined ratio. The unquoted and therefore rather illiquid
investments make up 20% of total plan assets. Following this investment strategy, comPlan antici-
pates a target value for the value fluctuation reserve of 16.0% (basis: 2015 financial year).
Other pension plans
The split of the assets of the other plans over the various investment categories and investment strat-
egy is as follows:
31.12.2014
31.12.2013
Category
Switzerland
Abroad
Third-party debt instruments
Switzerland
Abroad
Equity instruments
Switzerland
Real estate
Private markets
Quoted Not quoted
Total
Quoted Not quoted
Investment
strategy
21.0%
18.0%
39.0%
16.5%
8.0%
16.8%
13.7%
30.5%
22.9%
9.4%
24.5%
32.3%
26.0%
14.1%
11.5%
26.0%
14.1%
11.5%
3.5%
–
–
2.8%
8.8%
–
–
–
–
–
–
16.8%
13.7%
30.5%
22.9%
9.4%
32.3%
25.6%
25.6%
2.8%
8.8%
6.7%
–
6.7%
20.9%
–
20.9%
5.1%
5.1%
–
–
Total
6.7%
–
6.7%
20.9%
–
20.9%
5.1%
5.1%
–
–
–
–
–
–
–
–
–
–
Cash and cash equivalents and other investments
7.0%
67.3%
67.3%
Cash and cash equivalents and
alternative investments
10.5%
–
11.6%
11.6%
–
67.3%
67.3%
Total plan assets
100.0%
76.9%
23.1%
100.0%
32.7%
67.3%
100.0%
160
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a
t
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a
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t
a
d
i
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o
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n
o
c
e
h
t
o
t
s
e
t
o
N
The investment strategy pursues the goal of achieving the highest possible return on assets within
the framework of its risk tolerance and thus of generating income on a long-term basis in order to
meet all financial obligations. This is achieved through a broad diversification of risks over various
investment categories, markets, currencies and industry segments.
Additional information on plan assets
As of 31 December 2014, plan assets include Swisscom Ltd shares and bonds with a fair value of
CHF 7 million (prior year: CHF 6 million). The effective return on plan assets in 2014 amounted to
CHF 519 million (prior year: CHF 429 million).
In 2015, Swisscom expects to make payments to the pension funds for ordinary employee contri-
butions totalling CHF 239 million (excluding payments for early retirements and changes to the
pension plan).
Actuarial assumptions
Assumptions
Discount rate at 31 December
Expected rate of salary increases
Expected rate of pension increases
Interest on old age savings accounts
Longevity at age of 65 – men (number of years)
Longevity at age of 65 – women (number of years)
2014
2013
comPlan
Other plans
comPlan
Other plans
1.13%
1.75%
0.10%
1.13%
21.39
23.86
1.31%
1.81%
0.10%
1.13%
21.39
23.86
2.30%
2.24%
0.10%
2.30%
21.29
23.76
2.85%
2.19%
0.10%
2.30%
21.29
23.76
The discount rate is based upon CHF-denominated corporate bonds with an AA rating issued by
domestic and foreign issuers and listed on the Swiss Exchange. Future growth factors for salaries
correspond to a long-term historical average value which is specific to Swisscom. Growth in pen-
sions reflects comPlan’s ability to meet future pension increases based on the assumptions made.
Interest accruing on the retirement savings equates the discount rate. From 2012 on, Swisscom
applies the BVG 2010 generation tables for life-expectancy assumptions.
Sensitivity analysis comPlan
In CHF million
Discount rate (change +/–0.5%)
Expected rate of salary increases (changes +/– 0.5%)
Expected rate of pension increases (change +0.5%; –0.1%)
Interest on old age savings accounts (change +/– 0.5%)
Longevity at age of 65 (change +/–1 year)
Defined benefit obligations
Current service cost 1
Increase
Assumption
Decrease
Assumption
Increase
Assumption
Decrease
Assumption
(855)
78
749
117
156
990
(73)
(141)
(106)
(158)
(37)
8
27
8
4
45
(7)
(5)
(7)
(4)
1 The sensitivity refers to the current service cost recorded in personnel expense.
The sensitivity analysis takes into consideration the movement in pension-fund obligations as well
as current service costs in adjusting the actuarial assumptions by half a percentage point and a year,
respectively. In the process, only one of the assumptions is adjusted each time, the other param-
eters remain unchanged. In the sensitivity analysis in view of a negative movement in pension
increases, only a change of -0.1% was made as the reduction in pension benefits is not possible.
161
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C
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e
t
a
t
s
l
a
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a
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fi
d
e
t
a
d
i
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o
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n
o
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h
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o
t
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o
N
11 Share-based payments
In CHF million
Share-based payments Management Incentive Plan
Other share-based payments
Total expense of share-based payments
Management Incentive Plan
2014
2013
3
2
5
2
4
6
The Management Incentive Plan is an equity-share plan for members of the Group Executive Board
and Board of Directors as well as for other members of management. The members of the Board
of Directors are paid a portion of the management fee in Swisscom shares. Members of the Group
Executive Board receive 25% of their variable performance-related salary component in Swisscom
shares. Group Executive Board members may increase this share up to a maximum of 50%. The
shares are allocated based on their tax values. The level of the earnings-related compensation and
the number of shares allocated are determined in the subsequent business year once the financial
statements are finalised. The shares allocated to the members of the Group Executive Board are
based on the variable earnings-related compensation of the prior year as reported. The tax value
per share amounts to CHF 449 (prior year: CHF 371). The shares are subject to a retention period of
three years from the grant date. The shares are vested immediately upon delivery.
In 2014, the allocation and cost of share-based payments to the members of the Board of Directors
and of the Group Executive Board may be analysed as follows:
Allocation 2014
Members of the Board of Directors
Members of the Group Executive Board 1
Other Management Members
Total 2014
1 Allocation for the financial year 2013.
Number of allocated shares
Market price
in CHF
Expense in
CHF million
1,374
1,599
1,760
4,733
535
535
535
535
0.7
0.9
0.9
2.5
In 2013, the allocation and cost of share-based payments to the members of the Board of Directors
and of the Group Executive Board may be analysed as follows:
Allocation 2013
Members of the Board of Directors
Members of the Group Executive Board 1
Total 2013
1 Allocation for the financial year 2012.
Number of allocated shares
Market price
in CHF
Expense in
CHF million
1,667
2,707
4,374
442
442
442
0.7
1.2
1.9
Other share-based payments plans
As recognition for exceptional services rendered during the financial year, equity share premiums
may be awarded to a maximum of 10% of employees. In 2014, 4,520 shares with a market price of
CHF 535 per share were issued gratuitously and an expense of CHF 2 million was recorded. In the
prior year, 10,270 shares with a market price of CHF 442 were issued gratuitously for exceptional
services rendered and an expense of CHF 4 million was recorded.
162
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o
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o
C
s
t
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e
m
e
t
a
t
s
l
a
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n
a
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d
e
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a
d
i
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o
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n
o
c
e
h
t
o
t
s
e
t
o
N
12 Other operating expense
In CHF million
Rental expense
Maintenance expense
Loss on disposal of property, plant and equipment
Energy costs
Information technology cost
Advertising and selling expenses
Dealer commissions
Consultancy expenses and freelance employees
Allowances for receivables
Administration expense
Miscellaneous operating expenses
Total other operating expense
2014
346
322
11
83
239
221
349
199
87
145
538
2013
334
312
13
102
221
215
364
201
83
161
470
2,540
2,476
13 Capitalised costs of self-constructed assets and other income
In CHF million
Capitalised self-constructed assets
Gain on sale of property, plant and equipment. See Note 22.
Income from employment company Worklink (personnel hire)
Miscellaneous income
Total capitalised self-constructed assets and other income
2014
267
60
6
37
370
2013
256
16
4
112
388
Capitalised costs of self-constructed assets include personnel costs for the production of technical
installations, the construction of network infrastructures and the development of software for
internal use.
14 Financial income and financial expense
In CHF million
Interest income on financial assets
Change in fair value of interest rate swaps
Capitalised borrowing costs
Gain on successive company acquisitions. See Note 5.
Adjustment to dismantlement and restoration costs. See Note 28.
Foreign exchange gains
Other financial income
Total financial income
Interest expense on financial liabilities
Change in fair value of interest rate swaps
Interest expense on defined benefit obligations. See Note 10.
Present-value adjustments on provisions
Expense of early repayment of financial liabilities. See Note 26.
Other financial expense
Total financial expense
Financial income and financial expense, net
2014
2013
10
–
12
82
–
1
7
112
(228)
(46)
(24)
(16)
(41)
(17)
(372)
(260)
8
30
15
–
21
5
2
81
(259)
–
(37)
(15)
–
(29)
(340)
(259)
163
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m
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a
t
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a
i
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a
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fi
d
e
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a
d
i
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o
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n
o
C
s
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m
e
t
a
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s
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a
i
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n
a
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fi
d
e
t
a
d
i
l
o
s
n
o
c
e
h
t
o
t
s
e
t
o
N
The net interest expense on financial assets and financial liabilities is to be analysed as follows:
In CHF million
Interest income on cash and cash equivalents
Interest income on other financial assets
Total interest income on financial assets
Interest expense on bank loans, debenture bonds and private placements
Interest expense on finance lease liabilities
Interest expense on other financial liabilities
Total interest expense on financial liabilities
Total financial income and financial expense, net
15 Income taxes
Income tax expense
In CHF million
Current income tax expense
Adjustments recognised for current tax of prior periods
Deferred tax expense
Total income tax expense recognised in income statement
Thereof Switzerland
Thereof foreign countries
2014
1
9
10
(189)
(36)
(3)
(228)
(218)
2014
373
5
4
382
412
(30)
2013
1
7
8
(214)
(41)
(4)
(259)
(251)
2013
322
(20)
32
334
354
(20)
Additionally the other comprehensive income includes positive income taxes of CHF 254 million
(prior year: expense of CHF 184 million) which may be analysed as follows:
In CHF million
Foreign currency translation adjustments of foreign subsidiaries
Actuarial gains and losses from defined benefit pension plans
Change in fair value of cash flow hedges
Gains and losses from cash flow hedges transferred to income statement
Total income tax expense recognised in other comprehensive income
2014
15
242
(2)
(1)
254
2013
(14)
(169)
–
(1)
(184)
164
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t
n
e
m
e
t
a
t
s
l
a
i
c
n
a
n
fi
d
e
t
a
d
i
l
o
s
n
o
C
s
t
n
e
m
e
t
a
t
s
l
a
i
c
n
a
n
fi
d
e
t
a
d
i
l
o
s
n
o
c
e
h
t
o
t
s
e
t
o
N
Analysis of income taxes
The applicable income tax rate which serves to prepare the following analysis of income tax
expense is the weighted average income tax rate calculated on the basis of the Group operating
subsidiaries in Switzerland. The applicable income tax rate is 20.9% (prior year: 20.6%). The increase
of the applicable income tax rate is the result of higher tax rates in various Swiss cantons.
In CHF million
Income before income taxes in Switzerland
Income before income taxes foreign countries
lncome before income taxes
Applicable income tax rate
Income tax expense at the applicable income tax rate
Reconciliation to reported income tax expense
Effect of share of results of associates
Effect of tax rate changes on deferred taxes
Effect of use of different income tax rates in Switzerland
Effect of use of different income tax rates in foreign countries
Effect of non-recognition of tax loss carry-forwards
Effect of recognition and offset of tax loss carry-forwards not recognised in prior years
Effect of deferred tax assets written off
Effect of impairment losses on goodwill
Effect of exclusively tax-deductible expenses and income
Effect of non-taxable income and non-deductible expenses
Effect of income tax of prior periods
Total income tax expense
Effective income tax rate
2014
2,206
(118)
2,088
20.9%
436
(5)
(21)
(2)
(10)
9
(2)
–
–
(16)
(12)
5
382
2013
2,149
(120)
2,029
20.6%
418
(6)
(2)
(7)
(12)
9
(47)
4
5
(20)
8
(16)
334
18.3%
16.5%
In 2013, previously unrecognised tax loss carry-forwards arising from mergers of Group companies
were claimed for tax purposes. The positive impact on income tax expense in 2013 amounted to
CHF 21 million.
Deferred tax assets and liabilities
Movements in current tax assets and liabilities are to be analysed as follows:
In CHF million
Current income tax liabilities at 1 January, net
Recognised in income statement
Recognised in other comprehensive income
Income taxes paid in Switzerland
Income taxes paid in foreign countries
Additions from acquisition of subsidiaries
Current income tax liabilities at 31 December, net
Thereof current income tax assets
Thereof current income tax liabilities
Thereof Switzerland
Thereof foreign countries
2014
162
378
1
(377)
(9)
–
155
(17)
172
159
(4)
2013
134
302
3
(307)
29
1
162
(22)
184
168
(6)
165
s
t
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e
m
e
t
a
t
s
l
a
i
c
n
a
n
fi
d
e
t
a
d
i
l
o
s
n
o
C
s
t
n
e
m
e
t
a
t
s
l
a
i
c
n
a
n
fi
d
e
t
a
d
i
l
o
s
n
o
c
e
h
t
o
t
s
e
t
o
N
Recognised deferred tax assets and liabilities are to be analysed as follows:
In CHF million
Property, plant and equipment
Intangible assets
Provisions
Defined benefit obligations
Tax loss carry-forwards
Other
Total tax assets (tax liabilities)
Thereof deferred tax assets
Thereof deferred tax liabilities
Thereof Switzerland
Thereof foreign countries
Assets
Liabilities
31.12.2014
Net
amount
Assets
Liabilities
31.12.2013
Net
amount
47
–
79
509
216
97
948
(467)
(341)
(4)
–
–
(76)
(888)
(420)
(341)
75
509
216
21
60
417
(357)
(91)
151
41
–
24
268
203
83
619
(342)
(364)
(14)
–
–
(76)
(796)
(301)
(364)
10
268
203
7
(177)
279
(456)
(328)
151
In 2014, deferred tax assets and liabilities have changed as follows:
In CHF million
Property, plant and equipment
Intangible assets
Provisions
Defined benefit obligations
Tax loss carry-forwards
Other
Total
Balance at
31.12.2013
Recognised
in income
statement
Recognised
in other
compre-
hensive
income
Change
in scope
of consoli-
Foreign
currency
translation
Balance at
dation adjustments 31.12.2014
(301)
(364)
10
268
203
7
(177)
(119)
35
65
–
16
(1)
(4)
–
–
–
242
–
13
255
–
(12)
–
(1)
–
2
(11)
–
–
–
–
(3)
–
(3)
(420)
(341)
75
509
216
21
60
In 2013, deferred tax assets and liabilities have changed as follows:
In CHF million
Property, plant and equipment
Intangible assets
Provisions
Defined benefit obligations
Tax loss carry-forwards
Other
Total
Balance at
31.12.2012
Recognised
in income
statement
Recognised
in other
compre-
hensive
income
Change
in scope
of consoli-
Foreign
currency
translation
Balance at
dation adjustments 31.12.2013
(243)
(380)
41
419
165
47
49
(57)
32
(31)
16
36
(28)
(32)
–
–
–
(169)
–
(12)
(181)
(4)
(13)
–
2
–
–
(15)
3
(3)
–
–
2
–
2
(301)
(364)
10
268
203
7
(177)
Deferred tax assets relating to unused tax loss carry-forwards and to deductible temporary differ-
ences are recognised if it is probable that they can be offset against future taxable profits or exist-
ing temporary differences. At as 31 December 2014, various subsidiaries recognised deferred tax
assets on tax loss carry-forwards and other temporary differences totalling CHF 950 million (prior
year: CHF 619 million) since it was foreseeable that tax loss carry-forwards could be offset against
future taxable profits. Of this amount, tax loss carry-forwards and other temporary differences
of CHF 237 million (prior year: CHF 247 million) were recognised by subsidiaries reporting a loss in
2013 or 2014. On the basis of the approved business plans of these subsidiaries, Swisscom consid-
ers it probable that the tax loss carry-forwards and temporary differences can be offset against
future taxable profits.
166
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t
n
e
m
e
t
a
t
s
l
a
i
c
n
a
n
fi
d
e
t
a
d
i
l
o
s
n
o
C
s
t
n
e
m
e
t
a
t
s
l
a
i
c
n
a
n
fi
d
e
t
a
d
i
l
o
s
n
o
c
e
h
t
o
t
s
e
t
o
N
Tax loss carry-forwards and other temporary differences for which no deferred tax assets were
recorded, expire as follows:
In CHF million
Expiring within 1 year
Expiring within 1 to 2 years
Expiring within 2 to 3 years
Expiring within 3 to 4 years
Expiring within 4 to 5 years
Expiring within 5 to 6 years
Expiring within 6 to 7 years
No expiration
Total unrecognised tax loss carry-forwards
Thereof Switzerland
Thereof foreign countries
31.12.2014
31.12.2013
1
2
2
8
14
29
23
115
194
62
132
1
1
–
–
8
8
23
134
175
23
152
No deferred tax liabilities (prior year: CHF 6 million) were recognised on the undistributed earn-
ings of subsidiaries as of 31 December 2014. Temporary differences of subsidiaries and associ-
ates, on which no deferred income taxes were recognised as of 31 December 2014, amounted to
CHF 779 million (prior year: CHF 1,264 million).
16 Earnings per share
Undiluted earnings per share are calculated by dividing net income attributable to shareholders
of Swisscom Ltd by the weighted average number of shares outstanding. Treasury shares are not
counted in the number of outstanding shares.
In CHF million, except where indicated
Share of net income attributable to equity holders of Swisscom Ltd
Weighted average number of shares outstanding (number)
Basic and diluted earnings per share (in CHF)
2014
1,694
2013
1,685
51,801,267
51,800,666
32.70
32.53
Swisscom has no share options and share subscription rights outstanding which could lead to a
dilution of earnings per share.
17 Cash and cash equivalents
In CHF million
Cash and sight balances
Total cash and cash equivalents
31.12.2014
31.12.2013
302
302
723
723
As in the prior year, Swisscom had no term deposits outstanding in 2014.
167
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e
m
e
t
a
t
s
l
a
i
c
n
a
n
fi
d
e
t
a
d
i
l
o
s
n
o
C
s
t
n
e
m
e
t
a
t
s
l
a
i
c
n
a
n
fi
d
e
t
a
d
i
l
o
s
n
o
c
e
h
t
o
t
s
e
t
o
N
18 Trade and other receivables
In CHF million
Billed revenue
Accrued revenue
Allowances
Total trade receivables, net
Accruals from international roaming traffic
Receivables from debt-collection activities
Receivables from construction contracts
Other receivables
Allowances
Total other receivables, net
Total trade and other payables
31.12.2014
31.12.2013
2,413
236
(195)
2,454
60
26
33
28
(15)
132
2,586
2,321
206
(164)
2,363
91
26
30
22
(16)
153
2,516
All trade and other receivables are due within one year. Trade receivables are the object of active
credit risk management which focuses on the assessment of country risks, on-going review of
credit risks and the monitoring of the receivables. Credit-risk concentrations in Swisscom are mini-
mised due to the large number of customers. Risks are monitored by country.
The geographical distribution of trade receivables is as follows:
In CHF million
Switzerland
Italy
Other countries
Total billed and accrued revenue
Switzerland
Italy
Other countries
168
Total allowance for receivables
Total trade receivables, net
31.12.2014
31.12.2013
1,759
854
36
2,649
(51)
(140)
(4)
(195)
2,454
1,701
809
17
2,527
(45)
(118)
(1)
(164)
2,363
s
t
n
e
m
e
t
a
t
s
l
a
i
c
n
a
n
fi
d
e
t
a
d
i
l
o
s
n
o
C
s
t
n
e
m
e
t
a
t
s
l
a
i
c
n
a
n
fi
d
e
t
a
d
i
l
o
s
n
o
c
e
h
t
o
t
s
e
t
o
N
Analysis of maturity and allowances
The due dates of trade receivables as well as the related allowances are to be analysed as follows:
In CHF million
Not overdue
Past due up to 3 months
Past due 4 to 6 months
Past due 7 to 12 months
Past due over 1 year
Total
Gross
amount
1,858
421
78
93
199
2,649
31.12.2014
Allowance
(8)
(6)
(6)
(31)
(144)
(195)
Gross
amount
1,733
400
80
92
222
2,527
31.12.2013
Allowance
(8)
(6)
(4)
(15)
(131)
(164)
The table below presents the changes in allowances for trade and other receivables.
In CHF million
Balance at 31 December 2012
Additions to allowances
Write-off of irrecoverable receivables subject to allowance
Release of unused allowances
Foreign currency translation adjustments
Balance at 31 December 2013
Additions to allowances
Write-off of irrecoverable receivables subject to allowance
Release of unused allowances
Additions from acquisition of subsidiaries
Foreign currency translation adjustments
Balance at 31 December 2014
Construction contracts
Trade
receivables
Other
receivables
209
88
(131)
(5)
3
164
93
(60)
(6)
7
(3)
195
15
1
–
–
–
16
1
–
(2)
–
–
15
Information on uncompleted construction contracts as of the balance sheet date is as follows:
In CHF million
Contract costs of current projects
Recognised gains less losses
Contract costs including share of gains and losses, net
Less progress billings
Total net receivables from construction contracts
Thereof receivables from construction contracts
Thereof liabilities from construction contracts
Advance payments received
2014
104
6
110
(79)
31
33
(2)
72
2013
108
3
111
(84)
27
29
(2)
61
In 2014, construction contracts generated net revenues of CHF 293 million (prior year: CHF 295 mil-
lion).
169
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e
m
e
t
a
t
s
l
a
i
c
n
a
n
fi
d
e
t
a
d
i
l
o
s
n
o
C
s
t
n
e
m
e
t
a
t
s
l
a
i
c
n
a
n
fi
d
e
t
a
d
i
l
o
s
n
o
c
e
h
t
o
t
s
e
t
o
N
19 Other financial assets
In CHF million
Balance at 31 December 2012
Additions
Disposals
Change in fair value recognised in income statement
Change in fair value recognised in equity
173
161
(25)
–
–
Foreign currency translation adjustments recognised in income statement
(4)
Balance at 31 December 2013
Additions
Disposals
Additions from acquisition of subsidiaries
Change in fair value recognised in income statement
305
24
(159)
24
–
Foreign currency translation adjustments recognised in income statement 15
Balance at 31 December 2014
Thereof other current financial assets
Thereof other non-current financial assets
209
20
189
Loans and
receivables
Available-
for-sale
Derivative
financial
instruments
41
4
(3)
–
1
(1)
42
8
(15)
18
–
–
53
9
44
23
–
(20)
3
–
–
6
–
–
–
5
–
11
11
–
Total
237
165
(48)
3
1
(5)
353
32
(174)
42
5
15
273
40
233
Loans and receivables
As of 31 December 2014, term deposits totalled CHF 11 million (prior year: CHF 156 million). As of
31 December 2014, financial assets in the amount of CHF 149 million were not freely available.
These assets serve as security for bank loans.
Available-for-sale financial assets
Available-for-sale financial assets primarily include financial investments in equity instruments. As
a general rule, shares not quoted on stock exchanges are recorded at cost since their fair value can-
not be reliably determined. As of 31 December 2014, the carrying amount of investments in shares
recorded at cost totalled CHF 30 million (prior year: CHF 21 million).
Derivative financial instruments
As at 31 December 2014, derivative financial instruments with a positive market value of
CHF 11 million were recognised (prior year: CHF 6 million). Derivative financial instruments include
foreign-currency swaps and interest-rate swaps. See Note 33.
170
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a
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fi
d
e
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a
d
i
l
o
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n
o
C
s
t
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e
m
e
t
a
t
s
l
a
i
c
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a
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fi
d
e
t
a
d
i
l
o
s
n
o
c
e
h
t
o
t
s
e
t
o
N
20 Inventories
In CHF million
Raw material and supplies
Customer premises equipment and merchandise
Advance payments made
Finished and semi-finished goods
Total inventories, gross
Allowances on inventories
Total inventories, net
31.12.2014
31.12.2013
6
141
5
5
157
(8)
149
6
147
–
6
159
(7)
152
In 2014, inventory-related costs amounting to CHF 1,145 million (prior year: CHF 1,046 million) were
recorded under the cost of goods and services purchased.
21 Other non-financial assets
In CHF million
Prepaid expenses
Value-added taxes receivable
Advance payments made
Other assets
Total other current non-financial assets
Prepaid expenses
Other assets
Total other non-current non-financial assets
31.12.2014
31.12.2013
164
7
55
26
252
10
47
57
148
14
29
19
210
12
45
57
22 Non-current assets held for sale
On 31 December 2014, the carrying value of non-current assets held for sale amounted to
CHF 80 million (prior year: CHF 13 million). Included therein are real-estate properties and invest-
ments in associates of the business segment Other Operating Segments with a carrying value of
CHF 70 million and CHF 10 million, respectively. As of 31 December 2013, the long-term assets held
for resale comprised exclusively real-estate properties of the segment Other Operating Segments.
As part of the takeover of PubliGroupe, one real-estate property and investments in associates
were acquired which are intended to be disposed of in the next twelve months. The associates
relate to various shareholdings in media companies in Switzerland. In the provisional takeover bal-
ance sheet of PubliGroupe, the fair values of the real-estate property and the investments in asso-
ciates amount to CHF 137 million. By the end of 2014, investments in associates of CHF 57 million
were sold. See Note 5 for further information. In 2014, real-estate properties and investments in
associates were sold for a purchase price of CHF 205 million (prior year: CHF 5 million) resulting in a
gain on disposal of CHF 33 million (prior year: CHF 4 million) which was recognised as other income.
171
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m
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t
a
t
s
l
a
i
c
n
a
n
fi
d
e
t
a
d
i
l
o
s
n
o
C
s
t
n
e
m
e
t
a
t
s
l
a
i
c
n
a
n
fi
d
e
t
a
d
i
l
o
s
n
o
c
e
h
t
o
t
s
e
t
o
N
23 Property, plant and equipment
In CHF million
Acquisition costs
Land,
buildings and
leasehold
improvements
Technical
installations
Other
assets
Advances made
and assets
under
construction
Balance at 31 December 2012
2,872
Additions
Disposals
Additions from acquisition of subsidiaries
Adjustment to dismantlement and restoration costs
Reclassifications to non-current assets held for sale
Other reclassifications
Foreign currency translation adjustments
Balance at 31 December 2013
Additions
Disposals
Additions from acquisition of subsidiaries
Adjustment to dismantlement and restoration costs
Reclassifications to non-current assets held for sale
Other reclassifications
Foreign currency translation adjustments
11
(26)
2
–
(39)
12
–
2,832
9
(68)
2
–
(102)
114
(2)
24,572
1,318
(816)
–
(32)
–
135
58
25,235
1,453
(656)
–
123
–
175
(82)
3,320
219
(288)
30
13
–
109
–
3,403
237
(225)
2
34
–
170
–
Balance at 31 December 2014
2,785
26,248
3,621
Accumulated depreciation/amortisation and impairment losses
Balance at 31 December 2012
Depreciation and amortisation
Disposals
Reclassifications to non-current assets held for sale
Foreign currency translation adjustments
Balance at 31 December 2013
Depreciation and amortisation
Disposals
Other reclassifications
Foreign currency translation adjustments
2,046
29
(21)
(26)
–
2,028
31
(41)
1
–
18,521
1,047
(815)
–
25
18,778
1,072
(656)
(1)
(40)
2,297
263
(281)
–
–
2,279
287
(212)
(2)
–
Balance at 31 December 2014
2,019
19,153
2,352
649
379
–
–
–
–
(257)
–
771
290
–
–
–
–
(471)
–
590
–
–
–
–
–
–
–
–
–
–
–
Net carrying amount
Net carrying amount at 31 December 2014
Net carrying amount at 31 December 2013
Net carrying amount at 31 December 2012
766
804
826
7,095
6,457
6,051
1,269
1,124
1,023
590
771
649
Total
31,413
1,927
(1,130)
32
(19)
(39)
(1)
58
32,241
1,989
(949)
4
157
(102)
(12)
(84)
33,244
22,864
1,339
(1,117)
(26)
25
23,085
1,390
(909)
(2)
(40)
23,524
9,720
9,156
8,549
In 2014, borrowing costs amounting to CHF 12 million were capitalised (prior year: CHF 15 million).
The average interest rate used for the capitalisation of borrowing costs was 2.2% (prior year: 2.5%).
As of 31 December 2014, the carrying amount of property, plant and equipment acquired under
finance leases amounted to CHF 438 million (prior year: CHF 524 million). See Note 28 for further
information on the adjustments to the costs of dismantling and restoration.
172
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a
i
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n
a
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fi
d
e
t
a
d
i
l
o
s
n
o
C
s
t
n
e
m
e
t
a
t
s
l
a
i
c
n
a
n
fi
d
e
t
a
d
i
l
o
s
n
o
c
e
h
t
o
t
s
e
t
o
N
24 Goodwill and other intangible assets
In CHF million
Acquisition costs
Internally
generated
software
Goodwill
Purchased
Customer
software relationships
Brands
Other
intangible
assets
Total
Balance at 31 December 2012
6,210
1,218
1,693
1,089
266
Additions
Disposals
Reclassifications
Additions from acquisition of subsidiaries
Foreign-currency translation adjustments
–
–
–
159
38
127
(349)
137
2
2
196
(143)
52
–
15
–
(21)
–
51
18
–
–
–
7
5
Balance at 31 December 2013
6,407
1,137
1,813
1,137
278
Additions
Disposals
Reclassifications
Additions from acquisition of subsidiaries
Foreign-currency translation adjustments
–
(9)
–
192
(46)
156
(80)
97
1
(4)
195
(68)
58
4
(22)
–
(3)
–
21
(22)
Balance at 31 December 2014
6,544
1,307
1,980
1,133
Accumulated amortisation and impairment losses
Balance at 31 December 2012
1,548
Amortisation
Impairment losses
Disposals
Foreign-currency translation adjustments
–
23
–
27
Balance at 31 December 2013
1,598
Amortisation
Impairment losses
Disposals
Reclassifications
Foreign-currency translation adjustments
Balance at 31 December 2014
Net carrying amount
Net carrying amount at 31 December 2014
Net carrying amount at 31 December 2013
Net carrying amount at 31 December 2012
–
–
(9)
–
(32)
1,557
4,987
4,809
4,662
838
202
1
(347)
2
696
223
–
(79)
–
(2)
1,243
230
1
(142)
11
1,343
239
1
(68)
–
(16)
838
1,499
469
441
380
481
470
450
697
130
–
(21)
11
817
109
–
(3)
–
(18)
905
228
320
392
–
–
–
–
(6)
272
148
28
–
–
3
179
27
–
–
–
(3)
978
220
(55)
(188)
6
1
962
156
(30)
(143)
44
(3)
11,454
543
(568)
1
225
79
11,734
507
(190)
12
262
(103)
986
12,222
197
4,671
88
2
(49)
1
239
102
–
(29)
2
(2)
678
27
(559)
55
4,872
700
1
(188)
2
(73)
203
312
5,314
69
99
118
674
723
781
6,908
6,862
6,783
As of 31 December 2014, other intangible assets included advance payments made and uncom-
pleted development projects of CHF 128 million (prior year: CHF 190 million). Apart from goodwill,
there are no intangible assets with indefinite useful lives. As of 31 December 2014, accumulated
impairment losses on goodwill of CHF 1,557 million were recorded. The increase in goodwill of
CHF 192 million in 2014 results from the takeover of PubliGroupe. See Note 5 for further informa-
tion. Goodwill arising from investments in associates is classified as part of the investments in asso-
ciates.
173
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fi
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a
d
i
l
o
s
n
o
C
s
t
n
e
m
e
t
a
t
s
l
a
i
c
n
a
n
fi
d
e
t
a
d
i
l
o
s
n
o
c
e
h
t
o
t
s
e
t
o
N
Goodwill impairment testing
Goodwill is allocated to the cash-generating units of Swisscom according to their business activ-
ities. Goodwill acquired in a business combination is allocated to each cash-generating unit
expected to benefit from the synergies of the business combination. The allocation of the goodwill
to the cash-generating units is as follows:
In CHF million
Residential Customers Swisscom Switzerland
Small and Medium-Sized Enterprises Swisscom Switzerland
Corporate Business Swisscom Switzerland
Fastweb
Other cash-generating units
Total goodwill
31.12.2014
31.12.2013
2,787
2,630
656
734
592
218
656
734
604
185
4,987
4,809
Goodwill was tested for impairment in the fourth quarter of 2014 after the business planning had
been completed. The recoverable amount of a cash-generating unit is determined based on its
value in use, using the discounted cash flow (DCF) method. The projected free cash flows are esti-
mated on the basis of the business plans approved by management in general covering a three-
year period. A planning horizon of five years is used for the impairment test of Fastweb. For the
free cash flows extending beyond the detailed planning period, a terminal value was computed by
capitalising the normalised cash flows using a constant growth rate. The growth rates applied are
those customarily assumed for the country or market. The key assumptions underlying the calcu-
lations are as follows:
Cash-generating unit
Residential Customers Swisscom Switzerland
WACC
pre-tax
6.51%
Small and Medium-Sized Enterprises Swisscom Switzerland
6.54%
Corporate Business Swisscom Switzerland
Fastweb
6.56%
10.60%
2014
WACC
Long-term
post-tax growth rate
5.13%
5.13%
5.13%
7.70%
0%
0%
0%
2013
WACC
Long-term
post-tax growth rate
5.09%
5.09%
5.09%
0%
0%
0%
WACC
pre-tax
6.43%
6.45%
6.46%
1.0%
10.90%
8.00%
1.0%
Other cash-generating units
6.6–8.2% 5.1–6.4%
0–1.0% 6.4–11.9% 5.1–9.7%
0–1.5%
The application of pre- or post-tax discount rates (WACC pre-tax and WACC post-tax) results in the
same value in use. The discount rates used take into consideration the specific risks relating to the
cash-generating unit being considered. The projected cash flows and management assumptions
are corroborated by external sources of information. The approach taken and assumptions made
for the impairment tests of Swisscom Switzerland and Fastweb are presented below.
174
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a
d
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o
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n
o
C
s
t
n
e
m
e
t
a
t
s
l
a
i
c
n
a
n
fi
d
e
t
a
d
i
l
o
s
n
o
c
e
h
t
o
t
s
e
t
o
N
Residential Customers, Small- and Medium-Sized Enterprises and Corporate Business –
Swisscom Switzerland
The impairment test of goodwill is conducted on these cash-generating units. The recoverable
amount was determined based on the value in use using the discounted cash flow (DCF) method.
The forecast of future cash flows is based upon the three-year business plan approved by manage-
ment. For the free cash flows extending beyond the detailed planning period, a long-term growth
of zero was assumed, as in the prior year. The change from the prior year is a result of structural
changes in the telecommunications sector leading to improved growth prospects. As of the meas-
urement date, the recoverable amount at all cash-generating units, based on their value in use,
was higher than the carrying amount relevant for the impairment test. Swisscom is of the opinion
that none of the anticipated changes in key assumptions which can be reasonably expected would
cause the carrying amount of the cash-generating units to exceed the recoverable amount.
Fastweb
The impairment test of Fastweb was undertaken in the fourth quarter of 2014. The recoverable
amount was determined on the basis of the value in use using the discounted cash flow method.
The basis for projecting future cash flows is the business plan prepared by management for the
five years 2015 to 2019. This plan takes into consideration historical empirical values and manage-
ment’s expectations regarding the future development of the relevant market. The impairment
test took into account the following assumptions:
Assumptions
Description
Average annual growth in revenue during
the detailed planning period
Projected EBITDA margin
(EBITDA as % of net revenue)
Projected capital expenditure rate
(capex as % of net revenue)
Post-tax discount rate
Long-term growth rate
In the business plan, an average annual growth in revenue of 3.3% is expected for
the detailed planning period up to 2019. In the prior year, an average annual growth
in revenue of 4.1% had been expected for the detailed planning period 2014–2018.
The projected EBITDA margin in 2019 is 41%. In the previous year, for the year 2018
also an EBITDA margin of 41%, was assumed.
In the period up to 2019, it is anticipated that capital expenditure in relation to net
revenue will be normalised to 18%. Last year a rate of investment of 17% was
anticipated for the year 2018.
The post-tax discount rate is 7.70% (prior year: 8.00%) and the related pre-tax
discount rate is 10.60% (prior year: 10.90%). The discount rate is calculated
using the Capital Asset Pricing Model (CAPM). This latter comprises the weighted
cost of own equity and of external borrowing costs. The risk free interest rate
on which the discount rate is based on, is derived from ten-year bonds issued
by the German government with a zero interest rate, but at least an interest
rate of 3%. A premium for the country risk of Italy is then added.
The normalised free cash flows in the terminal value were capitalised with a
constant growth rate of 1.0% as in the prior year. The growth rate employed
corresponds to that customarily used for the country and market based upon
experience values as well as future projections and which are corroborated
by external information sources. The growth rate employed does not exceed
the long-term average growth rate customarily used for the country and market.
As of the date of the impairment test, no impairment of goodwill resulted. The recov-
erable amount exceeded the carrying amount by EUR 1,164 million (CHF 1,405 million).
The following changes in material assumptions lead to a situation where the value in use equals
the carrying amount:
Average annual growth rate through 2019 with the same EBITDA margin as in the business plan
Projected EBITDA margin 2019
Capital expenditure rate 2019
Post-tax discount rate
Long-term growth rate
Assumptions
Sensitivity
3.3%
41%
18%
7.70%
1.0%
–0.4%
34%
25%
10.20%
–2.4%
175
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N
25 Investments in associates
In CHF million
Balance at 1 January
Additions
Disposals
Additions from acquisition of subsidiaries. See Note 5.
Gain on successive company acquisitions
Dividends
Share of net results
Foreign currency translation adjustments
Balance at 31 December
2014
153
3
(108)
48
82
(30)
26
(3)
171
2013
268
1
(105)
–
–
(43)
30
2
153
The participations which are reflected in the consolidated financial statements of Swisscom using
the equity method of accounting are set out in Note 41. Dividends income of CHF 30 million (prior
year: CHF 43 million) is attributable mainly to the dividends paid by LTV Yellow Pages and Belgacom
International Carrier Services.
In September 2014, Swisscom acquired PubliGroupe SA in a public takeover which, at the time of
the transaction, owned 51% of the share capital of LTV Yellow Pages Ltd. The remaining 49% of LTV
Yellow Pages Ltd was held by Swisscom. As a result of the takeover, Swisscom assumed full con-
trol over LTV Yellow Pages Ltd which previously was reflected in Swisscom’s consolidated financial
statements as an associate. At the time of the takeover, the carrying value of the 49% shareholding
in LTV Yellow Pages Ltd in Swisscom’s consolidated financial statements amounted to CHF 26 mil-
lion. The difference of CHF 82 million between the carrying value and the fair value of the 49%
shareholding was recognised as other income in the fourth quarter of 2014. The fair value of the
49% shareholding of CHF 108 million was accounted for as a component of the acquisition costs
of the PubliGroupe takeover. See Note 5 for further information. In addition, a 48% shareholding
in Zanox Ltd (Zanox) was acquired as part of the takeover of PubliGroupe which is accounted for in
accordance with the equity method in the consolidated financial statements of Swisscom. Zanox is
the European market leader in performance advertising.
In 2013, Swisscom increased its shareholding in Cinetrade from 49% to 75%. As of the acquisition
date, there was a difference between the carrying value of Cinetrade and its fair value of CHF 2 mil-
lion, which was recognised as other financial income. See Notes 5 and 14.
The following table provides selected summarised key financial data of the associates:
In CHF million
Income statement
Net revenue
Operating expense
Operating income
Net income
Balance sheet at 31 December
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Equity
2014
2013
2,347
(2,223)
124
122
1,131
935
(1,087)
(316)
663
2,328
(2,174)
154
119
972
988
(876)
(352)
732
176
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o
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a
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d
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N
26 Financial liabilities
In CHF million
Bank loans
Debenture bonds
Private placements
Finance lease liabilities
Other interest-bearing financial liabilities
Derivative financial instruments. See Note 33.
Other non-interest-bearing financial liabilities
Total current financial liabilities
Bank loans
Debenture bonds
Private placements
Finance lease liabilities
Other interest-bearing financial liabilities
Derivative financial instruments. See Note 33.
Other non-interest-bearing financial liabilities
Total non-current financial liabilities
Total financial liabilities
Bank loans and credit limit
In CHF million
Bank loans in CHF variable interest-bearing
Bank loans in CHF variable interest-bearing
Bank loans in CHF variable interest-bearing
Bank loans in EUR variable interest-bearing
Bank loans in EUR variable interest-bearing
Bank loans in USD fixed interest-bearing
Total
31.12.2014
31.12.2013
960
547
–
14
2
49
8
1,580
921
4,557
925
547
3
49
22
7,024
8,604
8
1,324
206
13
2
76
27
1,656
1,345
4,184
920
642
2
51
23
7,167
8,823
Due within
Par value
in CHF
31.12.2014
31.12.2013
Carrying amount
2015
2016
2017
2015
2020
2028
530
300
130
421
361
96
530
300
130
421
361
139
–
300
130
430
368
125
1,881
1,353
During 2014, Swisscom took up short-term bank loans on a weekly basis. As of the balance sheet
date, there were, as a result, short-term Swiss-franc denominated bank loans totalling CHF 530 mil-
lion outstanding (prior year: none). The effective interest rate of these bank loans was 0.17%.
In the prior year, Swisscom had taken up bank loans in EUR. The bank loan of EUR 300 million
(CHF 368 million) bears variable interest rate and has a seven-year term. The EUR 300 million
financing was designated for hedge accounting of net investments in foreign investments. In the
prior year, Swisscom repaid maturing bank loans amounting to CHF 150 million. As of 31 December
2014, no transaction costs were recognised in connection with the bank loans, as in the prior year.
The effective interest rate of the CHF denominated bank loans is 0.62%. For the bank loans in USD
and EUR, the rate is 4.62% and 0.55%, respectively. A portion of the EUR-denominated bank loans
totalling EUR 350 million was transformed into variable-rate CHF financing through foreign-cur-
rency swaps. The bank loans may become due for immediate repayment if the shareholding of the
Swiss Confederation in the capital of Swisscom falls below one third or if another shareholder can
exercise control over Swisscom.
Swisscom has a confirmed bank line of credit amounting to CHF 100 million maturing in 2016 and a
further confirmed line of credit of CHF 2,000 million from banks maturing in 2019. As of 31 Decem-
ber 2014, these lines of credit had not been drawn down, as in the prior year.
177
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m
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a
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fi
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N
Debenture bonds
In CHF million
Debenture bond in CHF
Debenture bond in CHF
Debenture bond in CHF
Debenture bond in CHF
Debenture bond in CHF
Debenture bond in CHF
Debenture bond in EUR
Debenture bond in EUR
Debenture bond in CHF
Debenture bond in CHF
Total
Maturity years
2007–2017
2008–2015
2009–2014
2009–2018
2010–2022
2012–2024
2013–2020
2014–2021
2014–2026
2014–2029
Par value
in CHF
Nominal
interest rate
31.12.2014
31.12.2013
Carrying amount
600
500
1,250
1,425
500
500
601
601
200
160
3.75%
4.00%
3.50%
3.25%
2.63%
1.75%
2.00%
1.88%
1.50%
1.50%
609
506
–
1,430
498
503
597
597
202
162
610
505
1,282
1,502
497
503
609
–
–
–
5,104
5,508
In 2014, Swisscom took up a debenture bond in an amount of EUR 500 million (CHF 601 million).
The coupon rate was 1.875% with a term of 7.5 years. The debenture bond was issued by Lunar
Funding V, an independent Irish multi-purpose vehicle. It is secured by a loan note from Lunar Fund-
ing V to Swisscom in the same amount. The amount taken up was applied to refinance existing
financial loans. In addition, the EUR 500 million financing was designated for hedge accounting of
net investments in foreign shareholdings. As in the prior year, Swisscom had issued a debenture
bond of EUR 500 million (CHF 614 million) through the intermediary of Lunar Funding V and which
was designated for hedge accounting of net investments in foreign shareholdings. During the cur-
rent financial year, Swisscom took up two Swiss-franc denominated debenture bonds, one in the
amount of CHF 200 million with a term of 12 years and a coupon rate of 1.50% and the other of
CHF 160 million with a term of 15 years with a coupon rate of 1.50%. During the current financial
year, Swisscom repaid upon maturity debenture bonds totalling CHF 1,250 million. In addition, of
the debenture bond maturing in 2018, a premature partial redemption took place amounting to
CHF 75 million (nominal value). The difference of CHF 8 million between the partial redemption
amount of CHF 83 million and the carrying value of the redeemed debenture bond of CHF 75 mil-
lion was recognised as other financial expense. In the prior year, Swisscom repaid a debenture
bond of CHF 550 million upon maturity. The effective interest rate on the Swiss-franc denominated
debenture bonds is 2.98% and 2.08% for those denominated in EUR. The investors are entitled to
sell the debentures back to Swisscom and/or Lunar Funding V if a shareholder other than the Swiss
Confederation gains a majority share in Swisscom and at the same time, the company’s rating falls
below BBB–/Baa3.
Private placements
In CHF million
Private placements in CHF domestic
Private placements in CHF abroad
Private placements in CHF abroad
Private placements in CHF abroad
Private placements in EUR abroad
Total
Due within
Par value
in CHF
31.12.2014
31.12.2013
Carrying amount
2016
2017
2018
2019
2014
350
250
72
278
205
350
245
68
262
–
925
350
243
68
260
205
1,126
Swisscom repaid private placements amounting to EUR 167 million (CHF 201 million) in 2014 and,
in the prior year, a private placement totalling EUR 108 million. The interest rate risk of private
placements maturing in 2016 is hedged with interest-rate swaps and was designated as cash flow
hedges for hedge accounting purposes. The duration of the hedges is identical to the duration of
the hedged private placements. The total EUR-denominated private placement was transformed
178
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N
into variable CHF financing using foreign currency swaps for the whole period through to maturity.
The swap of fixed interest-bearing EUR financing into variable CHF financing was designated as a
fair value hedge. As in the prior year, no transaction costs were recorded as of 31 December 2014
in connection with the private placements. The effective interest rate on the private placements
is 1.67%. The CHF private placements of CHF 600 million maturing in 2017 through 2019 may
become due for immediate repayment if the shareholding of the Swiss Confederation in the capi-
tal of Swisscom falls below 35% or if another shareholder can exercise control over Swisscom. The
investors in the remaining private placements are entitled to resell their investments to Swisscom
should the Swiss Confederation permanently give up its majority shareholding in Swisscom.
Liabilities arising from finance leases
Swisscom concluded two agreements in 2001 for the sale of real estate. At the same time, Swisscom
entered into long-term agreements to lease back part of the real estate sold which, in part, qualify
as finance leases. The gain realised on real estate classified as finance leases was deferred. As of
31 December 2014, the deferred gains totalled CHF 167 million (prior year: CHF 183 million). The
deferred gains are released to other income over the term of the individual leases. The effective
interest rate of the finance lease liabilities was 6.25%.
In the third quarter of 2014, Swisscom repurchased, prior to contractual maturity, real estate used
for operating purposes which was accounted for previously as a finance lease. The difference of
CHF 33 million between the purchase price of CHF 98 million and the carrying value of the finance-
lease liability of CHF 65 million was recognised as finance expense.
The minimum lease payments and financial liabilities relating to these leaseback agreements are
set out in the following table:
In CHF million
Within 1 year
Within 1 to 2 years
Within 2 to 3 years
Within 3 to 4 years
Within 4 to 5 years
After 5 years
Total future minimum lease payments
Less future financing costs
Total finance lease liabilities
Thereof current finance lease liabilities
Thereof non-current finance lease liabilities
31.12.2014
31.12.2013
48
47
42
41
38
1,240
1,456
(895)
561
14
547
54
54
53
48
48
1,564
1,821
(1,166)
655
13
642
The future payments of the liabilities arising under finance leases, expressed in terms of their
present value, as of 31 December 2013 and 2014 were as follows:
In CHF million
Within 1 year
Within 1 to 2 years
Within 2 to 3 years
Within 3 to 4 years
Within 4 to 5 years
After 5 years
Total present value of finance lease liabilities
31.12.2014
31.12.2013
14
14
9
9
6
509
561
13
14
13
9
8
598
655
In addition, operating lease arrangements exist for miscellaneous real estate with terms of 1 to
25 years. See note 35. In 2014, conditional rental payments of CHF 3 million were recorded as rental
expense (prior year: CHF 4 million).
179
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a
t
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a
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a
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fi
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27 Trade and other payables
In CHF million
Supplier invoices received
Goods and services received not yet invoiced
Total trade payables
Accruals from international roaming traffic
Liabilities from debt-collection activities
Liabilities from construction contracts
Miscellaneous liabilities
Total other liabilities
Total trade and other payables
28 Provisions
In CHF million
Balance at 31 December 2012
Additions to provisions
Present-value adjustments
Release of unused provisions
Use of provisions
Balance at 31 December 2013
Additions to provisions
Present-value adjustments
Release of unused provisions
Use of provisions
Additions from acquisition of subsidiaries
Foreign currency translation adjustments
Balance at 31 December 2014
Thereof current provisions
Thereof non-current provisions
31.12.2014
31.12.2013
1,102
449
1,551
48
28
2
247
325
1,082
503
1,585
33
23
2
227
285
1,876
1,870
Termination
benefits
Dismantlement
and restoration
costs
Regulatory
proceedings
66
31
–
(31)
(21)
45
8
–
(9)
(16)
6
–
34
32
2
512
57
13
(100)
(1)
481
162
13
(6)
(4)
–
–
646
–
646
104
13
2
–
(1)
118
3
2
–
(17)
–
–
106
16
90
Other
158
46
–
(17)
(32)
155
44
1
(30)
(24)
1
(1)
146
64
82
Total
840
147
15
(148)
(55)
799
217
16
(45)
(61)
7
(1)
932
112
820
Provisions for termination benefits
As of 31 December 2014, provisions of CHF 34 million for personnel reduction costs were recog-
nised, the largest share of which relates to various downsizing programmes resulting from reorgan-
isations within the operating segments of Swisscom Switzerland.
Provisions for dismantling and restoration costs
The provisions for dismantling and restoration costs relate to the dismantling of telecommuni-
cation installations and transmitter stations and the restoration to its original state of the land
owned by third parties on which they are located. The provisions are computed by reference to esti-
mates of future anticipated dismantling costs and are discounted using an average interest rate of
1.69% (prior year: 2.79%). The effect of using different interest rates amounted to CHF 151 million
(prior year: CHF 21 million). In 2013, as a result of new location and expansion strategies, Swisscom
reassessed the costs of dismantling and restoration. As a result the provisions for dismantling and
restoring telecommunication installations were increased by CHF 57 million. As regards trans-
mitter stations, the reassessment resulted in a decrease of provisions by CHF 79 million. In 2014,
adjustments in an aggregate amount of CHF 157 million (prior year: CHF 19 million) were recorded
180
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N
under property, plant and equipment and of CHF 1 million (prior year: CHF 23 million) was recog-
nised in the income statement. The non-current portion of the provisions is expected to be settled
after 2020.
Provisions for regulatory proceedings
In accordance with the revised Telecommunications Act, Swisscom provides interconnection
services and other access services to other telecommunication service providers in Switzerland.
In previous years, several telecommunication service providers demanded from the Federal
Communications Commission (ComCom) a reduction in the prices charged to them by Swisscom.
As a result of legal opinions, Swisscom set up provisions in prior years. The provisions recognised in
2013 consolidated financial statements have not changed materially during the current financial
year. As of 31 December 2014, the provisions relating to the proceedings for interconnection and
other access services of Swisscom (Switzerland) Ltd amounted to CHF 106 million. Settlements
made in 2014 amounted to CHF 17 million. Any settlements are dependent upon the date on which
legally binding rulings and decisions are issued.
Other provisions
Other provisions include provisions for environmental, contractual and tax risks. The non-current
portion of the provisions will most likely be settled between 2015 and 2017.
29 Contingent liabilities
Proceedings conducted by the Competition Commission
The Competition Commission (ComCo) is currently investigating a number of companies in the
Swisscom Group. The investigation into the relationship of ADSL wholesale prices to the ADSL retail
prices is described below. If it is proven that Swisscom has infringed the rules of fair competition,
ComCo is entitled to impose sanctions pursuant to the Anti-Trust Law. This sanction depends on the
length, severity and nature of the violation and may amount to up to 10% of the revenue generated
by the company in question in the relevant markets in Switzerland over the last three financial years.
On 20 October 2005, ComCo launched an investigation into Swisscom Ltd and Swisscom (Switzer-
land) Ltd into possible abuse of a dominant market position. The object of the investigation is the
question whether Swisscom has set the prices for ADSL pre-services for Internet service provid-
ers at such a high level that no scope remains for these providers for an adequate profit margin
in relation to the end-customer prices demanded by Swisscom itself (price squeezing). Swisscom
contests the allegation of market dominance and refutes the accusation of price squeezing. It is of
the opinion that the prices for its ADSL pre-services leave its ADSL competitors enough room for a
reasonable profit margin. With its decision of 5 November 2009, ComCo sanctioned Swisscom for
abuse of a market-dominant position in the case of ADSL services and levied a fine of CHF 220 mil-
lion. Swisscom appealed against the ruling at the Federal Administrative Court on 7 December
2009. On the basis of a legal opinion, Swisscom concludes that, from the present-day perspective,
it is improbable that a court of final appeal will levy sanctions. It thus has raised no provisions in
the consolidated financial statements as of 31 December 2013 and 2014. In the event of a legally
binding decision on abuse, claims could be asserted against Swisscom under civil law. Swisscom
considers it unlikely that such civil claims can be enforced.
Regulatory proceedings
Swisscom provides interconnection and other access services for other telecommunication service
providers in Switzerland in accordance with the revised Swiss Federal Telecommunications Act
(TCA). Other access proceedings in accordance with the revised TCA are pending with the Federal
Communications Commission (ComCom) and the Federal Administrative Court.
181
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30 Other non-financial liabilities
In CHF million
Deferred revenue
Value-added taxes payable
Advance payments received
Other current non-financial liabilities
Total other current non-financial liabilities
Deferred gain on sale and leaseback of real estate
Other non-current non-financial liabilities
Total other non-current non-financial liabilities
31.12.2014
31.12.2013
407
120
54
137
718
167
208
375
375
128
126
130
759
183
127
310
Deferred revenues mainly comprise deferred payments for prepaid cards and prepaid subscription
fees. The deferred gain from the sale and leaseback of real estate is released to the income state-
ment under other income over the lease term. See Notes 13 and 26.
31 Additional information concerning equity
Share capital and treasury shares
As of 31 December 2014, the total number of shares issued remained unchanged from the prior
year at 51,801,943 shares. All shares have a par value of CHF 1 and are fully paid up. Each share
entitles the holder to one vote. Shares with an aggregate market value of CHF 5 million (prior year:
CHF 6 million) were allocated for share-based compensation plans. See Note 11.
The holdings of treasury shares have changed as follows:
Balance at 31 December 2012
Purchases on the market
Allocated for share-based compensation
Balance at 31 December 2013
Purchases on the market
Allocated for share-based compensation
Balance at 31 December 2014
Number
446
15,000
(14,644)
802
8,600
(9,253)
149
Average price
in CHF
In CHF million
361
435
442
435
525
535
525
–
6
(6)
–
5
(5)
–
After deducting 149 treasury shares (prior year: 802 shares), the balance of shares outstanding as at
31 December 2014 totalled 51,801,794 (prior year: 51,801,141 shares).
182
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o
N
Other reserves
In CHF million
Balance at 31 December 2012
Foreign currency translation adjustments of foreign subsidiaries
Change in fair value of available-for-sale financial assets
Change in fair value of cash flow hedges
Fair value losses of cash flow hedges transferred to income statement
Income tax expense
Balance at 31 December 2013
Foreign currency translation adjustments of foreign subsidiaries
Change in fair value of cash flow hedges
Fair value losses of cash flow hedges transferred to income statement
Income tax expense
Balance at 31 December 2014
Hedging
reserve
(31)
–
–
7
6
(1)
(19)
–
10
5
(3)
(7)
Fair value
reserve
6
–
1
–
–
–
7
–
–
–
–
7
Foreign
currency
translation
adjustments
(1,608)
63
–
–
–
(14)
(1,559)
(46)
–
–
15
Total
other
reserves
(1,633)
63
1
7
6
(15)
(1,571)
(46)
10
5
12
(1,590)
(1,590)
The hedging reserves comprise the changes in the fair value of hedging instruments which were
designated as cash flow hedges. Changes in the fair value of available-for-sale financial assets are
recognised in the fair value reserves. Reserves arising from foreign currency translation adjust-
ments comprise the differences from the foreign currency translation of the financial statements
of subsidiaries and associates from the functional currency into Swiss francs. On 31 Decem-
ber 2014, cumulative foreign currency translation losses before taxes at Fastweb amounted to
CHF 1,960 million (prior year: CHF 1,917 million).
Other comprehensive income
Other comprehensive income in 2014 may be analysed as follows:
2014, in CHF million
Actuarial gains and losses from
defined benefit pension plans
Income tax expense
Items that will not be reclassified to
income statement, net of tax
Foreign currency translation adjustments
of foreign subsidiaries
Change in fair value of cash flow hedges
Fair value losses of cash flow hedges
transferred to income statement
Income tax expense
Items that are or may be reclassified subsequently
to income statement, net of tax
Total other comprehensive income
(918)
Retained
earnings
Hedging
reserve
Foreign
currency
translation
reserve adjustments
Fair value
Equity
holders of
Swisscom
Non-
controlling
interests
(1,160)
242
(918)
–
–
–
–
–
–
–
–
–
10
5
(3)
12
12
–
–
–
–
–
–
–
–
–
–
–
–
(46)
–
–
15
(31)
(31)
(1,160)
242
(918)
(46)
10
5
12
(19)
(937)
(1)
–
(1)
–
–
–
–
–
(1)
Total
other
compre-
hensive
income
(1,161)
242
(919)
(46)
10
5
12
(19)
(938)
183
s
t
n
e
m
e
t
a
t
s
l
a
i
c
n
a
n
fi
d
e
t
a
d
i
l
o
s
n
o
C
s
t
n
e
m
e
t
a
t
s
l
a
i
c
n
a
n
fi
d
e
t
a
d
i
l
o
s
n
o
c
e
h
t
o
t
s
e
t
o
N
Other comprehensive income in 2013 may be analysed as follows:
Retained
earnings
Hedging
reserve
Foreign
currency
translation
reserve adjustments
Fair value
Equity
holders of
Swisscom
Non-
controlling
interests
Total other
compre-
hensive
income
2013, in CHF million
Actuarial gains and losses from
defined benefit pension plans
Income tax expense
Items that will not be reclassified to
income statement, net of tax
Foreign currency translation adjustments
of foreign subsidiaries
Gains and losses from available-for-sale
financial assets transferred to income statement
Change in fair value of cash flow hedges
Fair value losses of cash flow hedges
transferred to income statement
Income tax expense
Items that are or may be reclassified subsequently
to income statement, net of tax
845
(169)
676
–
–
–
–
–
–
Total other comprehensive income
676
–
–
–
–
–
7
6
(1)
12
12
–
–
–
–
1
–
–
–
1
1
–
–
–
845
(169)
676
63
63
–
–
–
(14)
49
49
1
7
6
(15)
62
738
2
–
2
–
–
–
–
–
–
2
847
(169)
678
63
1
7
6
(15)
62
740
Share of equity attributable to non-controlling interests
In 2014, transactions with non-controlling shares worth CHF 157 million were recognised. As part
of the takeover of PubliGroupe, the outstanding 49% of the non-controlling shares in Swisscom
Directories Ltd and local.ch Ltd were acquired for CHF 162 million. The difference between the pur-
chase price of CHF 162 million and the book value of the minority interest of CHF 26 million was
recognised as an equity transaction with no effect on income. For further information see Note 5.
184
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e
m
e
t
a
t
s
l
a
i
c
n
a
n
fi
d
e
t
a
d
i
l
o
s
n
o
C
s
t
n
e
m
e
t
a
t
s
l
a
i
c
n
a
n
fi
d
e
t
a
d
i
l
o
s
n
o
c
e
h
t
o
t
s
e
t
o
N
32 Dividends
Distributable reserves are determined on the basis of equity as reported in the statutory financial
statements of the parent company, Swisscom Ltd, and not on the equity as reported in the consoli-
dated financial statements. At 31 December 2014, Swisscom Ltd’s distributable reserves amounted
to CHF 5,513 million. The dividend is proposed by the Board of Directors and must be approved by
the Annual General Meeting of Shareholders. The dividend proposed for the 2014 financial year is
not recorded as a liability in these consolidated financial statements. Treasury shares are not enti-
tled to a dividend.
Swisscom paid the following dividends in 2013 and 2014:
In CHF million, except where indicated
Number of registered shares eligible for dividend (in millions of shares)
Ordinary dividend per share (in CHF)
Dividends paid
2014
51.802
22.00
1,140
2013
51.801
22.00
1,140
The dividend payments for the 2012 and 2013 financial years were funded entirely from retained
earnings. The Board of Directors proposes to the Annual Shareholders’ Meeting of Swisscom Ltd to
be held on 8 April 2015 the payment of an ordinary dividend of CHF 22 per share in respect of the
2014 financial year. This equates to a total dividend distribution of CHF 1,140 million. The dividend
payment is foreseen on 15 April 2015.
33 Financial risk management and supplementary disclosures
regarding financial instruments
Swisscom is exposed to various financial risks resulting from its operating and financial activities.
The most significant financial risks arise from changes in foreign exchange rates, interest rates as
well as creditworthiness and the ability of counterparties to meet their payment obligations. A fur-
ther risk arises from the ability to ensure adequate liquidity. Swisscom’s financial risk management
is conducted in accordance with established guidelines with the aim of limiting potential adverse
effects on the financial situation of Swisscom. In particular, these guidelines contain risk limits for
approved financial instruments and specify risk monitoring processes. Financial risk management,
with the exception of the management of credit risks arising from business operations, is handled
by the central Treasury Department. It identifies, evaluates and hedges financial risks in close coop-
eration with the Group’s operating units. The implemented risk management process also calls for
routine reports on the development of financial risks.
Market price risks
Foreign exchange risks
Swisscom is exposed to foreign exchange risks; these can impact the Group’s financial results and
consolidated equity. Foreign exchange risks which have an impact on cash flows (transaction risks)
are partially hedged by financial instruments and designated for hedge accounting. In addition, for-
eign exchange risks with an impact on equity (translation risks) are partially hedged through finan-
cial instruments and designated for hedge accounting. The aim of Swisscom’s foreign exchange
risk management policy is to limit the volatility of planned cash flows. Forward currency contracts,
currency options and currency swaps may be employed to hedge transaction risks. These hedging
measures concern principally the USD and EUR. EUR-denominated financing is employed in order
to hedge the translation risk of positions in EUR. As of the balance sheet date, Swisscom contracted
financial liabilities totalling EUR 1,300 million (CHF 1,563 million) which were designated for hedge
accounting for net investments in foreign shareholdings.
The currency risks and hedging contracts for foreign currencies as of 31 December 2014 are to be
analysed as follows:
In CHF million
At 31 December 2014
Cash and cash equivalents
Trade and other receivables
Other financial assets
Financial liabilities
Trade and other payables
Net exposure at carrying amounts
Net forecasted cash flows exposure in the next 12 months
Net exposure before hedges
Forward currency contracts
Foreign currency swaps
Currency swaps
Hedges
Net exposure
EUR
USD
Other
35
4
21
(2,019)
(67)
(2,026)
(362)
(2,388)
336
–
421
757
(1,631)
4
–
173
(144)
(74)
(41)
(455)
(496)
–
446
–
446
(50)
2
7
–
–
(15)
(6)
–
(6)
–
–
–
–
(6)
185
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n
e
m
e
t
a
t
s
l
a
i
c
n
a
n
fi
d
e
t
a
d
i
l
o
s
n
o
C
s
t
n
e
m
e
t
a
t
s
l
a
i
c
n
a
n
fi
d
e
t
a
d
i
l
o
s
n
o
c
e
h
t
o
t
s
e
t
o
N
The currency risks and hedging contracts for foreign currencies as of 31 December 2013 are to be
analysed as follows:
In CHF million
At 31 December 2013
Cash and cash equivalents
Trade and other receivables
Other financial assets
Financial liabilities
Trade and other payables
Net exposure at carrying amounts
Net forecasted cash flows exposure in the next 12 months
Net exposure before hedges
Forward currency contracts
Foreign currency swaps
Currency swaps
Hedges
Net exposure
EUR
USD
Other
60
8
3
(1,721)
(59)
(1,709)
(367)
(2,076)
211
46
635
892
(1,184)
3
8
142
(130)
(54)
(31)
(343)
(374)
209
–
–
209
(165)
–
11
–
–
(13)
(2)
–
(2)
–
–
–
–
(2)
Foreign-currency sensitivity analysis
The following sensitivity analysis shows the impact on the income statement should the EUR/
CHF and USD/CHF exchange rates change in line with their implicit volatility over the next twelve
months. This analysis assumes that all other variables, in particular the interest rate level, remain
constant.
In CHF million
31.12.2014
31.12.2013
Income impact on balance sheet items
EUR volatility of 4.29% (previous year: 4.93%)
USD volatility of 9.72% (previous year: 9.58%)
Hedges for balance sheet items
EUR volatility of 4.29% (previous year: 4.93%)
USD volatility of 9.72% (previous year: 9.58%)
Planned cash flows
EUR volatility of 4.29% (previous year: 4.93%)
USD volatility of 9.72% (previous year: 9.58%)
Hedges for planned cash flows
EUR volatility of 4.29% (previous year: 4.93%)
USD volatility of 9.72% (previous year: 9.58%)
87
4
(18)
–
16
44
(14)
(43)
84
3
(31)
–
18
33
(13)
(20)
The volatility of the balance sheet positions and planned cash flows is partially offset by the volatility
of the related hedging contracts.
Interest rate risks
Interest rate risks arise from fluctuations in interest rates which could have a negative impact on
the financial position of Swisscom. Fluctuations in interest rates lead to changes in interest income
and expense. Furthermore, they may impact the market value of certain financial assets, liabilities
and hedging instruments. Swisscom actively manages interest rate risks. The main aim thereof is
to limit the volatility of planned cash flows. Swisscom employs interest rate swaps and options to
hedge its interest rate risk.
186
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e
m
e
t
a
t
s
l
a
i
c
n
a
n
fi
d
e
t
a
d
i
l
o
s
n
o
C
s
t
n
e
m
e
t
a
t
s
l
a
i
c
n
a
n
fi
d
e
t
a
d
i
l
o
s
n
o
c
e
h
t
o
t
s
e
t
o
N
The structure of interest-bearing financial instruments at nominal values is as follows:
In CHF million
Fixed interest-bearing financial liabilities
Variable interest-bearing financial liabilities
Total interest-bearing financial liabilities
Fixed interest-bearing financial assets
Variable interest-bearing financial assets
Total interest-bearing financial assets
Total interest-bearing financial assets and liabilities, net
Variable interest-bearing
Fixed through interest rate swaps
Variable through interest rate swaps
Variable interest-bearing, net
Fixed interest-bearing
Fixed through interest rate swaps
Variable through interest rate swaps
Fixed interest-bearing, net
Total interest-bearing financial assets and liabilities, net
31.12.2014
31.12.2013
5,997
2,444
8,441
(115)
(348)
(463)
7,978
2,096
(350)
–
1,746
5,882
350
–
6,232
7,978
6,498
2,094
8,592
(231)
(753)
(984)
7,608
1,341
(350)
42
1,033
6,267
350
(42)
6,575
7,608
Interest-rate sensitivity analysis
The following sensitivity analysis shows the effects on the income statement and equity if CHF
interest rates move by 100 basis points. In computing sensitivity in equity, negative interest rates
are excluded.
In CHF million
At 31 December 2014
Variable financing
Interest rate swaps
Cash flow sensitivity, net
At 31 December 2013
Variable financing
Interest rate swaps
Cash flow sensitivity, net
Credit risks
Income statement
Equity
Increase
100 base points
Decrease
100 base points
Increase
100 base points
Decrease
100 base points
(21)
4
(17)
(13)
3
(10)
21
(4)
17
13
(3)
10
–
5
5
–
9
9
–
(6)
(6)
–
(2)
(2)
Credit risks from operating activities
Swisscom is exposed to credit risks arising from its operating activities. Swisscom has no significant
concentrations of credit risk. The Group has policies in place to ensure that products and ser vices
are only sold to creditworthy customers. Furthermore, outstanding receivables are continually
monitored as part of its operating activities. Swisscom recognises credit risks through individual
and general lump-sum allowances. In addition, the danger of risk concentrations is minimised by
the large number of customers. Given that the financial assets as of the balance sheet date are
neither impaired nor in default, there are no indications that the debtors will not be capable of
meeting their payment obligations. Further information on financial assets is set out in Notes 17,
18 and 19.
187
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t
a
t
s
l
a
i
c
n
a
n
fi
d
e
t
a
d
i
l
o
s
n
o
C
s
t
n
e
m
e
t
a
t
s
l
a
i
c
n
a
n
fi
d
e
t
a
d
i
l
o
s
n
o
c
e
h
t
o
t
s
e
t
o
N
Credit risks from financial transactions
Swisscom is exposed to the risk of counterparty default through the use of derivative financial
instruments and financial investments. Requirements to be met by counterparties are defined in
guidelines governing derivative financial instruments and financial investments. Furthermore, indi-
vidual limits by counterparty have been set. These limits and counterparty credit assessments are
reviewed regularly. Swisscom signs netting agreements as issued by ISDA (International Swaps and
Derivatives Association) with the respective counterparties in order to control the risk inherent in
derivative transactions. The carrying amount of financial assets corresponds to the credit risk and
is to be analysed as follows:
In CHF million
Cash and cash equivalents
Trade and other receivables
Loans and receivables
Derivative financial instruments
Total carrying amount of financial assets
Note
31.12.2014
31.12.2013
17
18
19
19
302
2,586
209
11
3,108
723
2,516
305
6
3,550
The carrying amounts of cash and cash equivalents and other financial assets and the related
Standard & Poor’s ratings of the counterparties are to be summarised as follows:
In CHF million
31.12.2014
31.12.2013
13
129
15
149
1
123
3
7
–
10
72
522
422
149
–
135
136
151
3
–
16
–
22
1,034
Liquidity risk
Prudent liquidity management includes the holding of adequate reserves of cash and cash equiva-
lents and marketable securities as well as the provision of adequate financing. Swisscom has pro-
cesses and policies in place that guarantee sufficient liquidity in order to settle current and future
obligations. Swisscom has a confirmed line of credit of CHF 100 million maturing in 2016 from
banks and a further confirmed line of credit of CHF 2,000 million from banks maturing in 2019. As
of 31 December 2014, these lines of credit had not been drawn down, as in the prior year.
AAA
AA+
AA
AA–
A+
A
A–
BBB+
BBB
BBB-
Without rating
Total
188
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e
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e
t
a
t
s
l
a
i
c
n
a
n
fi
d
e
t
a
d
i
l
o
s
n
o
C
s
t
n
e
m
e
t
a
t
s
l
a
i
c
n
a
n
fi
d
e
t
a
d
i
l
o
s
n
o
c
e
h
t
o
t
s
e
t
o
N
The contractual maturities of financial liabilities including estimated interest payments as of
31 December 2014 are as follows:
In CHF million
At 31 December 2014
Non-derivative financial liabilities
Bank loans
Debenture bonds
Private placements
Finance lease liabilities
Other interest-bearing financial liabilities
Other non-interest-bearing financial liabilities
Trade and other payables
Derivative financial liabilities
Derivative financial instruments
Total
Carrying Contractual Due within Due within Due within
1 year 1 to 2 years 3 to 5 years
amount
payments
Due after
5 years
1,881
5,104
925
561
5
30
1,975
5,778
970
1,456
5
30
963
640
6
48
2
8
1,876
1,876
1,853
98
157
58
383
120
356
47
–
6
7
8
370
2,293
608
121
1
–
16
11
259
2,725
–
1,240
2
16
–
80
10,480
12,247
3,578
927
3,420
4,322
The contractual maturities of financial liabilities including estimated interest payments as of
31 December 2013 are as follows:
In CHF million
At 31 December 2013
Non-derivative financial liabilities
Bank loans
Debenture bonds
Private placements
Finance lease liabilities
Other interest-bearing financial liabilities
Other non-interest-bearing financial liabilities
Trade and other payables
Derivative financial liabilities
Derivative financial instruments
Total
Estimation of fair values
Carrying Contractual Due within Due within Due within
1 year 1 to 2 years 3 to 5 years
amount
payments
Due after
5 years
1,353
5,508
1,126
655
4
50
1,455
6,184
1,192
1,821
3
50
14
1,419
217
54
1
27
1,870
1,870
1,870
442
626
7
54
1
8
–
677
2,395
687
149
1
–
–
127
180
81
44
10
322
1,744
281
1,564
–
15
–
45
10,693
12,755
3,683
1,182
3,919
3,971
The carrying amounts of trade receivables and payables as well as other receivables and payables
are a reasonable estimate of their fair value because of their short-term maturities. The carrying
amounts of cash and cash equivalents and current loans receivable correspond to the fair values.
The fair value of available-for-sale financial investments is based on quoted stock exchange prices
or equates to their purchase cost. The fair values of other non-current financial assets are computed
on the basis of the maturing future payments, discounted at market interest rates. The fair value
of non-publicly traded interest-bearing financial liabilities is estimated on the basis of the matur-
ing future payments discounted at market interest rates. The fair value of publicly traded inter-
est-bearing financial liabilities is based upon stock-exchange quotations as at the balance-sheet
date. The fair value of finance lease obligations is estimated on the basis of the maturing future
payments, discounted at market interest rates. The fair value of publicly traded derivative financial
instruments as well as investments held for trading or for sale is based on quoted stock exchange
prices as of the balance sheet date. Interest rate swaps and currency swaps are discounted at mar-
ket interest rates. Foreign-currency forward contracts and foreign-currency swaps are valued by
reference to foreign-exchange forward rates as of the balance sheet date.
189
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e
t
a
t
s
l
a
i
c
n
a
n
fi
d
e
t
a
d
i
l
o
s
n
o
C
s
t
n
e
m
e
t
a
t
s
l
a
i
c
n
a
n
fi
d
e
t
a
d
i
l
o
s
n
o
c
e
h
t
o
t
s
e
t
o
N
Fair value hierarchy
The fair value hierarchy encompasses the following three levels:
> Level 1: stock-exchange quoted prices in active markets for identical assets or liabilities;
> Level 2: other factors which are observable on markets for assets and liabilities, either directly
or indirectly;
> Level 3: factors that are not based on observable market data.
Asset/liability valuation categories and fair value of financial instruments
The carrying values and fair values of financial assets and financial liabilities with their correspond-
ing valuation categories are summarised in the following table. Not reflected therein are cash and
cash equivalents, trade receivables and payables as well as miscellaneous receivables and payables
whose carrying value corresponds to a reasonable estimation of their fair value.
In CHF million
At 31 December 2014
Derivative financial instruments
Available-for-sale financial assets
Financial assets measured at fair value
Other loans and receivables
Financial assets not measured at fair value
Derivative financial instruments
Financial liabilities measured at fair value
Bank loans
Debenture bonds
Private placements
Finance lease liabilities
Other interest-bearing financial liabilities
Other non-interest-bearing financial liabilities
Financial liabilities not measured at fair value
Carrying amount
Fair Value
Loans and
receivables
Available-
At fair value
through
for-sale profit or loss
Financial
liabilities
Level 1
Level 2
Level 3
–
–
–
209
209
–
–
–
–
–
–
–
–
–
–
23
23
–
–
–
–
–
–
–
–
–
–
–
11
–
11
–
–
98
98
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,881
5,104
925
561
5
30
–
5
5
–
–
–
–
–
5,610
–
–
–
–
11
11
240
240
98
98
1,922
–
957
1,173
5
30
8,506
5,610
4,087
–
18
18
–
–
–
–
–
–
–
–
–
–
–
190
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e
m
e
t
a
t
s
l
a
i
c
n
a
n
fi
d
e
t
a
d
i
l
o
s
n
o
C
s
t
n
e
m
e
t
a
t
s
l
a
i
c
n
a
n
fi
d
e
t
a
d
i
l
o
s
n
o
c
e
h
t
o
t
s
e
t
o
N
In CHF million
At 31 December 2013
Derivative financial instruments
Available-for-sale financial assets
Financial assets measured at fair value
Other loans and receivables
Financial assets not measured at fair value
Derivative financial instruments
Financial liabilities measured at fair value
Bank loans
Debenture bonds
Private placements
Finance lease liabilities
Other interest-bearing financial liabilities
Other non-interest-bearing financial liabilities
Financial liabilities not measured at fair value
Carrying amount
Fair Value
Loans and
receivables
Available-
At fair value
through
for-sale profit or loss
Financial
liabilities
Level 1
Level 2
Level 3
–
–
–
305
305
–
–
–
–
–
–
–
–
–
–
21
21
–
–
–
–
–
–
–
–
–
–
–
6
–
6
–
–
127
127
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,353
5,508
1,126
655
4
50
–
1
1
–
–
–
–
–
5,836
–
–
–
–
6
–
6
308
308
127
127
1,383
–
1,147
1,194
4
50
8,696
5,836
3,778
–
20
20
–
–
–
–
–
–
–
–
–
–
–
In addition, as of 31 December 2014, there were available-for-sale financial assets with a carrying
value of CHF 30 million (prior year: CHF 21 million) which are valued at acquisition cost.
Level 3 financial instruments developed as follows in 2013 and 2014:
In CHF million
Balance at 31 December 2012
Additions
Disposals
Change in fair value recognised in equity
Change in fair value recognised in income statement
Balance at 31 December 2013
Additions
Disposals
Balance at 31 December 2014
Available-for-sale financial assets
20
1
(1)
1
(1)
20
1
(3)
18
The level-3 assets consist of investments in various investment funds and individual companies.
The fair value was calculated by using a valuation model. In 2013 and 2014, there were no reclassifi-
cations between the various levels.
191
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a
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a
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i
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o
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o
C
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m
e
t
a
t
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a
i
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a
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fi
d
e
t
a
d
i
l
o
s
n
o
c
e
h
t
o
t
s
e
t
o
N
Asset/liability valuation categories and results of financial instruments
The results for each asset/liability valuation category are to be analysed as follows:
Loans and
receivables
Available-
for-sale
At fair value
through profit
or loss
Financial
liabilities
Hedging
transactions
In CHF million
2014
Interest income (interest expense)
Change in fair value
Foreign currency translation adjustments
Gains and losses transferred from equity
Net result recognised in income statement
Change in fair value
Gains and losses transferred to income statement
Net result recognised in other comprehensive income
Total net result by asset/liability category
10
–
1
–
11
–
–
–
11
–
–
–
–
–
–
–
–
–
(2)
(46)
3
–
(45)
–
–
–
(45)
(223)
–
–
–
(223)
–
–
–
(223)
(3)
–
–
(2)
(5)
10
5
15
10
In CHF million
2013
Loans and
receivables
Available-
for-sale
At fair value
through profit
or loss
Financial
liabilities
Hedging
transactions
Interest income (interest expense)
Change in fair value
Foreign currency translation adjustments
Gains and losses transferred from equity
Net result recognised in income statement
Change in fair value
Gains and losses transferred to income statement
Net result recognised in other comprehensive income
Total net result by asset/liability category
8
–
8
–
16
–
–
–
16
–
–
(1)
–
(1)
1
–
1
–
(4)
30
4
–
30
–
–
–
30
(250)
–
(8)
–
(258)
–
–
–
(258)
(5)
–
–
(1)
(6)
7
6
13
7
In addition, in 2014, allowances for trade and other receivables amounting to CHF 87 million (prior
year: CHF 83 million) were recorded under other operating expenses.
Derivative financial instruments
At 31 December 2013 and 2014, the following derivative financial instruments were recorded:
In CHF million
Fair value hedges
Cash flow hedges
Other derivative financial instruments
Total derivative financial instruments
Thereof current derivative financial instruments
Thereof non-current derivative financial instruments
Contract value
Positive fair value
Negative fair value
31.12.2014 31.12.2013 31.12.2014 31.12.2013 31.12.2014 31.12.2013
–
824
929
42
728
911
1,753
1,681
–
6
5
11
11
–
–
–
6
6
–
6
–
(10)
(88)
(98)
(49)
(49)
(13)
(16)
(98)
(127)
(76)
(51)
Fair Value Hedges
In CHF million
Currency swaps in EUR
Total fair value hedges
Contract value
Positive fair value
Negative fair value
31.12.2014 31.12.2013 31.12.2014 31.12.2013 31.12.2014 31.12.2013
–
–
42
42
–
–
–
–
–
–
(13)
(13)
192
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i
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o
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N
In 2007, for the purpose of hedging the foreign currency and interest rate risks of financing in
EUR, cross-currency swaps for EUR 48 million were entered into which were designated as fair
value hedges for hedge accounting. Of this amount, EUR 35 million matured in 2014, which were
reported as negative fair values of CHF 13 million in the prior year. As of the balance-sheet date,
Swisscom reported no instruments designated as fair value hedges for hedge accounting purposes.
Cash Flow Hedges
In CHF million
Currency swaps in USD
Interest rate swaps in CHF
Forward currency contracts in USD
Forward currency contracts in EUR
Total cash flow hedges
Contract value
Positive fair value
Negative fair value
31.12.2014 31.12.2013 31.12.2014 31.12.2013 31.12.2014 31.12.2013
235
350
–
239
824
–
350
167
211
728
6
–
–
–
6
–
–
–
–
–
–
(9)
–
(1)
(10)
–
(13)
(2)
(1)
(16)
Swisscom entered into interest rate swaps with final maturities in 2016 in order to hedge interest
rate risks of CHF 350 million of the variable CHF-denominated interest-bearing private placements.
These hedges were designated as cash flow hedges for hedge accounting purposes. As of 31 Decem-
ber 2014, these interest rate swaps were recorded with a negative fair value of CHF 9 million (prior
year:CHF 13 million). CHF 10 million was recognised in the hedging reserve within consolidated
equity for these hedging instruments (prior year:CHF 13 million). In 2009, interest rate swaps des-
ignated for hedge accounting for the premature hedging of the interest rate risk for the intended
issuance of debenture loans totalling CHF 500 million were closed out. The effective share of CHF 24
million was left in the other reserves. It is being released to interest expense over the hedged dura-
tion of debenture bonds issued in 2009. As of 31 December 2014, a negative amount of CHF 2 mil-
lion (prior year: CHF 5 million) is recognised in the hedging reserve as part of consolidated equity.
As of 31 December 2014, derivative financial instruments include currency swaps of USD 237 mil-
lion and forward currency contracts of EUR 199 million, which serve to hedge future purchases of
goods and services in the respective currencies. The hedges were designated for hedge accounting
purposes. The hedges disclose a positive fair value of CHF 6 million (prior year: negative market
value of CHF 3 million). A positive amount of CHF 5 million was recognised in the hedging reserve
within consolidated equity for these designated hedging instruments (prior year: negative amount
of CHF 4 million).
Other derivative financial instruments
In CHF million
Currency swaps in EUR
Interest rate swaps in CHF
Currency swaps in USD
Currency swaps in EUR
Forward currency contracts in USD
Forward currency contracts in EUR
Total other derivative financial instruments
Contract value
Positive fair value
Negative fair value
31.12.2014 31.12.2013 31.12.2014 31.12.2013 31.12.2014 31.12.2013
421
200
211
–
–
97
929
592
200
2
75
42
–
911
–
–
5
–
–
–
5
–
6
–
–
–
–
6
(47)
(40)
–
–
(1)
–
(96)
(1)
–
–
(1)
–
(88)
(98)
In 2010 in order to hedge currency and interest rate risks arising in connection with EUR-denomi-
nated financing, interest rate swaps were entered into covering EUR 350 million with a duration of
five years. These hedges were not designated for hedge accounting. Already in 2007, interest rate
swaps for EUR 228 million had been entered to hedge currency and interest rate risks arising in con-
nection with EUR-denominated financing and which had not been designated for hedge account-
ing. Of this amount, EUR 167 million matured in 2014.
Furthermore, derivative financial instruments as at 31 December 2014 include interest rate
swaps covering CHF 200 million with maturities ending in 2040 with a negative market value of
CHF 40 million (prior year: positive value of CHF 6 million and a negative market value of CHF 1 mil-
lion) which were not designated for hedge accounting.
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N
In addition, foreign currency forward contracts and currency swaps for EUR and USD which serve to
hedge future transactions in connection with Swisscom’s operating activities were not designated
for hedge accounting purposes are included in derivative financial instruments.
Cross-border lease agreements
Between 1996 until 2002, Swisscom entered into various cross-border lease agreements, under the
terms of which parts of its fixed line and mobile phone networks were sold or leased on a long-
term basis and leased back. Swisscom defeased a significant part of the lease obligations through
the acquisition of investment-grade financial investments. The financial assets were irrevocably
deposited with a trust. In accordance with Interpretation SIC 27 “Evaluating the Substance of
Transactions involving the Legal Form of a Lease”, these financial assets and liabilities in the same
amount are netted and not recorded in the balance sheet. As of 31 December 2014, the financial
liabilities and assets, including accrued interest, which arose from cross-border lease agreements
amounted to USD 66 million or CHF 65 million, which, in compliance with SIC 27, were not recog-
nised in the balance sheet (prior year: USD 63 million or CHF 56 million).
Netting of financial instruments
In CHF million
At 31 December 2014
Receivables from international roaming
Billed revenue
Accruals
Total receivables from international roaming
Liabilities from international roaming
Supplier invoices received
Accruals
Total liabilities from international roaming
At 31 December 2013
Receivables from international roaming
Billed revenue
Accruals
Total receivables from international roaming
Liabilities from international roaming
Supplier invoices received
Accruals
Total liabilities from international roaming
Gross amount
Settlement
Net amount
26
164
190
34
152
186
37
238
275
41
180
221
(19)
(104)
(123)
(19)
(104)
(123)
(26)
(147)
(173)
(26)
(147)
(173)
7
60
67
15
48
63
11
91
102
15
33
48
Swisscom enters into derivative transactions under International Swaps and Derivatives Associa-
tion (ISDA) master netting agreements. Under such agreements the amounts owed by each coun-
terparty on a single day in respect of all transactions outstanding in the same currency are aggre-
gated into a single net amount that is payable by one party to the other. The ISDA agreements
do not meet the criteria for balance-sheet netting as Swisscom has presently no legally enforce-
able right to offset the recognised amounts and such a right may only be applied to future occur-
rences such as a credit default or other credit events. In 2014, Swisscom recorded an amount of
CHF 2 million for which such netting agreements existed. In the event of netting, derivative assets
of CHF 11 million and derivative liabilities of CHF 98 million would be reduced to CHF 9 million and
CHF 96 million, respectively. In the prior year, Swisscom recognised an amount of CHF 6 million for
which such netting agreements existed. In the event of netting, the derivative assets in the prior
year of CHF 6 million would be reduced to CHF zero and the derivative liabilities would be reduced
from CHF 127 million to CHF 121 million.
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a
d
i
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n
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h
t
o
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s
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N
Charges for international roaming between telecom enterprises are settled over a clearing centre.
Receivables and payables arising from roaming charges between the contracting parties are netted
and settled on a net basis. Those receivables and payables for which Swisscom has a legal right of
offset are netted in Swisscom’s consolidated financial statements.
Management of equity resources
Managed capital is defined as equity including non-controlling interests. Swisscom seeks to main-
tain a robust equity basis. This basis enables it to guarantee the continuing existence of the com-
pany as a going concern and to offer investors an appropriate return in relation to the risks entered
into. Furthermore, Swisscom maintains funds to enable investments to be made which will bring
future benefits to customers as well as generate further returns for investors. The managed capital
is monitored through the equity ratio which is the ratio of consolidated equity to total assets. The
following table illustrates the calculation of the equity ratio:
In CHF million
Share of equity attributable to equity holders of Swisscom Ltd
Share of equity attributable to non-controlling interests
Total capital
Total assets
Equity ratio in %
31.12.2014
31.12.2013
5,454
3
5,457
20,932
26.1
5,973
29
6,002
20,496
29.3
In its strategic targets, the Federal Council has ruled that Swisscom’s net indebtedness shall not
exceed approximately 2.1 times the operating result before taxes, interest and depreciation and
amortisation (EBITDA). Exceeding this limit temporarily is permitted. The net-debt-to-EBITDA ratio
is as follows:
In CHF million
Debenture bonds
Bank loans
Private placements
Finance lease liabilities
Other financial liabilities
Total financial liabilities
Cash and cash equivalents
Current financial assets
Non-current fixed interest-bearing deposits
Net debt
Operating income before depreciation and amortisation (EBITDA)
Ratio net debt/EBITDA
31.12.2014
31.12.2013
5,104
1,881
925
561
133
8,604
(302)
(40)
(142)
8,120
4,413
1.8
5,508
1,353
1,126
655
181
8,823
(723)
(160)
(128)
7,812
4,302
1.8
Net debt consists of total financial liabilities less cash and cash equivalents, current financial assets
as well as non-current fixed interest-bearing financial investments.
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a
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fi
d
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d
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n
o
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h
t
o
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s
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t
o
N
34 Supplementary information on the statement of cash flows
Changes in operating assets and liabilities
In CHF million
Trade and other receivables
Inventories
Other non-financial assets
Trade and other payables
Provisions
Other non-financial liabilities
Defined benefit obligations
Total changes in operating assets and liabilities
Other cash flows from financing activities
2014
4
(7)
(41)
(85)
(40)
(22)
(22)
(213)
2013
178
8
7
(172)
(16)
119
(20)
104
In 2014, other cash flows from financing activities aggregated CHF 14 million (prior year: CHF 12 mil-
lion). This relates mainly to payments in connection with hedging contracts and the commitment
fee for the guaranteed credit limit.
Non-cash investing and financing transactions
Additions to property, plant and equipment include additions from finance leases amounting to
CHF 13 million (prior year: CHF 10 million). As a result of changes in the assumptions made in esti-
mating the provisions for dismantling and restoration costs, an increase of CHF 157 million net was
recognised in property, plant and equipment (prior year: reduction of CHF 19 million). See Note 23.
35 Future commitments
Commitments for future capital expenditures
Firm contractual commitments for future investments in property, plant and equipment and other
intangible assets as of 31 December 2014 aggregated CHF 1,004 million (prior year: CHF 862 million).
Operating leases
Operating leases relate primarily to the rental of real estate for business purposes. See Note 26.
In 2014, payments for operating leases amounted to CHF 316 million (prior year: CHF 301 million).
Future minimum lease payments in respect of operating lease contracts are as follows:
In CHF million
Within 1 year
Within 1 to 2 years
Within 2 to 3 years
Within 3 to 4 years
Within 4 to 5 years
After 5 years
Total future minimum lease payments
31.12.2014
31.12.2013
153
136
120
104
91
455
1,059
104
95
76
62
50
240
627
196
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N
36 Research and development
Costs aggregating CHF 18 million for research and development were expensed in 2014 (prior year:
CHF 20 million).
37 Related parties
Majority shareholder, associates and non-controlling interests
Transactions and balances outstanding at year end with related entities and individuals for 2014
are as follows:
In CHF million
Confederation
Associates
Other minority shareholders
Total 2014/Balance at 31 December 2014
Income
Expense
Receivables
Liabilities
397
100
–
497
160
145
1
306
178
9
–
187
668
6
2
676
Transactions and balances outstanding at year end with related entities and individuals for 2013
are as follows:
In CHF million
Confederation
Associates
Other minority shareholders
Total 2013/Balance at 31 December 2013
Income
Expense
Receivables
Liabilities
372
131
8
511
170
206
–
376
186
14
1
201
382
10
–
392
Majority shareholder
Pursuant to the Swiss Federal Telecommunication Enterprises Act (“Telekommunikations unter-
nehmungsgesetz, TUG”), the Swiss Confederation (“the Confederation”) is obligated to hold a
majority of the share capital and voting rights of Swisscom. On 31 December 2014, the Confeder-
ation as majority shareholder held 51.0% (prior year: 51.2%) of the issued shares of Swisscom Ltd.
Any reduction of the Confederation’s holding below a majority would require a change in law which
would need to be voted upon the Federal Assembly, which would also be subject to a facultative
referendum by Swiss voters. As the majority shareholder, the Swiss Confederation has the power
to control the decisions of the general meetings of shareholders which are taken by the absolute
majority of effectively cast votes. This relates primarily to the approval of dividend distributions
and the election of the members of the Board of Directors. Swisscom supplies telecommunication
services to and in addition, procures services from the Confederation, the majority shareholder in
Swisscom. The Confederation comprises the various departments and administrative bodies of the
Confederation and the other companies controlled by the Confederation (primarily the Post, Swiss
Federal Railways, RUAG as well as Skyguide). All transactions are conducted on the basis of normal
relationships with customers and suppliers and on conditions applicable to unrelated third parties.
In addition, financing trans actions are entered into with the Swiss Post on normal commercial terms.
Associates and non-controlling interests
Services provided to/from associates and non-controlling interests are based upon market prices.
The associates are listed in Note 41.
Post-employment benefits funds
Transactions between Swisscom and the various pension funds are detailed in Note 10.
197
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a
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n
o
c
e
h
t
o
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s
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t
o
N
Key management compensation
In CHF million
Current compensation
Share-based payments
Social security contributions
Total compensation to members
of the Board of Directors
Current compensation
Share-based payments
Benefits paid following retirement
from Group Executive Board
Pension contributions
Social security contributions
Total compensation to members of the Group Executive Board
2014
1.5
0.8
0.1
2.4
5.6
0.7
0.3
0.7
0.5
7.8
2013
1.6
0.8
0.1
2.5
5.8
0.9
1.5
0.7
0.5
9.4
Total compensation to members of the Board of Directors and of the Group Executive Board
10.2
11.9
Individuals in key positions of Swisscom are the members of the Board of Directors and the Group
Executive Board of Swisscom Ltd. Compensation paid to members of the Board of Directors con-
sists of basic emoluments plus functional allowances and meeting attendance fees. One third of
the entire compensation of the Board of Directors (excluding meeting allowances) is paid in shares.
Compensation paid to the members of the Group Executive Board consists of a fixed basic sal-
ary component settled in cash, a variable performance-related portion settled in cash and shares,
services provided and non-cash benefits as well as pension and social-insurance benefits. 25% of
the variable performance-related share of the members of the Group Executive Board is paid out
in shares. The Group Executive Board members may increase this share to 50% at their discretion.
See Note 11. The disclosures required by the Swiss Ordinance against Excessive Compensation in
Listed Companies (OaEC) are set out in the chapter containing the Remuneration Report. Shares in
Swisscom Ltd held by the members of the Board of Directors and Group Executive Board are set out
in the Notes to the Consolidated Financial Statements of Swisscom Ltd.
38 Service concession agreements
On 21 June 2007 and in accordance with the Swiss Federal Telecommunications Act (TCA),
ComCom granted Swisscom a basic-service license for 2008 to 2017. As licensee, Swisscom (Swit-
zerland) Ltd is required to offer the entire range of the basic service to all sections of the Swiss pop-
ulation throughout the whole territory of Switzerland during the ten-year duration of the license.
The license covers the whole territory of Switzerland. The basic service is to guarantee access to
a minimum offering of telecommunication services. Within the framework of the basic service,
everyone has the right to a connection which allows national and international telephone calls
in real time, the transmission and reception of fax messages and access to the Internet. The basic
service also provides for the maintenance of a prescribed number of public telephones per munici-
pality (Publifon). The Federal Council periodically sets price ceilings for basic services.
198
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a
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h
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o
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s
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t
o
N
39 Risk assessment process
Swisscom has a centralised risk management system in place that distinguishes between strategic
and operative risks. All identified risks are quantified as a function of the probability of occurrence
and possible impact and are set forth in a risk report. The risk report is discussed periodically by
the Audit Committee of Swisscom. Management aims to monitor and control risks on an ongo-
ing basis. A risk assessment is undertaken to identify the risks arising from the application of the
accounting principles or from financial reporting. Control mechanisms are defined within the scope
of the internal control system to minimise the risks connected with financial reporting. Residual
risks are classified according to their possible impact and monitored accordingly. See Notes 4 and 33.
40 Events after the balance sheet date
Approval of the consolidated financial statements
The Board of Directors of Swisscom approved the release of these consolidated financial state-
ments on 4 February 2015.
Discontinuation of the minimum exchange rate CHF/EUR by the Swiss National Bank
On 15 January 2015, the Swiss National Bank announced it would no longer defend the CHF/EUR
minimum exchange rate. Subsequently, the value of the Swiss franc rose sharply against the euro
and other currencies that are relevant for Swisscom. The translation effect at subsidiaries and
associates that use a different functional currency results in lower amounts in the consolidated
financial statements and an increase in the cumulative exchange differences recognised in equity.
Nevertheless, the exchange rate at the time of the release of the consolidated financial statements
had no material impact on the total cash flow from operating activities and investing activities or
on net income for 2015.
199
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41 List of Group companies
Registered office
Shareholding in %
Currency
Share capital
in millions
Registered name
Switzerland
Alphapay Ltd
Axept Webcall AG
BFM Business Fleet Management Ltd
Billag Ltd
cablex Ltd
CT Cinetrade Ltd
Curabill Treuhand GmbH
Datasport Ltd
DL-Groupe GMG AG
iware SA
kitag kino-theater Ltd
Medgate Holding Ltd
Mona Lisa Capital Ltd
myKompass Ltd.
MyStrom Ltd
PG Lab SA
Plazavista Entertainment AG
PubliGroupe Ltd
Société Immobilière Dos-Vie S.A.
Swisscom Banking Provider Ltd
Swisscom Broadcast Ltd
Swisscom Directories Ltd
Swisscom Energy Solutions Ltd
Swisscom Event & Media Solutions Ltd
Swisscom Real Estate Ltd
Swisscom IT Services Ltd
Zurich
Opfikon
Ittigen
Fribourg
Berne
Zurich
St. Gallen
Gerlafingen
Geneva
Morges
Zurich
Zug
Ittigen
Luzern
Ittigen
Lausanne
Zurich
Lausanne
Delémont
Muri bei Bern
Berne
Zurich
Ittigen
Ittigen
Ittigen
Berne
Swisscom IT Services Finance Custom Solutions Ltd Olten
Swisscom Switzerland Ltd
Teleclub AG
Teleclub Programm AG
Transmedia Communications Ltd
Wingo Ltd
Worklink AG
Belgium
Belgacom International Carrier Services SA
Hospitality Services Belgium SA
Swisscom Belgium N.V.
Denmark
Ittigen
Zurich
Zurich
Geneva
Fribourg
Berne
Brussels
Brussels
Brussels
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100
100
100
100
100
75
100
100
66.7
100
75
40
99.5
20
100
100
75
98.4 1
100
100
100
100
50.1
100
100
100
100
100
75
25
21.8
100
100
22.4
100
100
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
EUR
EUR
EUR
0.5
0.2
1.0
0.1
5.0
0.5
–
0.2
0.1
0.1
1.0
6.2
5.0
0.1
0.1
0.1
0.1
2.3
0.7
5.0
25.0
1.5
13.3
0.1
100.0
150.0
0.1
1,000.0
1.2
0.6
1.9
3.0
0.5
1.5
0.6
4,330.2
0.6
0.3
0.1
–
–
0.2
0.1
–
Swisscom Hospitality Denmark A/S
Hellerup
100
DKK
Germany
Abavent GmbH
Hospitality Services Germany GmbH
Spree7 GmbH
Swisscom Telco GmbH
Zanox Ltd
Finland
Swisscom Hospitality Finland Oy
Vilant Systems Oy
Kempten
Munich
Berlin
Eschborn
Berlin
Helsinki
Espoo
100
100
80
100
47.5
100
20
EUR
EUR
EUR
EUR
EUR
EUR
EUR
1 Share of Swisscom after expiry of offer period. A procedure for the cancellation of the remaining minority shareholdings was initiated.
See Note 5.
Hospitality Networks and Services UK Ltd
London
100
GBP
Registered name
France
Hospitality Services France SA
local.fr SA
Great Britain
Italy
Fastweb S.p.A.
Hospitality Services Italia S.r.l.
Metroweb S.p.A. 1
Swisscom Italia S.r.l.
Liechtenstein
Swisscom Re Ltd
Luxembourg
Milan
Milan
Milan
Milan
Vaduz
Registered office
Shareholding in %
Currency
Share capital
in millions
Paris
Bourg-en-Bresse
96
67
EUR
EUR
5.6
0.5
1.6
41.3
0.1
29.2
2,502.6
100
100
10.6
100
EUR
EUR
EUR
EUR
100
CHF
5.0
Hospitality Services Luxembourg SA
Luxembourg
100
EUR
Netherlands
Bone B.V.
Improve Digital B.V.
NGT International B.V.
SVBmedia Group B.V.
Swisscom Hospitality Benelux B.V.
Norway
Utrecht
Amsterdam
Capelle a/d IJssel
Rotterdam
The Hague
100
85
100
100
100
EUR
EUR
EUR
EUR
EUR
Swisscom Hospitality Norway A/S
Oslo
100
NOK
Austria
Hospitality Services GmbH
Swisscom IT Servics Finance SE
Portugal
Vienna
Vienna
100
100
EUR
EUR
HSIA Hospitality Services Portugal
Lisbon
100
EUR
Romania
Swisscom Hospitality s.r.l.
Brasov
100
RON
Sweden
Sellbranch AB
Spain
Stockholm
50.1
SEK
Hospitality Networks and Services España SA
Barcelona
100
EUR
Singapore
Swisscom IT Services Finance Pte Ltd
Singapore
100
SGD
USA
Hospitality Services North America Corp.
Swisscom Cloud Lab Ltd
Dulles
Delaware
98
100
USD
USD
1 Investment is accounted for using the equity method. Through its representation on the Board of Directors of the company,
Swisscom can exercise a significant influence.
–
–
–
–
2.5
–
0.3
0.3
0.1
1.1
1.9
0.1
0.1
0.1
1.6
–
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Report of the Statutory Auditor
Report of the Statutory Auditor on the Consolidated Financial
Statements to the General Meeting of Shareholders of Swisscom Ltd,
Ittigen (Berne)
Report of the Statutory Auditor on the Consolidated Financial Statements
As statutory auditor, we have audited the accompanying consolidated financial statements on
pages 132 to 201 of Swisscom Ltd, which comprise the income statement, statement of compre-
hensive income, balance sheet, statement of cash flows, statement of changes in equity and notes
for the year ended 31 December 2014.
Board of Directors’ Responsibility
The board of directors is responsible for the preparation and fair presentation of the consolidated
financial statements in accordance with International Financial Reporting Standards (IFRS) and the
requirements of Swiss law. This responsibility includes designing, implementing and maintaining
an internal control system relevant to the preparation and fair presentation of consolidated finan-
cial statements that are free from material misstatement, whether due to fraud or error. The board
of directors is further responsible for selecting and applying appropriate accounting policies and
making accounting estimates that are reasonable in the circumstances.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on
our audit. We conducted our audit in accordance with Swiss law and Swiss Auditing Standards as
well as International Standards on Auditing. Those standards require that we plan and perform the
audit to obtain reasonable assurance whether the consolidated financial statements are free from
material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclo-
sures in the consolidated financial statements. The procedures selected depend on the auditor’s
judgement, including the assessment of the risks of material misstatement of the consolidated
financial statements, whether due to fraud or error. In making those risk assessments, the auditor
considers the internal control system relevant to the entity’s preparation and fair presentation
of the consolidated financial statements in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the entity’s internal control system. An audit also includes evaluating the appropriateness of the
accounting policies used and the reasonableness of accounting estimates made, as well as evalu-
ating the overall presentation of the consolidated financial statements. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements for the year ended 31 December 2014 give a
true and fair view of the financial position, the results of operations and the cash flows in accordance
with International Financial Reporting Standards (IFRS) and comply with Swiss law.
202
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Report on Other Legal Requirements
We confirm that we meet the legal requirements on licensing according to the Auditor Oversight
Act (AOA) and independence (article 728 CO and article 11 AOA) and that there are no circum-
stances incompatible with our independence.
In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we con-
firm that an internal control system exists, which has been designed for the preparation of consol-
idated financial statements according to the instructions of the board of directors.
We recommend that the consolidated financial statements submitted to you be approved.
KPMG AG
Rolf Hauenstein
Licensed Audit Expert
Auditor in Charge
Gümligen-Berne, 4 February 2015
Daniel Haas
Licensed Audit Expert
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Financial statements
of Swisscom Ltd
Income statement
In CHF million
Net revenue from sale of goods and services
Other income
Total net revenue and other income
Personnel expense
Other operating expense
Total operating expenses
Operating income
Financial expense
Financial income
Income from participations
Income tax expense
Net income
2014
238
30
268
(84)
(107)
(191)
77
(263)
220
2,447
(9)
2,472
2013
235
40
275
(89)
(108)
(197)
78
(220)
256
135
(10)
239
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Balance sheet
In CHF million
Assets
Cash and cash equivalents
Other financial assets
Receivables from Group companies
Dividends receivable from subsidiaries
Other receivables from third parties
Other assets
Total current assets
Participations
Loans to third parties
Loans to Group companies
Total non-current assets
Total assets
Liabilities and equity
Financial liabilities to third parties
Financial liabilities to Group companies
Trade payables due to third parties
Other payables to third parties
Other payables to Group companies
Total current liabilities
Financial liabilities to third parties
Financial liabilities to Group companies
Provisions
Total non-current liabilities
Total liabilities
Share capital
Capital surplus reserves
Retained earnings
Total equity
Total liabilities and equity
Note
31.12.2014
31.12.2013
156
–
127
9
2,400
3
10
2,696
7,767
104
5,153
13,024
15,720
1,506
1,719
6
106
15
3,352
6,514
224
55
6,793
10,145
52
21
5,502
5,575
15,720
9
10
5
4
5
7
571
135
166
89
2
8
971
7,148
92
7,573
14,813
15,784
1,535
2,996
6
139
17
4,693
6,552
239
57
6,848
11,541
52
21
4,170
4,243
15,784
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Notes to the financial statements
1 General information
The financial statements of Swisscom Ltd, the parent company of the Swisscom Group, comply
with Swiss law.
2 Contingent liabilities
At 31 December 2014, guarantees in favour of third parties for the account of Group companies
amount to CHF 260 million (prior year: CHF 142 million).
3 Fire insurance values of property, plant and equipment
The fire insurance values of property, plant and equipment correspond generally to their replace-
ment value or fair value.
4 Amounts payable to pension funds
As of 31 December 2014, amounts payable to pension funds totalled CHF 1 million (prior year: none).
5 Debenture bonds issued
The amounts, interest rates and maturities of debenture bonds issued by Swisscom Ltd are as
follows:
In CHF million or EUR
Debenture bond in CHF 2007–2017
Debenture bond in CHF 2008–2015
Debenture bond in CHF 2009–2014
Debenture bond in CHF 2009–2018
Debenture bond in CHF 2010–2022
Debenture bond in CHF 2012–2024
Debenture bond in EUR 2013–2020
Debenture bond in EUR 2014–2021
Debenture bond in CHF 2014–2026
Debenture bond in CHF 2014–2029
31.12.2014
Nominal
interest rate
3.75
4.00
–
3.25
2.63
1.75
2.00
1.88
1.50
1.50
Par value
600
500
–
1,425
500
500
500
500
200
160
31.12.2013
Nominal
interest rate
3.75
4.00
3.50
3.25
2.63
1.75
2.00
–
–
–
Par value
600
500
1,250
1,500
500
500
500
–
–
–
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6 Treasury shares
Swisscom Ltd recognises treasury shares separately as assets and establishes a reserve for treasury
shares in the same amount in equity. Treasury shares are measured at the lower of cost and market
value. Details of the balance of and movements in treasury shares are set out in Note 31 to the
consolidated financial statements.
7 Equity
Movements in the number of shares in circulation as well as the equity of Swisscom Ltd are as follows:
In CHF million
Balance at 1 January 2013
Net income
Dividends paid
Balance at 31 December 2013
Net income
Dividends paid
Balance at 31 December 2014
Number
of shares
Share
capital
51,801,943
–
–
51,801,943
–
–
51,801,943
52
–
–
52
–
–
52
Capital
surplus
reserves
Retained
earnings
21
5,071
Total
equity
5,144
239
–
–
21
–
–
239
(1,140)
(1,140)
4,170
2,472
4,243
2,472
(1,140)
(1,140)
21
5,502
5,575
Swisscom Ltd is a holding company established under Swiss law. According to the provisions of
law governing the appropriation of retained earnings by holding companies, the share capital and
appropriations to the general legal reserve to the extent of 20% of share capital as well as the
reserve for treasury shares may not be distributed. As of 31 December 2014, distributable reserves
aggregated CHF 5,513 million. Any dividend distribution must be proposed by the Board of Direc-
tors and approved by the Annual General Meeting of Shareholders.
8 Significant shareholders
On 31 December 2014, the Swiss Confederation (Confederation), as majority shareholder, held
51.0% (prior year: 51.2%) of the issued share capital of Swisscom Ltd. The Federal Telecommunication
Enterprises Act (TUG) stipulates that the Confederation must hold the majority of the capital and
voting rights of Swisscom Ltd.
9 Participations and recording of dividends from subsidiaries
Participations are accounted for at acquisition cost less provisions for impairment, as required. Div-
idend income from subsidiary companies is accrued provided that the annual general meetings
of the subsidiaries approve the payment of a dividend prior to approval of the annual financial
statements of Swisscom Ltd by the Board of Directors. A list of direct and indirect shareholdings of
Swisscom Ltd is provided in Note 41 to the consolidated financial statements.
10 Assets subject to restriction
As of 31 December 2014, financial assets totalling CHF 103 million were not freely available (prior
year: CHF 92 million). These assets serve to secure commitments arising from bank loans.
207
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11 Information on risk assessment process
Swisscom Ltd is fully integrated into the risk assessment process of Swisscom Group. This Group-
wide risk assessment process also takes into consideration the nature and scope of business
activities and the specific risks to which Swisscom Ltd is exposed. See Note 39 to the consolidated
financial statements.
12 Shareholdings of the members of the Board of Directors
and the Group Executive Board
The table below discloses the number of restricted and non-restricted shares held by the members
of the Board of Directors and the Group Executive Board and as well as individuals related to them
as of 31 December 2014 and 2013.
Number
Hansueli Loosli
Frank Esser 1
Barbara Frei
Hugo Gerber
Michel Gobet
Torsten G. Kreindl
Catherine Mühlemann
Richard Roy 2
Theophil Schlatter
Hans Werder
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Total shares of the members of the Group Executive Board
1 Elected as of 7 April 2014.
2 Resigned as of 7 April 2014.
Number
Urs Schaeppi (CEO) 1
Mario Rossi
Hans C. Werner
Marc Werner 2
Christian Petit 3
Roger Wüthrich-Hasenböhler 2
Heinz Herren 2
Andreas König 4
Total shares of the members of the Board of Directors
1 From 23 July to 6 November 2013 CEO ad interim and from 7 November 2013 CEO.
2 Joined the Group Executive Board as of 1 January 2014.
3 Joined the Group Executive Board as of 1 April 2014.
4 Resigned from the Group Executive Board as of 31 March 2014.
31.12.2014
31.12.2013
1,682
101
409
1,129
1,496
1,195
1,119
–
887
839
8,857
1,335
–
283
1,020
1,387
1,061
1,010
1,269
711
688
8,764
31.12.2014
31.12.2013
2,275
634
421
106
1,332
879
1,122
–
6,769
1,716
383
257
–
–
–
–
170
2,526
No share of the voting rights of any person required to make disclosure thereof exceeds 0.1% of the
share capital.
Proposed appropriation
of retained earnings
Proposal of the Board of Directors
The Board of Directors proposes to the Annual General Meeting of Shareholders to be held on
8 April 2015 that the retained earnings of CHF 5,502 million as of 31 December 2014 shall be
appropriated as follows:
In CHF million
Appropriation of retained earnings
Balance carried forward from prior year
Net income for the year
Total retained earnings
Ordinary dividend of CHF 22.00 per share to 51,801,794 shares in total 1
Balance to be carried forward
1 Excluding treasury shares.
31.12.2014
3,030
2,472
5,502
(1,140)
4,362
In the event that the proposal is approved, a dividend per share will be paid to shareholders on
15 April 2015 as follows:
Per registered share
Ordinary dividend, gross
Less 35% withholding tax
Net dividend paid
CHF
22.00
(7.70)
14.30
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Report of the Statutory Auditor
Report of the Statutory Auditor on the Financial Statements to the
General Meeting of Shareholders of Swisscom Ltd, Ittigen (Berne)
Report of the Statutory Auditor on the Financial Statements
As statutory auditor, we have audited the accompanying financial statements on pages 204 to
208 of Swisscom Ltd, which comprise the income statement, balance sheet and notes for the year
ended 31 December 2014.
Board of Directors’ Responsibility
The board of directors is responsible for the preparation of the financial statements in accordance
with the requirements of Swiss law and the company’s articles of incorporation. This responsibil-
ity includes designing, implementing and maintaining an internal control system relevant to the
preparation of financial statements that are free from material misstatement, whether due to
fraud or error. The board of directors is further responsible for selecting and applying appropriate
accounting policies and making accounting estimates that are reasonable in the circumstances.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We
conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Those standards
require that we plan and perform the audit to obtain reasonable assurance whether the financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclo-
sures in the financial statements. The procedures selected depend on the auditor’s judgement,
including the assessment of the risks of material misstatement of the financial statements,
whether due to fraud or error. In making those risk assessments, the auditor considers the internal
control system relevant to the entity’s preparation of the financial statements in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the entity’s internal control system. An audit also includes eval-
uating the appropriateness of the accounting policies used and the reasonableness of accounting
estimates made, as well as evaluating the overall presentation of the financial statements. We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
Opinion
In our opinion, the financial statements for the year ended 31 December 2014 comply with Swiss
law and the company’s articles of incorporation.
210
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Report on Other Legal Requirements
We confirm that we meet the legal requirements on licensing according to the Auditor Oversight
Act (AOA) and independence (article 728 CO and article 11 AOA) and that there are no circum-
stances incompatible with our independence.
In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we con-
firm that an internal control system exists, which has been designed for the preparation of financial
statements according to the instructions of the board of directors.
We further confirm that the proposed appropriation of available earnings complies with Swiss law
and the company’s articles of incorporation. We recommend that the financial statements submitted
to you be approved.
KPMG AG
Rolf Hauenstein
Licensed Audit Expert
Auditor in Charge
Gümligen-Berne, 4 February 2015
Daniel Haas
Licensed Audit Expert
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“I help customers in their
homes, rectify disruptions
to the Internet, set up
new computers and smart-
phones, and get rid of
viruses.”
Christian Gebs
My Service technician
Residential Customers
Further information
Focusing on
our customers
with a great deal
of passion and
reliability.
Over 1.4 million
homes and offices
are connected with
ultra-fast broadband.
Topics
Glossary
216216 Technical terms
220 Networks
221 Other terms
Index of keywords
Swisscom Group
five-year review
223
224
Over 1.4 million
Glossary
Technical terms
ADSL (Asymmetric Digital Subscriber Line): A broadband data transmission technology that
uses the existing copper telephone cable for broadband access to the data network. Filters at
the customer end and in the network prevent mutual interference, allowing traditional analogue
telephony and data transmission to exist in parallel. Depending on the line length and other factors,
the transmission speed varies between 150/50 kbps and a maximum of 6,000/600 kbps.
All-IP: All-IP is the technology behind the transition to a single unified network based on the Inter-
net Protocol (IP). All-IP means that all services such as television, the Internet or telephony run over
the same IT network based on the Internet Protocol. Phone calls are no longer transmitted using
analogue signals but instead take the form of data packets, as is the case for existing Internet ser-
vices. Thanks to the unified All-IP network infrastructure, devices and services can communicate
with one another and exchange data. In the medium and long term, Swisscom intends to migrate
all existing communications networks to IP to enable all telecommunications services (telephony,
data traffic, TV, mobile communications, etc.) to be offered over IP.
Bandwidth: Bandwidth refers to the transmission capacity of a medium, also known as the data
transmission rate. The higher the bandwidth, the more information units (bits) can be transmitted
per unit of time (second). It is defined in bps, kbps or Mbps.
Cloud: Cloud computing is an approach in which IT infrastructure, such as computing capacity,
data storage and even finished software and platforms can be modified according to need dynam-
ically and accessed via the Internet. The data centres, along with the resources and databases, are
distributed via the cloud. The cloud is also a synonym for hardware that does not have a precise
location.
Connectivity: Connectivity is the generic term used to denote IP services or the connection to the
Internet and the ability to exchange data with any partner on the network.
DSL (Digital Subscriber Line): DSL is the generic term for transmission technologies that use sub-
scriber lines based entirely or partly on copper. Examples of DSL technologies: ADSL or VDSL.
EDGE (Enhanced Data Rates for GSM Evolution): EDGE is part of the second generation of mobile
telephony and is a radio modulation technology used to enhance data transmission speeds in GSM
mobile networks. EDGE enables data transfer rates of up to 256 kbps. EDGE is currently available to
over 99% of the Swiss population.
FTTH (Fibre to the Home): FTTH refers to the end-to-end connection of homes and offices using
fibre-optic cables instead of traditional copper cables.
FTTS (Fibre to the Street)/FTTB (Fibre to the Building)/FTTC (Fibre to the Curb): FTTS, FTTB and
FTTC with vectoring refer to innovative, hybrid broadband connection technologies (optical fibre
and copper). With these technologies fibre-optic cables are laid as close as possible to the building,
or up to the basement in the case of FTTB, while the existing copper cabling is used for the remain-
ing section. VDSL’s subsequent evolution to G.fast will significantly increase bandwidths for FTTS
and FTTB.
G.fast (pronounced “G dot fast”): G.fast, the latest technology for copper lines, is capable of pro-
viding far more bandwidth than VDSL2. The use of G.fast for FTTS and FTTB is part of Swisscom’s
access strategy.
GPRS (General Packet Radio Service): GPRS is part of the second generation of mobile telephony
and increases the transfer rates of GSM mobile networks. GPRS enables speeds of 30 to 40 kbps.
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GSM (Global System for Mobile communications) network: GSM is a global second-generation
digital mobile telephony standard which, in addition to voice and data transmission, enables
services such as SMS messages and phone calls to other countries (international roaming).
HSPA (High Speed Packet Access): HSPA is an enhancement of the third generation of the UMTS
mobile communications standard. Compared to UMTS, HSPA enables large volumes of data to be
transmitted at faster speeds. HSPA enables far more customers to use the same radio cell simul-
taneously and at a consistently high speed than would be possible with UMTS. At locations where
mobile Internet use is particularly concentrated, HSPA is upgraded to HSPA+ (also referred to as HSPA
Evolution). The maximum transmission speed currently delivered by this technology is 42 Mbps.
ICT (Information and Communication Technology): A term coined in the 1980s, combining the
terms information and communication technology. It denotes the convergence of information
technology (information and data processing and the related hardware) and communication tech-
nology (technically aided communications).
IP (Internet Protocol): IP enables different types of services to be integrated on a single network.
Typical applications are virtual private networks (VPN), telephony (Voice over IP) and fax (Fax over IP).
IPTV (Internet Protocol Television): IPTV refers to the digital broadcasting of broadband applica-
tions (for example, television programmes and films) over an IP network.
ISP (Internet Service Provider): An ISP is a provider of Internet-based services, also commonly
referred to as Internet Provider. Services include Internet connection (using DSL, for example), hosting
(registration and operation of Internet addresses, websites and web servers) and content provision.
LAN (Local Area Network): A LAN is a local network for interconnecting computers, usually based
on Ethernet.
4G/LTE (Long Term Evolution): 4G/LTE is the successor technology to HSPA and is the fourth gen-
eration of mobile technology. At present, LTE enables mobile broadband data speeds of up to
150 Mbps.
4G+LTE Advanced: 4G+/LTE Advanced enables a theoretical bandwidth of up to 300 Mbps using
the mobile phone network. In doing so, it bundles 4G/LTE frequencies to achieve the necessary
capacity. In the near future, theoretical bandwidths of up to 450 Mbps will be achieved through the
further bundling of 4G/LTE frequencies.
MVNO (Mobile Virtual Network Operator): MVNO denotes a business model for mobile communi-
cations. In this case, the corresponding business (the MVNO) has little or no limited network infra-
structure. It therefore accesses the infrastructure of other mobile communication providers.
Net Promoter Score (NPS): NPS is a key figure that quantifies customer satisfaction directly and
willingness to recommend the service to other customers indirectly. The NPS is thus an analysis to
determine customer satisfaction.
Optical fibre: Fibre-optic cables enable optical data transmission, unlike copper cables, which use
electrical signals to transmit data.
OTT (Over the Top): OTT refers to content distributed by service providers over an existing network
infrastructure without operating the infrastructure themselves. OTT companies offer proprietary
services on the basis of the infrastructures of other companies in order to reach a broad range of
users quickly and cost-efficiently.
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PWLAN (Public Wireless Local Area Network): PWLAN denotes a wireless, local public network
based on the IEEE 802.11 WiFi standard family. Swisscom customers can use PWLAN at more than
1,200 hotspots in Switzerland and over 65,000 worldwide. A PWLAN typically offers data trans-
mission speeds of 5-10 Mbps.
Roaming: Roaming enables mobile network subscribers to use their mobile phones when travel-
ling abroad. The mobile telephone of a subscriber outside Switzerland automatically selects the
best-quality partner network. Information indicating the country and region where the mobile
phone is located at any given time is sent to the exchange in Switzerland where the mobile phone
is registered. On receipt of the calling signal, the exchange in Switzerland transmits it within a
fraction of a second to the right region in the respective country, where the signal is forwarded to
the base station in whose vicinity the mobile phone is located. The base station then forwards the
signal to the mobile phone and the call can be taken. Roaming only works if all countries involved
operate on the same frequency bands. In Europe all GSM networks use the same frequency bands.
Other countries such as the USA or countries in South America use a different frequency range.
Most mobile telephones today are triband or quadband and support 900 MHz and 1,800 MHz net-
works (which are most commonly used in Europe) as well as 850 MHz and 1,900 MHz networks.
Router: A router is a device for connecting or separating several computer networks. The router
analyses incoming data packets according to their destination address, and either blocks them or
forwards them accordingly (routing). Routers come in different forms, from large-scale network
devices to small devices for the home.
TDM (Time Division Multiplexing): Multiplexing is a method which allows the simultaneous trans-
mission of multiple signals over a single communications medium (line, cable or radio link), for
example, by means of classic telephony (using an ISDN or analogue line). Multiplexing methods are
often combined to achieve even higher utilisation. The signals are multiplexed once the user data
have been modulated on a carrier signal. At the receiver end the information signal is first demulti-
plexed and then demodulated.
Ultra-fast broadband: Ultra-fast broadband is broadband speeds of more than 50 Mbps – on both
fixed and mobile networks.
UMTS (Universal Mobile Telecommunications System): UMTS is an international third generation
mobile communications standard that combines mobile multimedia and voice services. A further
development of GSM, UMTS complements GSM and Public Wireless LAN in Switzerland. Today the
UMTS network covers around 99% of the Swiss population.
Unified Communications: An attempt to integrate the wide variety of modern communication
technologies. Different telecommunication services such as e-mail, unified messaging, telephony,
mobile, PDAs, instant messaging and presence functions are coordinated to improve the reacha-
bility of communication partners working on distributed projects, thereby speeding up business
processes.
VDSL (Very High Speed Digital Subscriber Line): VDSL is currently the fastest DSL technology,
allowing data transmission speeds of up to 100 Mbps. The current form of VDSL is called VDSL2.
Vectoring: Vectoring is a technology that is used in conjunction with VDSL2. It eliminates interference
(disruptions) between pairs of copper lines. This enables maximum a double increase in bandwidth.
Video on Demand: A service that allows subscribers to choose from a selection of films and to
watch the selected film at any time. The film is delivered to the subscriber either over the broad-
band cable network, over the original telephone network (DSL transmission), or over the new
fibre-optic network (optical transmission).
VoIP (Voice over Internet Protocol): VoIP is used to set up telephone connections via the Internet.
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VoLTE (Voice over LTE): LTE is, in effect, a pure data network. VoLTE enables phone calls via the LTE
data network.
VPN (Virtual Private Network): Colloquially, VPN is now used to refer to a virtual IP network (usually
encrypted) that acts as a closed subnetwork within another IP network (often the public Internet).
WLAN: WLAN stands for wireless local area network. A WLAN connects several computers wire-
lessly to a central information system, printer or scanner.
WLAN interworking / WiFi calling: WLAN interworking or WiFi calling enables users to make calls
via their mobile phone and the WLAN/WiFi network. This technology has improved mobile phone
reception in houses significantly.
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Networks
Leased lines: Swisscom operates various data networks. These data networks support leased lines
based on a range of different technologies such as SDH (Synchronous Digital Hierarchy) and, of
course, Ethernet. Business customers can take advantage of permanent, overload-free point-to-
point connections using bandwidths of between 2 Mbps and 10 Gbps. Redundancies are tailored
to customers’ individual requirements in terms of availability and security.
Next-generation network: To enable more cost-effective use of new services such as VoIP and
convergent solutions in the future, Swisscom is investing in a network infrastructure that is based
exclusively on All-IP. This infrastructure allows Swisscom to offer services irrespective of the type
of access technology selected (copper, wireless or fibre optic). Having migrated the data transport
network to IP, commissioned an IP-based telephony and multimedia platform, and launched its
first IP-based services such as Swisscom TV and VoIP, Swisscom has already gained experience in
All-IP offerings. The first products based solely on IP were already rolled out in 2009 and supple-
mented since then by a wide range of new services and bundled offerings.
PSTN network: The PSTN network connects virtually all private households and a large proportion
of business customers in Switzerland. Four-fold redundancy in the core network and two-fold redun-
dancy in the switching layer ensure excellent voice quality and optimum security and availability.
Transport network: The transport network is a wide area network that connects the regional parts
of the fixed network as well as the regional parts of the mobile network with each other as well
as with the respective central network core. It also provides the link to computer centres and the
global Internet. The transport network is used for all services (voice, video and data) and all custom-
ers (residential/business).
Wired access network: Swisscom’s copper access network is comprised primarily of twisted copper
wire pairs. It reaches practically every household in Switzerland. Swisscom began with the expan-
sion of optical fibre to homes and offices (FTTH) in 2008. It started rolling out broadband tech-
nology in 2000, first based on ADSL (coverage at end-2014: 98%). ADSL was followed in 2006 by
VDSL2 (coverage at end-2014: over 91%) and in 2008 by optical transfer via optical fibre technology
(coverage at end-2013: more than 1.4 million of homes and offices). To fulfil its mandate for basic
broadband provision, Swisscom also uses wireless technologies such as UMTS and satellite. At pres-
ent, ADSL is mainly used to provide Internet access. Internet access using very high bandwidths and
more broadband-intensive services such as IPTV and video telephony are transmitted only over
VDSL2 or optical fibre. A million customers are already using Swisscom’s IPTV, and more than 85%
enjoy at least one channel in HD quality (high-definition TV). At the end of 2013 Swisscom launched
a service on the fibre-optic network offering speeds of 1 Gbps.
Wireless access network: Swisscom operates a nationwide mobile network in Switzerland. The
mobile services it provides are based on GSM, UMTS and LTE, the dominant digital standards across
Europe and much of the world. Swisscom has implemented different technologies that enable trans-
mission between handsets and base stations. In 2005, it enhanced all active GSM antennas with
EDGE technology, a further development of GPRS. EDGE enables bandwidths of between 150 and
200 kbps and currently covers 99% of the Swiss population. Swisscom launched UMTS in 2004, and
has continuously expanded its mobile network to include the UMTS extension HSPA/HSPA+ since
2006. This ensures download speeds of up to 42 Mbps. By the end of 2014, UMTS/HSPA was available
to around 99% of the Swiss population. Swisscom took another major step in 2011 when it became
the first mobile provider in Switzerland to launch a field trial with LTE. Swisscom launched its 4G/LTE
offerings on the Swiss market in December 2012 and has since extended coverage to 97% of Swiss
households. At present, LTE enables bandwidths of up to 150 Mbps. Thus, Swisscom currently has the
most powerful mobile network in Switzerland and will continue to expand its technological lead – it
has already tested bandwidths of up to 450 Mbps in the laboratory.
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Other terms
Bit-stream access (BSA): Regulated bitstream access is a high-speed link that travels the last mile
from the local exchange to the customer’s home connection via a metallic pair cable. The BSA is set
up by Swisscom and is provided to other telecoms service providers (TSP) as an upstream service
at a price regulated by the government. TSPs can use this link, for example, to offer their customers
broadband services or fast Internet access.
Collocation: Collocation is governed by the Ordinance on Telecommunications Services (Verord-
nung über Fernmeldedienste, FDV). The market-dominant provider offers alternative providers
non-discriminatory access to the required locations so that they can use the location and install
and operate their own telecommunications systems at that location.
ComCo (Competition Commission): ComCo enforces the Federal Cartel Act, the aim of which is
to safeguard against the harmful economic or social impact of cartels and other constraints on
competition in order to foster competition. ComCo combats harmful cartels and monitors mar-
ket-dominant companies for signs of anti-competitive conduct. It is responsible for monitoring
mergers. In addition, it provides comments on official decrees that affect competition.
ComCom (Federal Communications Commission): ComCom is the decision-making authority for
telecommunications. Its primary responsibilities include issuing concessions for use of the radio
frequency spectrum as well as basic service licences. It also provides access (unbundling, intercon-
nection, leased lines, etc.), approves national numbering plans and regulates the conditions govern-
ing number portability and freedom of choice of service provider.
COSO/COSO ERM (Committee of Sponsoring Organizations of the Treadway Commission): COSO
is a voluntary, private-sector US organisation. Its goal is to improve the quality of financial reporting
by promoting ethical conduct, effective internal controls and good corporate management. The Enter-
prise Risk Management (ERM) Framework is an extension of COSO’s Internal Control Framework.
ERM (Enterprise Risk Management): ERM is a Group-wide management system that ensures the
assessment, handling and reporting of significant risks at Group level as well as Group-company level.
Ex-ante: In an ex-ante regulation approach, the particulars of the regulated offerings (commercial,
technical and operating conditions) must be approved by a government authority (authorisation
obligation). The conditions approved by the authority (for example, price) are known to the parties
using the regulated services. There is legal provision for the affected providers to establish that the
price has been correctly determined.
Ex-post: In an ex-post regulation approach, the parties must agree all possible aspects of the con-
tractual content (primacy of negotiation). In the event of a dispute, the authorities decide only on
the points on which the parties have been unable to agree (objection principle).
FTE (full-time equivalent): Throughout this report, FTE is used to denote the number of full-time
equivalent positions.
Full access: Full access in connection with unbundling means providing alternative telecommunica-
tions service providers with access to subscriber lines for the purpose of using the entire frequency
spectrum of metallic pair cables.
Hubbing: Hubbing relates to the trading of telephone traffic with other telecommunication operators.
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Interconnection: Interconnection means linking up the systems and services of two TSPs so as to
enable the logical interaction of the connected telecoms components and services and to provide
access to third-party services. Interconnection allows the customer of one provider to communi-
cate with the subscribers of another provider. Under the terms of the Federal Telecommunications
Act, market-dominant TSPs are required to allow their competitors interconnection at cost-based
prices (LRIC, see below).
ISO (9001, 14001–14064, 15504, 27001, 31000): ISO is the International Organization for Stand-
ardization. It draws up international standards in all fields, with the exception of electricity and elec-
tronics, for which the International Electrotechnical Commission (IEC) is responsible, and telecom-
munications, for which the International Telecommunication Union (ITU) is responsible. Together,
these three organisations form the WSC (World Standards Cooperation). The relevant ISO standards
are: ISO 9001 Quality Management System – Requirements; ISO 14001 to ISO 14064 Environmen-
tal Management System; ISO 15504 Software Process Improvement and Capability Determination
(SPICE); ISO 27001 Information Technology – IT Security Techniques – Information Security Man-
agement Systems – Requirements; ISO 31000 Risk Management Principles and Guidelines. These
standards govern the principles and general requirements for the risk management process.
Last mile: Also referred to as the local loop, the last mile denotes the subscriber access line between
the subscriber access point and the local exchange. In Switzerland, as in most other countries,
access to the last mile is regulated.
LRIC (Long-Run Incremental Costs): LRIC is the method defined by the Ordinance on Telecommu-
nications Services (Verordnung über Fernmeldedienste, FDV) for calculating regulating prices. It is
future-oriented and therefore creates economically efficient investment incentives.
OFCOM (Federal Office of Communications): OFCOM deals with issues related to telecommunica-
tions and broadcasting (radio and television), and performs official and regulatory tasks in these
areas. It prepares the groundwork for decisions by the Federal Council, the Federal Department for
Environment, Transport, Energy and Communications (DETEC) and the Federal Communications
Commission (ComCom).
Termination charges: Termination charges are levied by a network operator for forwarding calls to
another third-party network (e.g. calls from Orange to Swisscom or from Sunrise to Orange).
Unbundling: Unbundling of the last mile (Unbundling of the Local Loop, ULL) enables fixed-network
competitors without their own access infrastructure to access customers directly at non-discrimi-
natory conditions based on original cost. The prerequisite for ULL is the presence of a market-dom-
inant provider. There are two forms of unbundling: unbundling at the exchange (unbundling of the
local loop/ULL or LLU, referred to as TAL in Switzerland), currently available at around 600 unbun-
dled locations, and unbundling at the neighbourhood distribution cabinet (sub-loop unbundling,
referred to as T-TAL in Switzerland), in which Swisscom’s competitors have so far shown no interest.
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Index of keywords
Board of Directors
Capital expenditure
Compensation paid to members of the Board of Directors and the Group Executive Board
Distribution to shareholders
Employees
Equity
Fixed and mobile network
Goodwill
Group Executive Board
Group structure and organisation
Income taxes
Legal and regulatory environment
Macroeconomic environment
Market shares
Net debt and financing
Outlook
Pension
Provisions
Risk Management
Risks
Segment results
Share
Strategy
Ultra-fast broadband expansion
Pages
97–106
77
115–126
83
50–55; 156–162
75, 136
45–47; 220
173–175
107–111
24–26
164–167
33–36
31–32
38–42
76, 195
80
75, 157–161
180–181
85–86, 105–106, 185–195
85–87
64–72
81–83
26–29
45–46
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Swisscom Group five-year review
In CHF million, except where indicated
2010
2011
2012 1
2013
2014
Net revenue and results
Net revenue
Operating income before depreciation and amortisation (EBITDA)
EBITDA as % of net revenue
%
Operating income (EBIT) before impairment losses on goodwill
Operating income (EBIT)
Net income
Share of net income attributable to equity holders of Swisscom Ltd
Earnings per share
Balance sheet and cash flows
Equity at end of year
Equity ratio at end of year
Cash flow provided by operating activities
Capital expenditure in property, plant and equipment
and other intangible assets
Net debt at end of period
Employees
CHF
%
11,988
11,467
11,384
11,434
11,703
4,599
38.4
2,627
2,627
1,788
1,813
35.00
5,350
25.4
4,024
1,903
8,848
4,584
40.0
2,681
1,126
694
683
13.19
4,296
22.1
3,951
2,095
8,309
4,477
39.3
2,527
2,527
1,815
1,808
34.90
4,717
23.8
4,245
2,529 2
8,071
4,302
37.6
2,258
2,258
1,695
1,685
32.53
6,002
29.3
4,131
2,396
7,812
4,413
37.7
2,322
2,322
1,706
1,694
32.70
5,457
26.1
3,770
2,436
8,120
Full-time equivalent employees at end of year
Average number of full-time equivalent employees
number
number
19,547
20,061
19,464
19,832
19,514
19,771
20,108
19,746
21,125
20,433
Operational data at end of period
Fixed access lines in Switzerland
Broadband access lines retail in Switzerland
Mobile access lines in Switzerland
Swisscom TV access lines in Switzerland
in thousand
in thousand
in thousand
in thousand
3,233
1,584
5,828
421
3,120
1,661
6,049
608
3,013
1,727
6,217
791
2,879
1,811
6,407
1,000
2,778
1,890
6,540
1,165
Revenue generating units (RGU) Switzerland
in thousand
11,066
11,438
11,748
12,097
12,373
Unbundled fixed access lines in Switzerland
Broadband access lines in Italy
in thousand
in thousand
255
1,724
306
1,595 3
300
1,767
256
1,942
180
2,072
Swisscom share
Par value per share at end of year
CHF
1.00
1.00
1.00
Number of issued shares at end of period
in million of shares
51.802
51.802
51.802
Market capitalisation at end of year
Closing price at end of period
Closing price highest
Closing price lowest
Ordinary dividend per share
Ratio payout/earnings per share
Informations Switzerland
Net revenue
Operating income before depreciation and amortisation (EBITDA)
Capital expenditure in property, plant and equipment
and other intangible assets
21,296
18,436
20,400
355.90
393.80
433.50
400.00
CHF
CHF
CHF
CHF
%
411.10
420.80
358.00
21.00
60.00
323.10
334.40
390.20
22.00
166.79
22.00
63.04
22.00
67.63
22.00 4
67.27
1.00
51.802
24,394
470.90
474.00
1.00
51.802
27,067
522.50
587.50
467.50
9,340
3,922
9,243
3,945
9,268
3,864
9,358
3,685
9,586
3,788
1,311
1,537
1,994 2
1,686
1,751
Full-time equivalent employees at end of year
number
16,064
16,628
16,269
17,362
18,272
1 Amendments to IAS 19 revised, restated from 2012.
2 Including expenses of CHF 360 million for mobile frequencies.
3 As a result of the settlement of litigations Fastweb reduced the number of access lines by 197,000.
4 In accordance with the proposal of the Board of Directors to the Annual General Meeting.
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Publishing details
Key dates
> 5 February 2015
Annual Press Conference 2014, Zurich
> 8 April 2015
Annual General Meeting
of Shareholders, Zurich
> 10 April 2015
Ex-dividend date
> 15 April 2015
Dividend payment
> 6 May 2015
First-Quarter results 2015
> 19 August 2015
Second-Quarter results 2015
> 5 November 2015
Third-Quarter results 2015
> in February 2016
Annual Press Conference 2015, Zurich
Publication and production
Swisscom Ltd, Berne
Translation
CLS Communication AG, Basel
Production
MDD Management Digital Data AG, Lenzburg
Printing
Stämpfli Publikationen AG, Berne
Photographers
Elisabeth Real, Zurich
Stefan Walter, Zürich
Printed on chlorine-free paper
© Swisscom Ltd, Berne
The Annual Report is published in English,
French and German.
Further copies of the Annual Report can be ordered via
E-mail: annual.report@swisscom.com
A Swisscom company brochure is also available
in English, French, German and Italian.
The Corporate Responsibility Report 2014
is published as an online version at
www.swisscom.ch/cr-report.
General information
Swisscom Ltd
Head Office
CH-3050 Berne
Tel.:
+ 41 58 221 99 11
E-mail: swisscom@swisscom.com
Financial information
Swisscom Ltd
Investor Relations
CH-3050 Berne
Tel.:
E-mail:
Internet: www.swisscom.ch/investor
+ 41 58 221 99 11
investor.relations@swisscom.com
Social and environmental information
Swisscom Ltd
Group Communications & Responsibility
CH-3050 Berne
E-mail: corporate.responsibility@swisscom.com
Internet: www.swisscom.ch/responsibility
For the latest information, visit our website
www.swisscom.ch
The online version of the Swisscom
Annual Report is available in
English: www.swisscom.ch/report2014
German: www.swisscom.ch/bericht2014
French: www.swisscom.ch/rapport2014
P E R F O R M A N C E
neutral
Printed Matter
No. 01-15-277548 – www.myclimate.org
© myclimate – The Climate Protection Partnership